As of today, the Polkadot network is ranked at 6th position on coinmarketcap, being the sixth-largest blockchain in terms of market capitalization. ITSA has fully classified the DOT token according to the International Token Classification (ITC) framework and assigned a unique identifier. Polkadot is a multi-chain blockchain with unique chain architecture including a relay chain, parachains, and bridges. The network’s native utility token DOT is used for multiple purposes, including governance and staking. Using the ITC framework, ITSA classified DOT according to technological, economic, legal, and regulatory dimensions.
Author: Hissan Usmani
Polkadot is a next-generation blockchain protocol connecting multiple specialized blockchains into one unified network, run by Web3 Foundation and developed by Parity Technologies. The uniqueness of the protocol lies in its cross-chain interoperability and transfer functionality. Digital assets, tokens, and data can be interchanged and transferred within a multi-chain network. The Polkadot network allows both independent private and public blockchains, as well as oracles and decentralized apps to exchange data and information in an efficient, secure, and trusted environment. Polkadot is considered to be a unification network to bring diverse blockchains into a single ecosystem.
Polkadot achieves the unique interoperable functionality through its relay chain, parachains, and bridges, as shown in figure 1.
The relay chain is the heart of Polkadot, it acts as a master ledger and bookkeeper which overlooks all the network transactions and security. The second layer in the Polkadot network consists of the parachains, also known as parallel blockchains. These are customizable chains that can be used by individual companies. Multiple chains run simultaneously in a parachain network to avoid bottleneck situations and allow greater transaction speeds. The bridges are then used to connect and communicate to already existing and established blockchains like Bitcoin and Ethereum. It is similar to signing in for www.medium.com using your Google account; you use one account for multiple purposes.
The DOT token is the native token of the Polkadot network. It serves three main purposes:
In Figure 2, you can see the full classification of the DOT token as it is available in Tokenbase. The token is fully classified according to the six current dimensions of the ITC, which we now explain in more detail.
Economic Purpose (EEP): Provides the economic purpose of the token and the information on the reason for a token’s creation as well as its intended use and functionality. DOT is listed as a settlement and governance token (EEP22TU03) due to its design as a means of transaction settlement combined with governance functionality.
Industry Type (EIN): The dimension “Issuer Industry” forms part of the economic dimensions, and provides information on the industry in which the issuer of a token is active. The issuer of DOT is active in the field of cloud computing, distributed systems, and decentralized applications (EIN05DA03).
Technological Setup (TTS): This dimension describes how a token is implemented and deployed. DOT is the native token of the Polkadot network, which has its own native blockchain. DOT is classified as a Blockchain-Native Token (TTS41BC)
Legal Claim (LLC): The dimension “Legal Claim” provides information on the rights that a Token provides its holder with. DOT does not entitle its holder to any legal claim or rights against the issuing organization, so it is listed as a No-Claim Token (LLC31)
Issuer Type (LIT): The dimension “Issuer Type” provides information on the nature of the issuer of a token. DOT is issued by the Polkadot network, which is run by the Web3 Foundation and developed by Parity Technologies, so its Issuer Type is a Private Sector Legal Entity (LIT61PV).
Regulatory Framework (EU) (REU): The dimension “Regulatory Status EU” provides information on the potential classification of a token according to the European Commission’s proposal for a Regulation on Markets in Crypto Assets (MiCA, Regulation Proposal COM/2020/593 final). DOT qualifies as a Utility Token according to the definition provided in Article 3 (5) of Regulation Proposal COM/2020/593 final.
The International Token Standardization Association (ITSA) e.V. is a not-for-profit association of German law that aims at promoting the development and implementation of comprehensive market standards for the identification, classification, and analysis of DLT- and blockchain-based cryptographic tokens. As an independent industry membership body, ITSA unites over 100 international associated founding members from various interest groups. To increase transparency and safety on global token markets, ITSA currently develops and implements the International Token Identification Number (ITIN) as a market standard for the identification of cryptographic tokens, the International Token Classification (ITC) as a standard framework for the classification of cryptographic tokens according to their inherent characteristics. ITSA then adds the identified and classified token to the world’s largest token register, our International Token Database (Tokenbase).
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Hissan Usmani is currently writing his master thesis with ITSA and TU München on the topic “Bridging the Gap Between Financial Institutions and Blockchain Startups: The Overview, Challenges, and Recommendations Based on Expert Interviews From The Banking, Startup, Consulting and Organization Ecosystem”. He has a strong international background with significant time spent in Pakistan, the United States, and currently Germany. He is working in corporate finance and pursuing his master's degree in management at the Technische Universität München (TUM). You can contact him via firstname.lastname@example.org and connect on LinkedIn if you would like to further discuss ITSA e.V. or have any other open questions.