Will Polkadot (DOT) price reverse course now that cross-chain messaging is live?

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Development within the Polkadot (DOT) ecosystem has been slowly unfolding over the past year and a half, and the hard work the developers have been doing is finally starting to pay off as the parachain auctions end and the first channels launch on the mainnet.

The next phase of interoperability within the ecosystem is about to kick off now that cross-chain functionality is about to go live. This next step will allow Polkadot-based parachains to communicate with each other and transfer assets between chains.

Here’s a look at what the launch of the XCM messaging system means for the DOT price, what options are now available to DOT holders, and how this development increases its functionality within the Polkadot ecosystem.

Polkadot is free

Until now, DOT had limited uses and was basically isolated on its own network without much functionality. Its main functions included staking, governance and contributing to parachain equity loans, which helped reduce circulating supply but did little else to really drive demand.

The introduction of cross-chain communication has enabled DOT transfers to various parachain networks and number of use cases for the DOT token on parachains like Moonbeam and Astar Network.

Data from Cointelegraph Markets Pro and TradingView shows that the price of DOT has been hit hard by the six-month downtrend in the crypto market, with its price dropping 73% from its all-time high of $55. November 4.

DOT/USDT 1-day chart. Source: Trading View

With the token now trading at a notable support/resistance level, it remains to be seen whether the ability to transfer DOT across various parachains will help increase demand for DOT.

Related: Polkadot Launches Cross-Chain Messaging System to Solve Blockchain Bridge Problem

New use cases

A notable use of DOT that has grown in popularity in recent months is liquid staking and the minting of stablecoins using crypto assets as collateral.

DOT can now be transferred to DeFi-focused parachain Acala and deposited into its liquid staking contract in exchange for LDOT, which can then be used as collateral to mint aUSD, the decentralized stablecoin native to Polkadot and Kusama.

DOT can also be used in various DeFi applications, including yield farming, lending, and borrowing. As the introduction of cross-chain communication spreads across the Polkadot ecosystem, other uses of DOT are likely to emerge, especially as parachains roll out increased functionality.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

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