Early traders of Polkadot’s new DOT token have come in for an unfortunate surprise, as two prominent exchanges decided to list the token ahead of its “redenomination” despite warnings from the project.
The redenomination, due to take place on August 21, will see the new DOT denominated at one-hundredth of the value of the DOT (old), following a community vote. However, the project hasn’t sanctioned any exchange listing before the event on August 21 due to the risks involved.
DOT’s Road So Far
Polkadot’s original DOT token has been trading since 2019, and excitement has been building this year as the project launched on mainnet. However, the exact definition of the DOT token has recently been put to a community vote, the project’s first.
On July 27, Dr. Gavin Wood, co-founder of Polkadot, published a blog post announcing the results of the vote. DOT holders could choose between keeping the original 2017 sale definition of DOT or generating a “stock-split” that creates a New DOT token equivalent to one-tenth, one-hundredth, or one-thousandth of the DOT (old).
Token holders voted overwhelmingly for the option to split the token by a factor of 100. The change redefines the DOT token as being comprised of 10 billion Planck, the lower denominator of DOT (equivalent to Bitcoin’s smallest unit, Satoshi). It does not change the actual number of Plancks in the system, and so on August 21, all DOT (old) holders would see their balances increased by a factor of 100.
The announcement confirmed that while transfers from old to new DOT would be enabled on August 18, with the actual change in the denomination is only due to take place 72 hours later, on August 21.
Following the outcome of the vote, a public notice from Polkadot issued on August 18 warned that:
“There is a chance that some unscrupulous exchanges may choose to enact the redenomination prior to the date agreed by the Polkadot community, and thus report the apparent price at approximately 100 times lower than the actual market price.”
On August 18, both Binance and Kraken announced they were listing the new DOT token with immediate effect. To their credit, both exchanges did allude to the redenomination due to take effect within three days’ time in their respective announcements.
However, with the listings unsanctioned by the project itself and the price set at the redenominated value, it appears that both exchanges managed to cause significant confusion among traders. The price of the new DOT was inflated by up to ten times within the first hour of listing and rapidly fell again.
At the time of publication, Binance has also delayed the USDT-margined perpetual DOT contract until August 22.