Polkadot (DOT), a multi-chain protocol, witnessed a significant increase in on-chain activity in December, with weekly transaction fees on the transfer chain hitting an all-time high (ATH) of $2.6 million between December 18-25. This marked a staggering 1218% increase from the previous week’s total fees. The transfer chain, which acts as the network’s governance layer and connects various parachains, saw this surge in fees alongside more than a doubling in daily active users, averaging 15.3 thousand users connecting to the network daily during this period.
According to a crypto analyst known as Osmo, the spike in fees, similar to other blockchain movements, was driven by intense demand for Inscriptions. Inscriptions, akin to <a href="https://en.bitcoinhaber.net/cryptocurrency-market-rallies-as-investor-confidence-returns”>Bitcoin Ordinals, operate by embedding images or other data directly onto the chain and can be used to create unique cryptocurrencies like Non-fungible tokens (NFTs) and decentralized applications (dApps). Initially observed with Bitcoin, the unique concept of Inscriptions has gradually been adopted by other Layer 1 (L1) and Layer 2 (L2) networks, playing a key role in increasing transactions and fees across various networks in December.
A portion of the total fees earned on the network goes to DOT token holders who govern the protocol. Logically, this increase in fees could lead to a rise in demand for DOT. According to 21milyon.com, DOT experienced a 14.65% increase over the past week and approximately a 57% increase since the beginning of December.
Analysis of CoinMarketCap data indicates that mentions of the cryptocurrency on top crypto-focused social media channels have significantly risen. This uptrend has caught the attention of speculative investors. Open interest (OI) in DOT saw a 26% increase last week, signaling an influx of new capital into the derivatives market.