The DOT token is the native cryptocurrency of the Polkadot network, serving as its foundational digital asset. Much like Bitcoin (BTC) for the Bitcoin network or Ether (ETH) for Ethereum, DOT is integral to the operation, security, and evolution of the Polkadot ecosystem.
This guide provides a comprehensive overview of the DOT token, covering its primary functions, unit breakdowns, inflation model, and how to interact with testnet versions for development and experimentation.
Core Functions of the DOT Token
The DOT token is designed with three primary purposes in mind, each crucial for the network's decentralized and user-governed model.
Network Governance
DOT holders possess the right to participate in the governance of the Polkadot network. This means token holders can vote on proposed changes to the network's protocol. These proposals can encompass a wide range of decisions, including adjustments to transaction fees, modifications to the token's inflation rate, and even upgrades to the underlying codebase. This democratic process ensures the network evolves according to the collective will of its community.
Securing the Network Through Staking
Polkadot utilizes a Nominated Proof-of-Stake (NPoS) consensus mechanism. DOT holders can actively participate in securing the network by "staking" their tokens. This process involves locking up DOT to support trustworthy validators. In return for their contribution to the network's security and stability, stakers receive regular staking rewards. This system incentivizes long-term investment and active participation.
👉 Explore advanced staking strategies
Accessing Secure Computation and Parachains
DOT is the key to accessing the network's core resources. It is used to purchase Coretime, which grants blockspace on the Polkadot relay chain for secure computation and interoperability between parachains. Furthermore, DOT is required to reserve a unique parachain identifier (para ID) for projects looking to launch a parachain or a parathread (a pay-as-you-go parachain).
A portion of the annual DOT inflation is directed to the on-chain Treasury. This treasury is funded through various network activities and is used to finance projects that benefit the Polkadot ecosystem, as decided through community referenda.
Breaking Down the Planck Unit
On blockchains built with the Polkadot SDK, the smallest possible unit of account is called a Planck, named after the Planck length in physics. The DOT token is divisible into many smaller units, making micro-transactions possible.
| Unit | Decimal Places | Conversion to Planck | Conversion to DOT |
|---|---|---|---|
| Planck | 0 | 1 Planck | 0.0000000001 DOT |
| Microdot (uDOT) | 4 | 10^4 Planck | 0.0000010000 DOT |
| Millidot (mDOT) | 7 | 10^7 Planck | 0.0010000000 DOT |
| Dot (DOT) | 10 | 10^10 Planck | 1.0000000000 DOT |
| Million (MDOT) | 16 | 10^16 Planck | 1,000,000.00 DOT |
For comparison, the Kusama (KSM) network, Polkadot's canary network, uses a different base unit structure, with 1 KSM equaling 10^12 Planck.
The DOT Inflation Model
DOT is an inflationary cryptocurrency. Unlike models with a fixed supply, Polkadot has a fixed annual expansion of the token supply set at 120,000,000 DOT.
This newly minted DOT is distributed in two primary ways:
- 85% to stakers: This portion is paid as rewards to those who stake their DOT to secure the network via NPoS.
- 15% to the Treasury: This portion is sent to the on-chain Treasury to fund ecosystem development through community-approved proposals.
The core purpose of this inflation is dual: to incentivize participants to stake and secure the network and to provide a sustainable funding mechanism for the ecosystem's growth via the Treasury.
It is important to note that the inflation rate itself is not set in stone; it can be updated through on-chain governance based on ongoing economic research and network needs.
The term "net inflation" is also used. This accounts for the gross fixed inflation minus any DOT that is burned. Burns occur from Treasury inefficiency (unspent funds are periodically burned) and from Coretime sales. Therefore, the actual net increase in the circulating supply can be lower than the fixed 120 million DOT per year.
Net Inflation = Gross fixed inflation - burned supply (treasury + coretime sales)
How to Acquire DOT and KSM
DOT and its canary network counterpart, KSM (Kusama), are not freely distributed through an airdrop. The primary ways to acquire them are:
- Purchasing them on the open market through various cryptocurrency exchanges.
- Participating in the ecosystem and receiving funding from the Treasury.
- For original token holders, going through a specific claim process.
👉 Learn more about secure acquisition methods
A Guide to Obtaining Testnet Tokens
For developers and users who wish to experiment with Polkadot's features without using real-value tokens, several testnets are available. These networks provide free test tokens that mimic the functionality of DOT.
Paseo Testnet
Paseo is a next-generation testnet that closely mirrors the current Polkadot runtime environment, making it ideal for rigorous testing. You can obtain PAS tokens (Paseo's testnet token) from:
- The official Paseo faucet.
- Using the
!drip <your address>command in the dedicated Paseo Matrix chatroom.
The unit structure for PAS is identical to that of the mainnet DOT token.
Westend Testnet
Westend is Polkadot's long-standing testnet, designed for experimentation and validator practice. You can obtain WND tokens (Westend's testnet token) from:
- The dedicated Westend faucet.
- Using the
!drip <your address>command in the Westend Matrix chatroom. - Running a validator on the testnet and earning rewards.
The unit structure for WND is identical to that of the Kusama (KSM) token.
Frequently Asked Questions
What is the main purpose of the DOT token?
DOT has three core functions: governing the Polkadot network, staking to secure the network and earn rewards, and purchasing resources like Coretime or reserving parachain slots. It is the lifeblood of the entire ecosystem.
How does DOT inflation work?
A fixed amount of 120 million new DOT is created each year. Most (85%) is distributed as staking rewards to network participants, while the remainder (15%) is sent to the Treasury to fund community-approved projects. The actual net inflation is lower due to token burns.
What is the smallest unit of DOT?
The smallest unit is called a Planck. One full DOT is equal to 10,000,000,000 Planck (10^10). This allows for highly precise transactions and calculations on the network.
How can I get free testnet DOT?
You can obtain testnet tokens like PAS (on Paseo) or WND (on Westend) from official faucets or their respective community chat rooms. These tokens have no real-world value and are solely for testing purposes.
Can the DOT inflation rate change?
Yes. While the current model uses a fixed annual expansion, the inflation rate and its distribution model are ultimately governed by DOT holders. Changes can be proposed and voted on through Polkadot's on-chain governance system.
What is the difference between gross and net inflation?
Gross inflation is the fixed amount of new DOT created annually (120 million). Net inflation is this figure minus any tokens that are burned from Treasury inefficiency or Coretime sales, representing the actual net increase in the token supply.