Polkadot network mints money as Inscriptions drive demand

• The jump in fees came alongside a more than 2x increase in daily active users.
• DOT rose 14.65% over the past week and nearly 57% month-to-date.

Multichain protocol Polkadot [DOT] witnessed a sharp rise in on-chain activity in December.

According to AMBCrypto’s analysis of Token Terminal data, weekly transaction fees on the relay chain reached an all-time high (ATH) of $2.6 million between the 18th to the 25th of December.

This represented a whopping 1218% jump from the total fees collected the week before.

For the curious, the relay chain acts as the governance layer of the network and secures, governs, and connects several parachains.

Source: Token Terminal

The jump in fees came alongside a more than 2x increase in daily active users. An average of 15.3k users hopped onto the network daily during the aforementioned period.

Inscriptions effect?

Like other blockchains, the spurt was driven by heavy demand for inscriptions, according to a well-known crypto researcher and pseudonym Emperor Osmo

Similar to Bitcoin Ordinals, Inscriptions work by embedding images or other data directly on the chain. They can be used to create unique digital assets like non-fungible tokens (NFTs) and even decentralized applications (dApps).

While Bitcoin was the first to witness this frenzy, the unique concept was gradually picked up by other L1s and L2s as well. Inscriptions have been the primary driver in boosting transactions and fees across several networks in December.

DOT rallies 57% in December

As is well known, a portion of the total fees earned on the network goes to DOT tokenholders who govern the protocol. Logically, this means that a spike in fees could drive up demand for DOT. This is what exactly happened.

DOT rose 14.65% over the past week and nearly 57% since the beginning of December, AMBCrypto spotted using CoinMarketCap’s data.

Realistic or not, here’s DOT’s market cap in BTC’s terms

The rally generated a lot of social traction for the cryptocurrency. As per AMBCrypto’s analysis of CoinMarketCap’s data, the coin’s mentions on top crypto-focused social media channels increased significantly.

Source: Santiment

The uptrend also caught the eye of speculative traders. DOT’s Open Interest (OI) jumped 26% over the last week, signaling an influx of fresh capital into its derivatives market.