The search for finding the perfect Ethereum Killer may just end with Polkadot crypto (DOT) blockchain. Since its inception in 2016, the project has never stopped surprising the cryptocurrency community. Backed by a strong team of developers with proven records, Polkadot has a lot to offer in terms of solving the key issues surrounding blockchain technology which includes security, scalability, interoperability and trustworthiness. Let’s dive in and explore its potential with possible price prediction.
What is Polkadot Crypto Blockchain?
Polkadot (DOT) is an open-source, decentralized web that came to life in 2016. It was founded by Gavin Wood who happens to be one of the co-founders of the Ethereum network. Polkadot is an integral part of Web 3.0 Foundation in Switzerland and aims to address all the issues surrounding blockchain technology.
After observing the slow pace of development of the Ethereum blockchain, Gavin Wood resigned from his position as a CTO of Ethereum and founded Polkadot to fast pace the growth of blockchain technology. Polkadot is interoperable, upgradeable (Soft forks) and allows smart contracts & new blockchains creation. Therefore, termed as the “blockchain of blockchains“
Polkadot is developing the capacity to support 1,000,000 transactions per second
What is Polkadot (DOT) Token?
DOT is the cryptocurrency of the Polkadot ecosystem. Launched in August 2020, it is used to secure the network and help in bonding, staking and governance on Polkadot crypto network. Something similar to Cardano ADA & Solana crypto SOL.
DOT is used for staking by Nominators, Validators & Fishermen and it is also used for bonding Parachains to the Relay chains. Something I will explain later in the post. Clearly, DOT has a bigger role to play once the network turns fully functional and attracts global adoption.
DOT is inflationary and it has no maximum supply limit
Polkadot Architecture:
In order to understand the blockchain, you must understand what is it made up of.
1. Relay Chain:
Relay chain is the backbone of Polkadot ecosystem. It is built using Substrate (A product of Parity team which is used to create blockchains). Relay chain is responsible for network security, consensus and cross-chain interoperability. You cannot create smart contracts on the Relay chain. Any chain that connects to the relay chain is called Parachain.
Relay chain uses POS to achieve consensus
2. Parachains:
Parachains are blockchains that connect with Relay chain. Parachains delegate their consensus to Relay chain in order to make it fast and congestion-free. Each parachain can have its own governance or token but it must be able to pass the blocks that Relay chain can understand and validate. Parachains built with Substrate can only connect with the Relay chain.
Parachains are created to serve a specific role. For example, one Parachain looks after creating smart contracts while the other is built to process transactions. It can disconnect or connect back to the Relay chain as and when required ( like a monthly Netflix subscription).
Checkout our in-depth review on Polkadot Parachain.
Polkadot announced its first Parachain Auction in November 2021
3. Collators:
Collators are special chains that help connect Parachains with Relay chain. It handles all the communication between these two chains.
4. Parathreads:
Parathread blockchains are part of Parachains. It works on the pay-as-you-go model, something similar to SAAS payment method (Software as a Service). They are used less frequently on the network.
5. Bridges:
Bridges are special blockchains that help parachains and parathreads to connect with external blockchains like Ethereum or Cardano. Bridges make the network interoperable.
Polkadot Architecture as a Tree:
The root is the backbone of a tree, which represents the Relay chain. A tree has multiple branches, Polkadot has multiple Parachains. The trunk establishes the connection between the root and the branches that work similar to Collator which connects the Relay chain with Parachains. Parathreads are the extension of Parachains hence sub-branches. Finally, flowers are used for pollination by connecting with other flowers. Bridges work the same by connecting Parachains with other blockchains.
How does Polkadot work?
Polkadot works on a Nominated Proof of Stake (NPoS) consensus mechanism in which DOT holders are encouraged to become Nominators and allocate part of their stake to the Validators which help them get recognized by the blockchain. In turn, Validators check the transactions on the Parachains and validate the block confirmation after communicating with the Relay chain.
Once the consensus is achieved, profits are shared with the nominators. Be careful, if nominators choose an untrusted validator with a bad track record, the process may end up sharing the losses and you may lose a part of your DOT stake. This overall process is monitored by Fishermen.
What is Kusama?
Kusama is an independent decentralized blockchain. It is an experimental network for early-stage startups who wish to test their functionality before rolling out on Polkadot blockchain. Consider Kusama as a test or an unaudited version of Polkadot. It is built with Substrate and written with the same codes that were used to create Polkadot. Moreover, Kusama has its own native KSM token that performs a similar function to DOT token.
Polkadot vs Cardano:
| Comparison type | Polkadot (DOT) | Cardano (ADA) |
|---|---|---|
| Consensus Mechanism | NPoS | PoS |
| Test Network | Kusama | None |
| Projects Created | 350+ | Zero |
| Total Supply | Unlimited | 45 Billion |
| Token Type | Inflationary (10% YoY) | Deflationary |
| Community Engagement | Low | Very High |
Polkadot Benefits:
Super-Fast Network:
Thanks to its well-designed architecture. Polkadot has the power to process 1,000,000 transactions per second. With the help of Relay chain, it can process faster transactions on the respective Parachains without worrying about network congestion.
Advance Interoperability:
At the moment, Polkadot is the only blockchain that supports network interoperability within and outside its ecosystem. Internally, Parachains built with Substrate can communicate and connect with Relay chain. Externally, blockchains like Cardano or Ethereum can connect with Polkadot using bridges.
Fantom project (FTM Coin) is the latest competitor in the interoperability race.
Independent Test Network:
While every other blockchain requires DAPPS and smart contracts to run on their platform. Polkadot came up with its own test network named Kusama which help the early stage startups and developers test their code before going live on Polkadot. Hence encouraging creators to develop, test and run applications beforehand.
Financially Stable:
Polkadot is a financially stable project. It has received a total funding of $293.7 Million from 21 investors (Source: Crunchbase). The money is sufficient to build the complete blockchain network and sustain the development for the coming years.
Store of Value:
After the success of the Kusama KSM token, all eyes are on the DOT token. It is becoming investors’ favourite cryptocurrency after entering into the club of top 10 cryptocurrencies by Market Cap.
Polkadot Drawbacks:
Under Development:
Polkadot is a huge blockchain project. Its architectural design is one of the best in class but it will take time to develop and fully evolve to the point where it is capable of handling 1 Million transactions per second.
Inflationary Currency:
This is one of the biggest disadvantages of Polkadot (DOT) token. Polkadot is averaging an inflation rate of 10% per year that means you will lose 10% of the total value of the Polkadot tokens unless you use them for staking on trusted validators. Staking will help you hedge the inflation rate by receiving a gain of (10-15%) on average.
You need to stake DOT else it will lose 10% of its total value every year
Competitors:
Polkadot face stiff competition with emerging blockchains like Avalanche AVAX crypto, Cardano ADA and Solana SOL. Both these projects are as promising as Polkadot and all of them are fighting for the market share being ruled by Ethereum at the moment.
Polkadot Crypto Price:
Please check the latest Polkadot price, shared below –
Polkadot Price Prediction:
Polkadot is one of the most promising crypto projects in the space. It has reached an all-time high of $50 during the recent bull run and hit an all-time low of $10 later in the market crash. These price fluctuations clearly indicate DOT to be a highly volatile cryptocurrency.
If we consider its future potential and current adoption rate. It has a big upside with an ability to hit $100 by the end of this year. Having said that, one should always keep the variables in mind like the rise in competition and project development. Things will fall in place if Polkadot delivers what it’s ought to offer.
COSMOS Crypto (ATOM) is its biggest rival & an alternate investment option
How to buy Polkadot Coin?
You can buy Polkadot coin by creating an account on Poloniex cryptocurrency exchange from any location. If you’re in India, you can use WazirX cryptocurrency exchange to place a trade in INR and purchase Polkadot (DOT) coin.
Creating an account on any of these crypto exchanges is fairly simple. You have to create an account on the exchange followed by the KYC process. Once the KYC documents gets approved by the system, you can deposit the money and start buying you favourite crypto asset.
Please watch my video on How to buy bitcoin in India if you wish to learn the step by step process of buying digital assets on the crypto exchange.
Is Polkadot a good investment?
Backed by a strong team with a clear vision, the project has come a long way since its inception in 2016. With over 350 plus projects under the belt, Polkadot is going to take the crypto industry by storm.
However, on the flip side, it has an inflationary DOT token which has to be staked if you wish to hedge inflation. The pain doesn’t end there, Polkadot face stiff competition with Ethereum 2.0 and Solana, both these projects are out there to grab the market share. Ethereum has a first-mover advantage while Solana is gaining on the tech aspect and adoption rate, though it has missed its roadmap goals in the past.
In a nutshell, if you don’t worry much about inflationary currency and have faith in the project. It’s a good investment over the coins with no clear path. Please keep in mind, invest what you can afford to lose.
This covers my review and analysis of Polkadot crypto (DOT). In the next post, i will talk about revolutionary projects – Biconomy BICO coin and Polygon MATIC. If you like the post, please share it and educate your friends. Do remember to subscribe to my YouTube channel for more informative content, released every week.
DISCLAIMER:
Cryptocurrency is a highly volatile market. All the information shared in the post is for knowledge purpose only. By no means, it’s financial or investment advice. Readers are responsible for their own investment decisions and should only invest in cryptocurrency after proper research.
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Paras is a blockchain writer & video creator at Katoch Tubes. In his free time, he loves watching space exploration documentaries & Hollywood movies.