Is Polkadot a good investment? Polkadot is one of the leading Web3 interoperability-oriented blockchains. The platform has had massive success right from the onset. The founder of the blockchain, Gavin Wood, is also the Co-Founder of Ethereum. Due to the hastiness present in the EVM deployment, Ethereum has had to compensate with loads of updates over the 7 years it has existed.
On the other hand, Polkadot has been thoroughly researched and developed, giving it a clear edge over Ethereum. Let’s dive deeper.
What is Polkadot?
Polkadot is a next-generation layer 0 blockchain network. The protocol has the capability to connect to a host of specialized chains. When Gavin Wood got the idea of building Polkadot, his main goal was to eliminate the problem of blockchain interoperability.
For the non-techies reading this, interoperability between blockchains is the ability of blockchain networks to communicate. Several blockchain networks were mushrooming up at the time, but each was siloed off.
Gavin Wood sought to create a super-blockchain or a base layer protocol on which specific types of blockchain networks could be built. Since they shared the same base layer, they would be able to communicate with each other seamlessly.
Polkadot is no doubt very complicated and rather difficult for beginners to understand. Hopefully, as you read on, you will see the innate potential of the project.
Parachains
Previously, we mentioned that Polkadot allows the building of specific types of blockchain networks that can communicate on one unified network. These blockchains are called parachains.
To build parachains, developers use a framework called Substrate. The framework provides blockchain developers with an advanced but easy-to-use platform to build Parachains.
For ease of comprehension, you can imagine Substrate as a Music Equalizer, where all the parachains are dials on the equipment. Depending on the purpose, some dials can be high, while others can remain slightly lower.
After a Parachain has been built, it has to be connected to the main Polkadot (or Kusama) relay chain (base protocol layer). However, hundreds of other parachains are also waiting for the same number of slots. To ensure that a project will connect to the (few) parachain slots, parachain auctions take place. Whichever parachain wins gets to connect to the relay chain.
Kusama is a cousin network to Polkadot. It is where parachains test their blockchains before they can connect to the big brother, Polkadot. Parachain auctions deserve an article of their own.
Comparison With Ethereum
Polkadot is nothing like Ethereum. If anything, the network is superior to Ethereum. While Ethereum is a one-size-fits-all chain, Polkadot allows parachains to be as customized as they can.
Examples of parachains on Polkadot include Acala Network, Phala Network, and Hydra DX. Additionally, blockchain DeFi protocols can apply to become parachains on Polkadot. Hence, instead of chainlink, for instance, existing as a DApp on Ethereum, it can exist as a stand-alone blockchain on Polkadot.
Such an upgrade would give DeFi protocols much more room for growth because they can finally scale and expand their horizons without worrying about network congestion or fees. Each parachain is responsible for its security and scalability.
Polkadot Adoption
Polkadot has received much recognition from major names and brands in the blockchain space. As a layer zero network, it has the capability of bringing DeFi to bitcoin by allowing DEX or Liquidity-focuses parachains to include BTC in their pools.
According to a report by Messari, Polkadot was the most commonly held altcoin in Q4 2021. Apart from that, there are over 560 networks and growing, ready to be connected to Polkadot.
These parachains range from DeFi smart contracts to IoT, Privacy networks, cross-chain bridges, Metaverses, and NFT collections.
DOT Price and Tokenomics
The price of this asset had dropped like the rest of crypto, despite the mammoth fundamentals. Currently, the price of $DOT sits at $6.38. The price has been consolidating between $6.00 and $7.00 for the last three weeks.
The good news is that the asset seems to have finally found a bottom, as the $6.00 Institutional Level has been tested twice in the last four months. This good make Polkadot a good investment based on its current price.
Moreover, the price has hovered above this mark for almost a month and hasn’t broken it yet. That said, DOT is still trading below the 21-day EMA, which is bearish for the asset.
DOT has a total supply of 1,239,592,226 DOT and a circulating supply of 1,158,657,641 DOT. The project has a $7.37B market cap and currently sits at #11 on CoinGecko. The huge supply is nothing to worry about since the parachain auctions result in huge numbers of DOT getting locked up.
In addition to that, Polkadot has staking available, which further removes more tokens from circulation, pushing the price of DOT up.
FAQ
Is DOT a Good Investment in 2022?
Yes. DOT is a good investment. The project has superior backing from major blockchain developers, and big VC funds have invested in it. In addition to that, it has a lot of parachains in line waiting to connect. The Polkadot team has many other projects in the pipeline waiting to release in the future.
Does Polkadot have a future?
Yes. The Polkadot blockchain is set up to have a great future ahead. Polkadot introduced numerous advanced technologies and trading tools which is why this project has experienced massive growth in 2021 and will continue to do so over the next years.
Can Polkadot go to 1000$?
Yes. Polkadot has the potential to hit four figures. However, this may not happen in the near future owing to the large token supply. If crypto adoption skyrockets, then Polkadot will rise in price to $1000 or more.
Should I Buy Polkadot or Solana?
The choice of which crypto to buy lies solely with you. However, the best way to determine what crypto to invest in is to DYOR. This will give you all the information you need to make a clear decision. You can use this article as your first stepping stone into more Polkadot research.
Vincent Munene is a freelance writer and a great blockchain enthusiast. Blockchain has changed his life in terms of financial freedom and in return, he likes to educate people and keep them up to date on everything blockchain. He is a Biochemist by profession and also loves to play the piano.
