Polkadot (DOT) is in the news for the past few months. In this blog, we have discussed the structure of the Polkadot network and its blockchain cryptocurrency DOT in detail.
Cryptocurrencies are having their big break in 2021. The bull market is has taken multiple existing coins to all-time highs. Bitcoin rose to a whopping $62K for the first time in history. Whereas Ethereum, the second in line, has also broken the psychological barrier of $2K. At the moment, the crypto market cap is closing in on $2 Trillion. So, the crypto market is pretty much sunshine and butterflies for investors.
Crypto is an unpredictable industry. It has thrown some previously unknown coins to the stage in a relatively short span of time. One of them is Polkadot (DOT).
Polkadot has managed to take a seat among the top ten largest cryptocurrencies. Its year to date surge is close to 250%. This sudden meteoric rise has made investors curious about the coin. So, let’s discuss briefly what Polkadot is and how it is suddenly among the crypto’s walk of fame.
What is Polkadot (DOT)?
The Polkadot blockchain platform was built by the co-founder of Ethereum and two other programmers from the Web3 foundation. Polkadot makes it possible for developers to join two or more blockchains. Its network is one of the kind with the possibility of communication between blockchains. Moreover, user can interoperate by fastening up multiple blockchains in a single network.
Also Read: Invest In Cardano – The Future of Blockchain
The pros of the Polkadot network are transparent governance, scalability, and diversified sharding. It is an upgraded model created for assets, tokens and data transfer across chains.
Polkadot – A Sharded Blockchain Cryptocurrency
Polkadot is a sharded multichain protocol. The process of sharding involves the partitioning of blockchain and distribution of the workload among nodes of a peer to peer (P2P) network. Resultantly, a single node has to process only a small amount of data instead of the whole network’s data. This makes the network more scalable and swift.
In the Polkadot network, each shard operates as a single blockchain. Transaction and data exchange easily occurs among these blockchains in a secure manner.
Polkadot infrastructure has three main components.
Relay Chain: It is the central chain. All validators of the network are found here.
Parachains: These are sharded blockchains running parallel to each other and connected to the Relay chain. Each Parachain has its own unique validator known as collators
Bridges: Bridges blockchains facilitate the communication between the Polkadot network and other blockchains like bitcoin and Ethereum.
The DOT Token
Blockchain networks have their own blockchain cryptocurrencies that give some special rights to the holders of currency as well as fund the development process. For example, the Ethereum network has Ether (ETH) and Cardano has ADA.
Polkadot has native DOT tokens. They are currently trading in the cryptocurrency market at the price of $38. In the news when you hear that Polkadot’s price is sky-rocketing, it is actually the DOT token that goes up in value.
Uses of DOT Tokens:
DOT Token serves multiple purposes.
First of all, the DOT token holders are stakeholders in the Polkadot network. They can govern the direction of the chain. For instance, the token owners can decide the network fee, upgrades, fixes, addition of Parachains and schedule of important changes in the network.
DOT Token holders can also perform the most important function of verifying transactions on the Polkadot network. The scalable proof-of-stake model makes it binding on the participants to stake a fixed amount of DOT Tokens. Any malicious activity from participants can make them lose the staked token. Thus, the nodes carry out fast and clean verification of transactions.
The addition of a new Parachain in the network is facilitated by Bonding DOT Tokens. These are kept tied up until the Parachain is present in the network.
IS Polkadot A Competitor to Ethereum?
Ethereum network is a famous crypto blockchain in the market. It facilitates smart contracts and is similar in makeup to Polkadot. Ethereum uses the proof-of-work model at the moment which is causing scalability issues. The gas fee for Ethereum is increasing exponentially as more and more people participate in the verification of transactions on its blockchain. This aspect is making the ethereum blockchain less appealing among crypto enthusiasts. In this scenario, Polkadot presents itself as a cost-effective alternative.
Read More: What is Revolutionary about Ethereum 2.0
Polkadot makes smart contract run on parallel running small blockchains known as Parachains. Moreover, the transactional load is divided across multiple groups of nodes. As a result, data is swiftly processed without burdening a single node.
Large decentralized applications can easily operate on Polkadot without any scalability problem. Moreover, the bridges make connections with external chains possible. This facilitates interoperability among networks.
Bondly is a famous application built on the connection of Polkadot with the Ethereum blockchain.
Polkadot: The Next Ethereum
In a recent interview at Bloomberg, the CEO of Kraken said that Polkadot is the next Ethereum.
There are a lot of other coins being launched on top of this network and I think you’ll see a lot of things that were on Ethereum be ported on to Polkadot for lower transaction fees.
Last year, the CEO of Pantera Capital Management also said that from his firm’s perspective Polkadot had a “much higher than 10% chance of being a competitor to Ethereum.”
These experts of the crypto industry have high hopes for Polkadot. Let’s see where its market goes next.
Is Dot Token Worth the Hype?
The market predictions regarding DOT token warry greatly. However, its meteoric rise since the start of 2021 suggests that the coin will go far and beyond in the subsequent months.
As a blockchain cryptocurrency, the DOT token has appeal among Polkadot users. It allows them to verify transaction on the platform. Moreover, they can trade the coin in both the long term and short term.
The price of DOT has increased 22% in the past 7 days. It is the 6th largest cryptocurrency according to market cap. Traders are heavily trading DOT on multiple crypto exchanges. All this suggests the growing interest in DOT token.
Interesting for You: The Rise of Non Fungible Tokens (NFTs) in 2021
Recently a blockchain platform, Enjin, has announced the plans of building an NFT platform based on Polkadot. NFTs are a new craze in the crypto world. Most NFT ventures are based on Ethereum. Nonetheless, Polkadot is competing with Ethereum in this arena too.
The growing use cases of DOT token make it worth all the hype.
Market Predictions For Polkadot:
The market predictions from Coinpedia based on technical analysis suggest that the DOT token will reach $50 by the end of this year. This prediction seems plausible as per the market movements. However, many cryptocurrencies go bust in an instant. Therefore, we at AutoTrading Strategies, refrain from market predictions.
Market predictions can give you an idea of what other people think of the coin. If you decide to take action on some authoritative figure’s market prediction then it is your own sole discretion. We do not give any information that may sound like a piece of financial advice.
Polkadot DOT is doing good at the moment. It has a surging market cap and growing demand in the market. Moreover, it is a revolutionary blockchain with unique interoperability features. So, keep an eye on the institutional adoption of Polkadot. You can invest in this currency as well while its fundamentals look strong.