Introduction
Just days after its listing date (21 August 2020) on major exchanges the new DOT from $2.87 to above $6.00 i.e. more than 100% increase.
In this article we will look at the growth potential of this coin that has the ambition to take a chunk of the Ethereum as main smart contract platform. As usual in plain English.
A little bit of history
Polkadot has been around since the end o 2016. It was started by Gavin Wood. Wood was of the original co-founders and CTO of Etherem but left in 2016 to start the Polkadot project. For the records he was the inventor of the Solidity language.
After many difficulties and losing part of the funds of the original ICO of 2017, Polkadot managed to stand back up on their feet and launch their mainnet in May 2020.
What makes Polkadot valuable?
The 2 keywords here are scalability and interoperability. These are 2 big problems of the Bitcoin and Ethereum network.
Scalability issue
This we see every day by the slow BTC transaction and by high ETH network fees reaching $8-10 average peaking at $100. Polkadot offers a solution to all that
Theoretical transaction-per-second limitation:
- Bitcon: 7 tps
- Ethereum: 15- 20 tps
- VISA: 65,000 tps.
- Polkadot: 166,666+ tps
This is not just a nice number but it translates into 2 things: speed of light transactions and low fees!
PS: for the records we have to say that ETH 2.0 should solve the Ethereum network congestion problem with Proof of Stake, but none actually know when it will launch. It could be easily 2 years.
Interoperability issue
As we know every different blockchain (Bitcoin, Ethereum, EOSIO, Tezos, Cardano, Tron etc..) all operate as "independent silos". There is no way to send data and/or transactions from one blockchain to the other.
This also implies that the "programmable" blockchains, must develop their own DApps, which can only be used on that specific blockchain.
Polkadot proposes a final solution of the interoperability problem through its architecture made of 3 layers.
- Relay chain: the main chain, heart of the system.
- Parachains: "parallel blockchains" which the processing of multiple transactions in parallel (unlike ETH and BTC that have to process in series).
- Bridges: links to other blockchains, that allow exchange of data/transactions.
One huge perk
Unlike Ethereum, the ecosystem is built in a way that anyone can build a customized Parachain on Polkadot by using a "Swiss Army knife" tool called Substrate. This means:
lower entry barriers ->more adoption->more demand for DOT token->higher DOT price
Why does more adoption drive more DOT demand?
The DOT tokens have to be bonded or staked on the network to vote for the improvement proposals of the network and earn rewards. This reduces even more the circulating supply of DOT, and drives up the price even more.
And eyes, once you have purchased DOTs it is possible to stake them to earn rewards. Today it is possible on Kraken with 12% APY, but Binance is also opening to it. Alternatively you can use Math wallet, but it is more complicated.
Conclusions
The DOT (new) coin comes currently at #6 by market cap on Coingecko traded at just above $6.00 but considering its potentially disruptive tech and tokenomics it is still undervalued.
Besides considering it is listed on many major exchanges (see above) and support to Coinbase Custody (https://www.theblockcrypto.com/linked/55393/coinbase-custody-adds-support-for-polkadots-dot-token), generally this is one step before listing on Coinbase exchange which brings to the so called Coinbase-listing rally.
If you want to know more about the project check out this video by Coinbureau.
or check the Polkadot wiki website that contains a lot of technical and non-technical information.
https://wiki.polkadot.network/docs/en/getting-started
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Disclaimer: The topics in the article are pure representation of the opinions of the writer and do not constitute any form of financial advice. Investing is risky and you should consult your financial advisor before taking any position in any asset(s) described in this article.
