The Polkadot technology connects different cryptocurrencies into one network and allows the users to move between the blockchain easily. In fact, Polkadot creates the backbone of a new kind of Web3 and offers a form of internet that cannot be censored, and allows decentralized applications to live and run free on its decentralized stage. So, the future is very bright for Polkadot. Though Polkadot currently has a negative price trend but according to many crypto experts, it will have a high price trend in 2022!
- Polkadot is an open-source blockchain platform as well as cryptocurrency and it is gaining rapid popularity for its special features among crypto investors
- Polkadot uses a proof of stake consensus algorithm which is a blind assignment for Blockchain Extension and it is derived from Ouroboros
- The technology, features, and solutions offered by Polkadot can create an opportunity for savvy investors
- The first token sale of Polkadot was closed on October 27, 2017, and it raised a total of 485,331 ETH.
- Polkadot was added to Coinbase’s trading platform in June 2021
What Is Polkadot?
Polkadot is a blockchain platform for other blockchains. Polkadot is an open-source multi-chain protocol that offers the transfer and sharing of data between different blockchains. So, you can consider Polkadot as a bridge that connects different blockchains and facilitate data transfer therein. This technology was created by a Swiss-based technology company named Web3 Foundation. According to Web3 Foundation, the main target of Polkadot is to help different blockchains achieve interoperability through a community-driven and trustless platform. The first token sale of Polkadot was closed on October 27, 2017, and it raised a total of 485,331 ETH. Polkadot was added to Coinbase’s trading platform in June 2021.
How Does Polkadot Work?
Polkadot works as a way of storing information which works quite similarly to a database. Polkadot platform store the information to create –
1. A permanent timeline, without the need to purge data
2. Undatable records, so Polkadot can’t be easily hacked
3. Transparency and visibility to anyone
4. Decentralized currency is not limited to control by a single bank or entity
The Polkadot network creates three types of blockchains. They are –
The Relay Chain: This is the main blockchain where transactions are finalized. Here, this relay chain separates the addition of new transactions from the act of validating transactions in order to achieve a greater speed. This model allows Polkadot to process over 1,000 transactions per second!
Parachains: These are custom blockchains that use the relay chain’s computing resources to confirm whether the transaction is accurate or not.
Bridges: It allows the Polkadot network to interact with other blockchains. The developer team is working to build bridges with blockchains like EOS, Cosmos, Ethereum, and Bitcoin so that the cryptocurrencies can be swapped without a central exchange.
Why Is Polkadot (DOT) So Popular Right Now?
Though Polkadot is a new cryptocurrency but it has gained popularity very rapidly. The crypto traders, community, and experts are drawn to the Polkadot blockchain thanks to its innovativeness and from the fact that it has one of Ethereum’s blockchain co-founders as its co-founder and lead developer. Currently, Polkadot is ranked among the top 10 cryptocurrencies and some key reasons are –
1. Ethereum’s Rigidity
2. Appeal to Developers
3. Appeal to Speculative Investors
1. Ethereum’s Rigidity
Polkadot was basically created because of Ethereum’s refusal from the Proof of Work (PoW) to the Proof of Stake (PoS) consensus mechanism and delayed launch of ETH 2.0. Polkadot offers services similar to Ethereum, but is faster in transaction processing and maintains lower translation fees.
2. Appeal To Developers
Polkadot’s popularity increased rapidly because of its appeals to developers. For the last year or so, Polkadot has had the fastest-growing blockchain developer pool that can translate to a high number of apps developed on the platform. Moreover, the number of users also increased thanks to their amazing facilities.
3. Appeal To Speculative Investors
Another key reason for Polkadot’s sudden rise in popularity is the unexpected rise in its price. In the last year, Polkadot was appreciated by 500% and there were many daily price-action. Speculative long-term investors and day traders also play a very important role to gain popularity.
3 Reasons To Buy Polkadot In 2022
Below are three important reasons why Polkadot is the best token to buy in 2022 –
1. Polkadot Offers a Solution to the Interoperability Problem
2. Polkadot has Implemented Sharding
3. Polkadot has Innovative Partnerships
1. Polkadot Offers A Solution To The Interoperability Problem
Most of the tokens operate independently of each other. Usually, the blockchain networks are closed-loop for a variety of reasons and security is the top priority for most decentralized networks. But Polkadot offers trustless communication between blockchains and it doesn’t need to be placed in any 3rt party in order for communication across these systems to be effective. For example, you want to swap Bitcoin for Ethereum. Right now you have only one way to do that and that is to use some form of exchange like “Coinbase” to facilitate the process. So, Polkadot is working for direct swaps between investors and tokens. Basically, Polkadot is working for specialized blockchain systems to work together and create complex services from simple components.
2. Polkadot Has Implemented Sharding
Verifying a cryptocurrency transaction can be a very frustrating experience for crypto traders. Currently, blockchains can only complete a number of transactions per second and they can be considered as toll lanes on a road. So, when an investor wanted to send many transactions, they would be limited by the number of lanes the road had. This problem can easily be solved by the Sharding of Polkadot. Polkadot breaks the blockchain up into separate “shards” so that the transactions can be processed separately. This way more and more lanes are created on the road for data transactions. For example, now Polkadot can handle 1,000 transactions per second (TPS). When the technology will be fully operational, Polkadot would be able to handle over 1,000,000 TPS. The crypto world has never seen this kind of speed.
3. Polkadot Has Innovative Partnerships
Another reason you should consider investing in Polkadot is, it has lots of innovative partnerships. Recently, Polkadot has paired with Chainlink in order to use its Oracle network. Oracle network provides a way for real-world data to interact with the blockchain. The transaction is made via smart contracts, and able to be integrated into the blockchain. Thanks to the Chainlink network, Polkadot users can store the data on a permanent, unchangeable ledger. Partnerships like this can be very enticing to investors. Polkadot also launched on Ankr (CRYPTO: ANKR) StakeFi. It allows the coin holders to stake their crypto and earn rewards through the Ankr para chain. So, Staking Polkadot is also an important factor for investors who are looking to generate passive income and long-term returns from holding DOT.
Is It Worth Investing In Polkadot In 2022?
The decision to invest in any cryptocurrency should be informed not by its popularity and snowballing developer pool but by the investment goals of the investor. Many reasons influence the investors to invest in Polkadot. Moreover, this year Polkadot has reached an all-time high price and also ranked among the fastest-growing altcoins in 2021. Even when the market crashed, Polkadot remained profitable, setting a support level well above its January 2021 lows. So, Polkadot has reached stability which makes it relatively a low-risk investment. Moreover, if you check the analysis of crypto experts then it would seem like this is the best time to invest in Polkadot. But you should not be hassled to an investment decision. Take enough time to research Polkadot and identify your investment goals and then invest in Polkadot.
FAQs About Is Polkadot A Good Investment – 3 Reasons To Buy Polkadot
Does Polkadot Have A Future?
Yes, as a new cryptocurrency Polkadot has a bright future ahead. Polkadot will be rolling out the most robust platform for security, scalability, and innovation. Moreover, Polkadot is now on track to launch several parachains in 2022.
Can Polkadot Reach 1000 In 2022?
It is highly impossible for Polkadot to reach the 1000 USD mark in 2022. Polkadot is more of a network that is built to serve smart contract and currency applications. So, the demand for Polkadot will increase in the near future and so does its price.
Should I Buy Polkadot Or Cardano?
Both Polkadot and Cardano have a bright future ahead. However, Cardano has a lower risk with less strict penalties for investors and moderators compared to Polkadot. In this regard, Cardano is the better crypto to invest in.
Will Polkadot Burn Coins?
Yes, Polkadot burns coins. In fact, each month Polkadot burns 239,988 DOT tokens that amount to over $10 million.
Last Updated on October 25, 2022 by Magalie D.
Magalie D. is a Diploma holder in Public Administration & Management from McGill University of Canada. She shares management tips here in MGTBlog when she has nothing to do and gets some free time after working in a multinational company at Toronto.