Anyone who has been in the crypto industry for more than a minute will explain why Polkadot is commonly referred to as the ‘Ethereum Killer.’ Despite it not being a smart contract platform, Polkadot has a flexible architectural system that supports several building technologies, including smart contract platforms.
Although Polkadot is relatively new in the crypto scene, the digital asset has proved itself worthy of being in the top ranks. It has risen to the top-ten cryptocurrencies during its short existence period, even with an ICO event marred with hacker attacks.
So, how does Polkadot pose a threat to the world’s largest smart contract platform? Keep reading for some insightful information about the Polkadot (DOT) coin, its history, functionalities, and anything else you should know about the Ethereum killer.
- 1 What is Polkadot? A Brief History
- 2 The DOT Token ICO
- 3 DOT Redenomination
- 4 Polkadot’s Building Blocks: The DOT Ecosystem
- 5 How Can I Use DOT Tokens?
- 6 Advantages of DOT
- 7 Polkadot Coin Price History
- 8 How to Get DOT Tokens
- 9 Polkadot News
- 10 Polkadot vs. Ethereum vs. Cardano
- 11 What Next for DOT?
What is Polkadot? A Brief History
Dr. Gavin Wood, the Ethereum co-founder, is the brains behind Polkadot. Together with Peter Czaban and Robert Herbermeier, he sought to build a blockchain that would correct Ethereum’s shortcomings. The primary reason behind the development of Polkadot was to increase interoperability in the blockchain space, an area where Gavin felt that Ethereum 2.0 was developing too slowly.
The Polkadot platform development began in 2016, several months after Dr. Wood’s departure from Ethereum. By the end of the year, Wood had published the project’s first whitepaper. Polkadot would be the mother of all blockchains, unifying blockchains into one network.
Although Dr. Wood maintains that Polkadot isn’t Ethereum’s competitor, he began designing the network as a sharded version of Ethereum.
According to the project’s website, Polkadot is the next-generation blockchain protocol that unites an entire network of purpose-built blockchains, allowing them to work seamlessly at scale. It means developers can build other blockchains on the platform and connect them to share data between themselves without running into any trouble.
Through the Polkadot platform, independent public and private blockchains will be able to remain connected and collaborate. The protocol would come in handy to compound the blockchains’ strengths while minimizing their weaknesses.
In doing so, the Polkadot network solves two common issues in the crypto and blockchain space; scalability and interoperability. We’ll delve into the details of how this is made possible by the entire ecosystem and its unique features and functionalities.
The DOT ($DOT) token is the native token of the platform and is responsible for powering the entire network. Therefore, DOT token holders govern the entire protocol. Within a short time after the launch, DOT was already gearing up for the top ten cryptocurrencies on major platforms worldwide. Today, $DOT ranks 6th, with a total market cap of $31,839,304,856.
The DOT Token ICO
The DOT ICO roots trace back to 2015 when Wood co-founded Parity Technologies, together with Jutta Steiner. Parity would be in charge of developing node software for Ethereum and implementing projects that wanted to launch on the network. Shortly after its inception, Parity shifted its attention to Polkadot and a related project, Substrate.
Dr. Wood and Peter Czaban founded the Web 3 Foundation in 2017. Web3 Foundation is a Swiss-based non-profit that funds the research and development for teams building on the decentralized web and is in charge of the Polkadot network development. Web3 Foundation then commissioned Parity Technologies to develop Polkadot’s architecture and several other blockchain-related projects, including a multi-signature wallet to store the ICO’s funds.
Web3 Foundation held the DOT ICO in October 2017 and raised $145 million in Ethereum through two rounds of Dutch auctions. The foundation sold the DOT token for $0.29. During the ICO, 10 million DOT tokens were created as the platform’s native asset. 50% of this supply was allocated to the token sale investors, while Web3 received 30% to develop the Polkadot network further. The foundation retained a further 11.6% for future fundraising efforts. The 2019 private sale investors received 5%, while the 2020 token sale investors received 3.4% of the supply.
Barely a month after the ICO, the development team hit a snag. Hackers managed to get into the Parity multi-signature wallet used to store funds from the ICO.
In its ICO back in 2017, it sold each DOT token at $30. Currently, its price seems to have moved up only by $ 6, placing the DOT price at $36.60803478, but of course, there’s a catch.
Last year, on August 21st, the DOT token was effectively redenominated by a factor of 100. What this means is that DOT owners received 100 new DOT for the old ones they held. In more detail, original investors who purchased 1 DOT at $30 back in 2017 now have 100 DOT priced at $6 each, giving a total value of $600 for one coin.
If you think that the redenomination has something to do with its meteoric rise, then you are right to think so. Before the redenomination occurred, DOT was trading at $2.92, and since then, its price surged exponentially, making an enormous increase of roughly around 2000% to its investors. As it is with cryptocurrencies, there were a lot of controversies surrounding the event. Crypto exchanges such as Kraken and Binance listed the crypto before the redenomination despite a team’s clear warning. The result of this was sheer confusion and substantial monetary losses.
Polkadot’s Building Blocks: The DOT Ecosystem
The Polkadot network is 100% an open-source project brought to life by the Web3 Foundation. Being open-source, anyone can build services on Polkadot, contribute to the codebase, or run a node. It also allows it to facilitate interoperability between other blockchains, and this makes it unique, setting it apart from other blockchains such as Ethereum.
Core Functions of Polkadot in the Ecosystem
As the network’s native token, DOT powers the entire network. It has four crucial roles in the ecosystem, as outlined below.
As a community-powered platform, it’s only fair that token users are involved in the governance. DOT holders are entitled to complete control over the protocol. Unlike many blockchain platforms where only a few participants call the shots, Polkadot ensures everyone has a say, as long as they have some DOT tokens in their wallet. Therefore, miners’ benefits on other platforms are available for all token holders on the Polkadot protocol.
DOT holders participate in several activities under the network’s governance mechanism. These include managing protocol upgrades and fixes, determining network fees, and the addition or removal of parachains.
Polkadot uses Game Theory to facilitate its consensus mechanism and to remain secure for all network participants. Game Theory maintains that good actors in the system will get rewarded for staking their tokens. On the other hand, malicious participants will lose their DOT tokens as punishment by the network.
DOT holders have to play active roles for the network to complete valid transactions over parachains. They can achieve this by staking their tokens to perform the network’s functions.
The entire Polkadot system depends on the addition of new parachains. Parachains are the equivalent of blockchains, but in this case are customizable to allow polkadot to be interoperable with other native blockchains like Ethereum and Bitcoin. Users on the network can lock their DOT tokens during slot lease to secure a parachain slot. By bonding DOT tokens on the Polkadot network, it paves the way for the formation of new parachains.
Removing the bonded tokens gets rid of parachains. It takes place when the lease period lapses and the parachains become outdated or non-useful. The bonded tokens are then released back to the account that reserved them.
Another role that DOT plays in the ecosystem is accounting for vesting funds. Users can lock their tokens, which will make them untransferable. However, the tokens can be used elsewhere in the ecosystem. For example, they can come in handy for voting and staking.
The vesting funds are released gradually, following a linear release schedule. At each block, several tokens get released, although they don’t immediately reflect on-chain.
How Can I Use DOT Tokens?
Now that you know the functionalities of the DOT token, you’re probably thinking of obtaining some. So, how will you use the coins? Here are a few suggestions.
- Participate in the ecosystem
One of the most significant advantages of holding DOT tokens is that it gives holders the rights to perform certain functions within the Polkadot Network. Token holders can assume different roles, as defined by the positions of the native token on the network.
As a DOT token holder, you can participate in the decision-making process whenever upgrades and changes to the network are made available. You also get to be a collator on the web and participate in the token’s governance. Additionally, you can act as a validator, fisherman, or nominator on the platform.
- Financial transactions
Like many other digital assets, DOT tokens can facilitate transactions. The cryptocurrency is listed on major exchanges worldwide, allowing crypto enthusiasts to use the tokens just as they would other cryptocurrencies.
Advantages of DOT
The Polkadot project, as we have seen, is set to revolutionize blockchain technology by offering a bridge-like framework that provides the following advantages:
- Adaptable Consensus Mechanism: Polkadot delivers an open and flexible consensus mechanism to host the different blockchains on different consensus mechanisms.
- Infinite Scalability: Polkadot can support an endless number of blockchains and allow them to connect. These are known as para-chains.
- Upgradeability: Polkadot can support upgrades without using drastic hard forks to apply changes.
- Low Transaction Fees: Polkadot holds onto its claim to have lower transaction fees than Ethereum.
- Transactions with different chains: The framework can support the transfer of value between various blockchains. It is necessary for true interoperability and integration.
- Defined Management Mechanisms: These have defined management mechanisms that eliminate significant problems faced by other blockchains.
- Integrated Security: A unified security shield can protect the blockchain connected to Polkadot. It can help protect small circuits that do not have adequate load protection.
Polkadot Coin Price History
Unfortunately, the old DOT price data appears to have been removed from CoinMarketCap and Coingecko (presumably to avoid confusion). Before the deletion, the price of old DOT tokens was around $ 400 per coin, roughly the same price as Ethereum.
The price of the new DOT is currently just about $ 36. With that in mind, there isn’t much to say about DOT’s price history. Since the turnaround on August 21st, DOT prices have risen quite rapidly, as the cryptocurrency market keeps growing.
How to Get DOT Tokens
By owning and staking DOT, users gain the ability to vote on upgrades to the Polkadot network. Each vote is proportional to the amount of DOT they risk. Investing in DOT, however, should not be a hassle; follow the simple steps below:
Step 1: Open an Online Account
The easiest way to buy and sell cryptocurrency is through a crypto broker. Your broker allows you to convert fiat currency or other cryptocurrencies to Polkadots online with just a few clicks.
If you’re not sure where to buy polka dots, here are exchanges you can consider.
iTrustCapital is a self-managed IRA provider that allows you to invest in cryptocurrencies, gold, and silver through your retirement account. iTrustCapital focuses on providing investors with a clear and easy-to-understand platform which can be essential if you have never bought or sold alternative investments in the past.
When you reach retirement age, iTrustCapital allows you to choose whether you want reimbursements in cash or with the assets you invest. Although the platform offers a limited selection of cryptocurrencies compared to brokers like Coinbase, the simple structure and unique IRA offerings make iTrustCapital a great place to invest.
Kraken is a popular cryptocurrency exchange that offers access to new offerings. Kraken is characterized by a high-security level, with most coins stored in offline cold stores and servers monitored continuously by the military. This security obligation significantly reduces the chances of being hacked.
The low price is also worth considering. The fee schedule for attending Kraken participants is subject to different activity levels, with more active investors enjoying rock bottom prices. It can be a big boon for frequent investors.
Apart from high security and various tokens, Kraken also offers 24/7 customer service options to ensure you don’t have to trade alone.
Step 2: Buy a Wallet
For you to store your coins, a cryptocurrency wallet is crucial.
To get the highest level of security, it is best if you invest in a cold wallet. Cold wallets can be bought from sites like Amazon and come in the form of a flash drive. They offer more security because they are not accessible online; hence hackers can’t access your coins.
Step 3: Make Your Purchase
The final step in obtaining the cryptocurrency is placing an order through your broker’s or exchange’s trading platform.
Once your broker has completed your order, transfer the coins to the purchased wallet.
Can you Mine DOT?
Mining Polkadot is unnecessary even though it is still possible. Polkadot allows you to stake some of your tokens in the system to keep everything running, verifying that the transactions made are legit and not manipulated by hackers. In return for staking your coins, you get rewarded with more cash! In the case of Polkadot, all coins were pre-mined and sold during the ICO and afterward on exchanges.
If you plan on mining, you can do so on your computer, though it’s not advisable. The most preferred way is investing in an ASIC Miner. However, it is difficult to determine how profitable Polkadot mining is. Several variables are attached to it, such as the cost of electricity, cost of a mining setup, taxes, etc. Therefore, you must check the Polkadot profitability charts to show how profitable Polkadot mining is in your location.
YouTube famous Logan Paul recently sold $3.5 million worth of crypto-backed digital art in less than 24 hours. He collaborated with Bondly, a decentralized product in the Polkadot ecosystem, to create his Pokemon-inspired non-fungible tokens (NFTs) line.
The Polkadot ecosystem’s excitement continues to build ahead of the upcoming parachain auction, which will allow the Polkadot network to connect to other established networks such as Bitcoin and Ethereum. The data transfer mechanism between the different chains is known as the cross-chain message passing-lite and is currently in finalization during the Rococo phase of the project roadmap.
Once the code is entirely in check, Polkadot management will need to vote to activate Parachain’s functionality by upgrading it on-the-go, followed by a vote to start the slot auction and add useful parachains.
In another exciting event, FD7 Ventures, a Dubai-based crypto fund, announced today that it plans to raise $ 750 million from its Bitcoin holdings over the next 30 days to buy two altcoins, Cardano (ADA) and Polkadot (DOT).
FD7 Ventures reported that this move would better suit its investors’ needs looking to diversify their portfolios in the cryptocurrency space. While Bitcoin offers more robust opportunities in the long term, the popular cryptocurrency has become a relatively mature asset. Because of this, successful alternative coins have attracted investors’ interest.
Polkadot vs. Ethereum vs. Cardano
Crypto enthusiasts often pit Cardano, Polkadot, and Ethereum against one another, with Cardano and Polkadot often referred to as ‘Ethereum Killers.’
Despite persistent high gas fees on the Ethereum network and scalability issues, Ethereum has remained the most dominant network. But with developments springing up to improve the Cardano, Ethereum should probably be worried. The latest, the Mary Hard Fork, allows users to create their unique tokens, including NFTs, and transact directly with those on the Cardano platform. More reason for making it a viable competitor is its 3rd rank on CoinMarketCap immediately after Ethereum.
Polkadot shows potential, too, as it surged and cut in close at the sixth rank by market cap in a concise space of time. With the much attention it is gaining, it could very quickly overtake both Ethereum and Cardano. The question of whether they can co-exist is still vague, and only time will tell.
What Next for DOT?
To capture Polkadot’s roadmap in a single word, cautious would be the most suitable. Its developer, the Web3 Foundation, took its time to develop a fair and working roadmap.
The KILT core network, scheduled to go live this year, will be the first project to print a token with Polimec. KILT uses blockchain-based identities and credentials verifiable across multiple industries, including areas such as IoT (Internet of Things).
The launch is part of a government program in Germany, GAIA-X, which investigates blockchain use cases. It is in support of German and Swiss companies Hubert Burda Media and Ringier.
Polkadot will drastically change the way the Internet works. Decentralization has had a significant impact on security, data costs, and sensors. It will be more difficult for the government to block a decentralized network. Polkadot will enable more flexible anti-censorship applications that enhance existing applications such as Blockchain DNS and Tor. More decentralization increases security because there are more ways to obscure it. Due to higher scalability, this network can react more stably to higher network loads.
The native DOT token has not been around for trading on any crypto exchange in the world for long. However, the Polkadot blockchain’s potential is undeniable, and many experts see the potential for future growth. Polkadot currently has a market cap of $35.62B, with the total available supply of Polkadot is 0.97B DOT.
Polkadot Price Forecast
So, what does the future for $DOT’s price look like? The recent attention that $DOT has been getting from influential people like Logan Paul is fuelling the coin, and it seems to be headed upwards. The general feeling among the crypto community is that the token is headed to greater heights. A forecast by Wallet Investor shows a general upward trend for the next several months.
In terms of price, $DOT currently costs $35.74 at the time of writing. Digital Coin Price predicts the coin could reach $158.97 by around 2028.
Source: Digital Coin Price
Whatever the future holds for DOT, the crypto community can only wait and see. However, it’s clear that the digital token is headed for more, given the strides it’s already making. While the crypto industry at large is excited, we cannot wait to see what else Polkadot has in store.
Thanh Lanh Tran(1989) is Chief Editor from BitcoinUSD.com