Updated- 12/07/2021, 23:10 IST
Talking about altcoin, the co-founder of Ethereum, Gravin wood introduced us to new type of altcoin, Polkadot (DOT). With the first year of its launch Polkadot deemed to one the most successful cryptocurrency of 2020! How did it happen? Is this altcoin worth considering to invest you hard earned money? let us discuss the same in this blog…
What is Polkadot ??
DOT crypto is a next-gen, cutting-edge blockchain protocol that brings together numerous specific blockchains to a unified network. Just like Ether, it is a blockchain-powered network but more scalable. The central chain ensures the security of the entire network. On the other hand, the sidechains increase the network’s capacity.It is run by Web3 Foundation on an open-source project. The aim of Polkadot cryptocurrency is to eliminate the slow communication process between public and private blockchains.
The difference between Polkadot and Bitcoin is that Polkadot is a Proof of State (PoS) network and Bitcoin is a Proof of Work (PoW) network. This implies that if you wish to earn DOT coins on the blockchain, you need to hold a specific amount of DOT and stake it.
Essentially, a user will be rewarded for staking DOT in return for risking their holdings network validation.
Polkadot has quickly become one of the well-known cryptocurrencies, especially since 2020. Moreover, it is also viewed as a promising blockchain that can take over Ether’s dominance in 2021.
Why Polkadot is Unique?
Polkadot attempts to tackle one of the most pressing issues facing the blockchain sector, interoperability. Currently, the market is in a state of extreme compartmentalization. Blockchains function as separate islands of data with little way of leveraging the information the other networks posses. Polkadot eliminates these concerns through the integration of a variety of proprietary technologies. Notably, Polkadot is even able to communicate information from private blockchains to public networks and vice versa.
History of Polkadot (DOT)
The history of Polkadot actually starts with the history of Ethereum, as Polkadot was founded by Ethereum co-developer, Gavin wood. Wood was the co-founder, initial CTO, and core developer of Ethereum. He is also well known as the individual that invented the Solidity smart contract programming language that resides at the core of Ethereum’s functionality.
Wood decided to leave Ethereum to build a more robust programmable blockchain in early 2016. Specifically, he pondered how to develop a sharded version of Ethereum. By October 2016, he had the technical aspects worked out and had published the blockchain’s whitepaper.
Exactly a year later, Polkadot launched its Initial Coin Offering. The event, which took place from October 15–27, 2017, was one of the largest ICOs of the time. Specifically, the company secured around $145 million. However, the success of the event was short-lived.
Polkadot hacked :
Less than two weeks later, Parity Technologies, originally EthCore, one of the main development teams behind Polkadot was hacked. This hack resulted in a combined loss of around 150 million USD. Sadly, Polkadot’s ICO funding accounted for around 60%of the funds frozen during the hack. This loss of funding slowed development during the early days of the project.
How Does Polkadot (DOT) Work?
The Polkadot system functions in a unique manner that unites a network of heterogeneous blockchains called parachains and parathreads. These chains connect to and are secured by the Polkadot Relay Chain. There are also instances where these chains connect to external networks via bridges as well. This design provides Polkadot with added flexibility. Here are the main components of the network.
At the core of Polkadot’s functionality is the relay chain. This protocol is responsible for the network’s shared security, consensus, and cross-chain interoperability. Notably, consensus on the relay chain is achieved through two single-responsibility consensus mechanisms. The first one is for block production and the second one helps to accomplish finality.
Parachains are sovereign blockchains. These are networks that have their own tokens. In most instances, these networks are optimized for specific use cases. Keenly, Parachains are free to design their own governance mechanisms, allowing for maximum freedom without affecting other parachains.
Parathreads function similarly to parachains but with a few minor tweaks. These networks run on a pay-as-you-go model. This model is more cost-efficient for blockchains that don’t need continuous network connectivity to function correctly.
Another important feature are bridges. This protocol allows parachains and parathreads to connect and communicate with external networks like Bitcoin. Bridges expand the interoperability of the network.
Is Polkadot (DOT) worth investing??In 2020, Polka crypto was one of the most profitable and most trusted cryptocurrencies. If we go back to 2017, the Polkadot Foundation arranged an ICO wherein it raised around US$140 million. However, it went into losses and hence had to undergo two sales rounds in 2019 and 2020. In 2017, the price of a DOT was US$30 and the DOT holdings were recovered in August 2020. This means, users who purchased a US$30 coin, US$100 new coins were offered for US$6 each.
The DOT journey started at US$6, but then it encountered a sudden fall to US$2.81. Because of the new redonimation, it rendered multiple tokens that boosted its market capitalization from 0 to US$5 billion in just one day. Hence, in a very short time frame, Polkadot has acquired a top cryptocurrency position.
Further, recently, Bitcoin has processed 3 transactions/second and Ethereum has processed 15 transactions/second. This indicates the scalability issue both these cryptocurrencies face. Yet, Polkadot is a winner in scalability.
Polkadot’s parachains enable faster processing of transactions in parallel. This then boosts throughput. It is said that the first parachains will launch later this year, which can process 1 million transactions/second.
With such great prospects, investors are moving away from Bitcoin and Ethereum and investing in Polkadot.
Should we Invest Now?
Yes, definitely. 2021 is the right time to invest in Polkadot. In May 2021, Polkadot was hit hard due to market volatility and came to US$17.71 from an all high of US$48.68. In June, it has been fluctuating and growing steadily. On June 12th, the price of polkadotwas US$20.17. However, since then, it has been growing. However Investing in such capital is dubious because the crypto market is so volatile hence it is not recommended to invest in such cryptos before analysing the ups downs of the market.
How to Buy Polkadot (DOT)?
Polkadot (DOT) is available on the following exchanges:
KRAKENis the best option for USA residents.
BINANCE– Best for India, Australia, Canada, Singapore, UK, and most of the world. USA residents cannot purchase DOT here.