Security and interoperability between various blockchain protocols are the goals of the Polkadot (DOT) network. Polkadot uses a relay chain to connect and secure these multiple protocols. The linked blockchains or parachains transport both data and tokens across ecosystems per the Polkadot network. Interoperability makes Polkadot a multi-chain ecosystem where cross-chain registries and computation are possible.
As of September 2021, the DOT price has blasted through a critical resistance, indicating that the bulls are applying buying pressure to the markets. This buying pressure puts DOT in a position to undergo another move to the upside. DOT could soon retest its all-time high in a truly bullish scenario.
Polkadot has also recently made a sensational move into the hugely popular decentralized finance (DeFi) space, announcing its planned integration of the borrowing and lending platform Cream Finance (CREAM). The Cream Finance protocol enables account holders to use their cryptocurrencies as collateral. Users can take out loans without the risk of default, and the borrower has no chance of losing their funds. The total value locked (TVL) on Cream Finance has surpassed $1 billion. Polkadot is on track to integrate a variety of smart contract platforms shortly.
What Is Polkadot?
Engineered by former Ethereum developer Gavin Wood, Polkadot is a layer-1, high-performance, secure and scalable blockchain protocol that bridges numerous blockchains into 1 network. The blockchain-construction framework, Substrate, was used to build the relay chain that drives Polkadot. Polkadot makes developing decentralized apps (Dapps) easier. Some of the more notable project’s building on Polkadot are Moonbeam, Edgeware, and Centrifuge.
The DOT token plays a significant role in the Polkadot network. DOT facilitates staking, governance and payments on the platform. Staking your tokens works in a similar way to a traditional savings account where you deposit cash and earn interest on your savings. Polkadot uses a proof-of-stake consensus mechanism. When you deposit or stake, you earn DOT for using your tokens to help validate transactions on the Polkadot network.
Polkadot Market Position
The market cap of Polkadot as of September 2021 is around $32 billion, ranking it the 9th biggest cryptocurrency according to CoinMarketCap ($32,488,311,127). The current price of a single DOT token is around $30.
Market cap is the most important factor when establishing the actual market value of a network’s circulating token supply. The price of the asset is inconsequential, so you shouldn’t focus too much on it. The market cap helps reveal how risky an asset’s investment is and if there is room for a project to grow. Also, a higher market cap gives investors more liquidity, allowing them to cash out quickly.
Polkadot continues to onboard projects onto its network. Fintech company Liechtenstein Cryptoassets Exchange (LCX) recently announced it had chosen to leverage the Polkadot network to advance its security token standards. LCX is also bringing its DeFi terminal called Fire Salamander to Polkadot. Fire Salamander is a powerful decentralized exchange (DEX) aggregator that currently runs on Ethereum. Now LCX will propel Fire Salamander even further and expand the system by building on top of Polkadot’s parachain technology.
Polkadot’s mid-level (about $30 billion) market cap shows there is much room for Polkadot to grow compared to Ethereum’s $450 billion market cap or that of Cardano’s at $90 billion. Analysts identify the potential capacity for Polkadot to increase in value. The Polkadot ecosystem is forecasted to grow exponentially and, with it, the price of the DOT token.
Crypto Profit’s Bull Case for Polkadot
The Crypto Profit podcast provides excellent technical and fundamental analysis and believes in the long-term prospect of the Polkadot ecosystem. He thinks Polkadot’s aggressive moves into the DeFi space and increasing utility will be catalysts for price growth of the DOT token. The lending platform Parallel Finance aims to fortify its development as a DeFi alternative to Ethereum. Parallel will leverage the Polkadot ecosystem to build a suite of automated market making, staking and derivatives services for Polkadot. If bullish market sentiment continues, he sees Polkadot reaching new all-time highs by the end of the year, reaching prices between $80 to $120.
Shrimpy’s Bear Case for Polkadot
The Shrimpy Academy is made up of blockchain educators helping investors build profitable portfolios. Although Shrimpy believes Polkadot could take significant market share from Ethereum, he also sees a possible bearish scenario for the project. He cites that Polkadot’s 100 parachain limit may discourage smaller projects from competing in the ecosystem. Also, only Polkadot’s relay chain is live; the Polkadot network itself isn’t. Therefore, it is hard to tell if the Polkadot transaction fees are significantly lower than Ethereum’s.
Other competing ecosystems like Solana and Avalanche could also grab substantial market share and overtake Polkadot. If the bearish scenario plays out, Shrimpy didn’t give a price prediction but sees a solid move to the downside for the price of DOT.
Where to Buy Polkadot
You can buy the DOT token at several exchanges, including Coinbase, WeBull and Crypto.com. Coinbase is one of the most easy-to-use exchanges, and Binance has the lowest fees and other unique advantages. However, Binance's full platform is only available outside of the U.S, so if you're from the States, you should consider some of the aforementioned alternatives.
- Best For:Coinbase Learnsecurely through Coinbase's website
Sum of median estimated savings and rewards earned, per user in 2021 across multiple Coinbase programs (excluding sweepstakes). This amount includes fee waivers from Coinbase One (excluding the subscription cost), rewards from Coinbase Card, and staking rewards. ³Crypto rewards is an optional Coinbase offer. Upon purchase of USDC, you will be automatically opted in to rewards. If you’d like to opt out or learn more about rewards, you can click here. The rewards rate is subject to change and can vary by region. Customers will be able to see the latest applicable rates directly within their accounts.
- Best For:Intermediate Traders and Investorssecurely through Webull's app
- Best For:New Investorssecurely through Gemini Crypto's website
- Best For:Mobile Traderssecurely through Voyager's website
*Other fees may apply.
How Long Will it Take for Polkadot to Reach $100?
Polkadot has recently been gaining momentum as trading volume continues to rise. Polkadot has yet to have a breakout similar to other 3rd generation blockchain ecosystems. However, one of the significant components that could drive DOT prices higher is Polkadots’s parachain auctions coming later this year. These auctions are where hundreds of projects compete to acquire one of the limited slots available on the network. As part of the auction process, users vote for projects by locking up DOT tokens for a designated term to help fund the projects. The locking up of tokens reduces the circulating supply, which puts pressure on the price of DOT.
As more projects come on board, Polkadot will increase its user and developer base. The move should cause an increase in the price of DOT. For Polkadot to reach $100, the overall crypto markets must remain bullish. This opinion is only speculation and not financial advice because price predictions are not facts but conjecture.
Where to Store Polkadot Safely
Although some trading platforms allow you to stake your DOT tokens directly on their platforms, it’s never a good idea to leave your crypto assets on an exchange. Some wallets allow you to stake DOT securely, directly inside your wallet. You can store your crypto offline in a hardware wallet or online in a software wallet.
Best Hardware Wallet: Ledger
The Ledger is one of the best hardware wallets to secure your cryptocurrencies. The advantage of storing your DOT in your Ledger is that you also have the ability to stake securely and directly in your hardware wallet.
Best Software Wallet: Trust Wallet
Trust Wallet is one of the most reputable software crypto wallets. Trust Wallet allows you to keep your DOT coins safe while staking them in your wallet. Trust Wallet can receive, store, send and buy Polkadot via its integrated exchange.
One of the biggest additions to the Polkadot ecosystem will be the completion of the Frontier project. Frontier will enable any Substrate chain to host any tooling supported by Ethereum’s Solidity programming language. The completion of Frontier will allow the Polkadot ecosystem to flourish as use cases for the DOT token increase; token holders will reap the rewards.
Current Crypto Prices
As of September 2021, the overall crypto market cap continues to hold above $2 trillion. The Bitcoin price is consolidating around $50,000 and the 200-day moving average, poised to make a convincing break above $50,000. Ethereum has made a big move towards $4,000 and has since corrected back down. For the most up-to-date crypto prices, checkout the table below.
So, Is Polkadot a Good Investment?
The Polkadot ecosystem is steadily growing and is expected to expand exponentially soon. The highly anticipated parachain auctions will continue to onboard new projects, which will add more utility to the DOT token. With such great expectations, some investors are scaling out of Bitcoin and Ethereum and investing in Polkadot. Polkadot’s parachains enable faster processing of transactions and the first parachains will launch later this year, which can process 1 million transactions per second.
The explosion in DeFi protocols moving to Polkadot will surely infringe on Ethereum’s dominance over the DeFi space. The onboarding of hundreds of projects will significantly increase network transactions. Investing in DOT before these upgrades are implemented could prove to be very profitable for DOT holders in the future.
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About Tyran Christian
His expertise is in blockchain technology and cryptocurrencies.