While Bitcoin remains on top of the cryptocurrency market, other upcoming coins challenge this supremacy. One such coin is Polkadot, a relatively new coin carving its niche in this industry. But what is Polkadot, and how does it work? Understanding what this coin is all about will help you determine if it is a worthwhile investment.
Polkadot is a bit different from its predecessor Ethereum. Unlike Ethereum, which has only one avenue for transactions, such that only one transaction can happen simultaneously, Polkadot operates on parachains or parallel chains that are a series of interconnected blockchains. The parachains allow more transactions on the Polkadot blockchain, making it cheaper than carrying out these transactions on Ethereum.
Polkadot developers have also made the platform flexible enough to connect to other blockchains easily. This ability allows it to serve specific requirements. It makes the platform more interactive as compared to Ethereum.
Polkadot has shown some significant growth and seems like a good investment. However, you should keep in mind that there are no clear-cut reasons for investing in any digital currency. All of them are volatile and can either make you money or lead to losses. It all stems down to your research and making informed decisions. That said, here are five reasons why you may want to have the coin in your portfolio.
Polkadot solves interoperability issues
Polkadot protocol is unique as compared to other blockchain platforms. Interoperability has been a challenge for most blockchain-based projects. Blockchain projects are forced to create bridges to connect with other each other. These bridges increase the cost of transactions.
Polkadot is becoming popular with both investors and users because it is solving this problem. The protocol allows communication from public to private networks and private to public networks at no additional cost.
The protocol will enable the networks to transfer any data, assets and tokens. Solving this issue has seen Polkadot rise in popularity and value as it attracts more users, making it a worthwhile investment.
Polkadot allows for specialisation and customisation
This feature is another cause for the popularity of the Polkadot platform. There are many blockchains, and each has different functionalities. No one blockchain provides a platform able to support all functionalities. Polkadot provides a Substrate development framework that allows other blockchains to customise their platforms to fit a particular use case. With different blockchains operating on the same platform, developers can now focus on only the necessary code. This simplification allows more projects on the Polkadot platform that will continue attracting more developers, users, and, by extension, investors. As the Polkadot community continues to grow, so will its value. Investing in it now could see your investment grow tremendously soon. You can make good money if the coin rises even with a small margin.
Polkadot has a robust team
Polkadot project is spearheaded by a group of skilled and experienced developers. This project is part of the Web3 Foundation founded by one of Ethereum developers and co-founder Gavin Wood. Gavin is well known for developing Proof-of-Authority (PoA) consensus, Whisper and Solidity, among other developments. Other developers include Robert Habermeier, an experienced developer with expertise in distributed systems, cryptography and blockchains, as well as Peter Czaban, who holds a Master’s degree from Oxford University and has experience in data analytics. With such a team behind this project, you can expect better and bigger developments to take place in the future. With such prospects, the Polkadot project is likely to grow in value, making it a coin worth investing in.
Polkadot has a high market cap
In addition to its functional features, Polkadot has also shown some impressive growth in its financial side. The coin currently has a market cap of more than $24 billion. Such a market cap indicates that the coin is highly stable. It is unlikely to be affected by sudden market shocks as its high capitalisation keeps it stable. You acquire the market cap by multiplying the total number of coins in circulation with the coin’s current price. Even though all cryptocurrencies are volatile and are adversely affected by sudden market shocks, a high market cap provides some form of cushion from this shock. The market cap also indicates the value of a particular coin. Coins with high market caps are lower-risk investments since they can sustain market shocks. Polkadot has shown that it can do this by holding on to its value despite the crypto market going through severe shocks in the last few months.
Polkadot has a high liquidity
The liquidity of a cryptocurrency is the ease with which you can buy or sell it when you need to convert it into fiat currency without significantly affecting its price. It reflects the general health of a cryptocurrency. A highly liquid coin is easier to trade as you will always find willing buyers and sellers in real-time. You can quickly capitalise on any trading opportunities that present themselves in the market. To determine the liquidity of a coin, check its daily trading volume. The higher it is, the higher the coin’s liquidity. In the last 24 hours, Polkadot has recorded a trading volume of more than $1 billion. This volume indicates that there is enough demand in the crypto market for this coin. Whether you plan to buy it and keep it for the long or short term, you will be able to sell it when you need to.