This guide will help you learn what Polkadot is, why it’s an exciting investment opportunity, and how you can add this cryptocurrency to your portfolio.
It’s important to note that even though cryptocurrency is a type of digital currency that uses blockchain technology. Not every blockchain-based network has its separate cryptocurrency. For example, take the Bitcoin network, it has its native token called Bitcoin (BTC), but Ethereum doesn’t have its cryptocurrency. Instead, other protocols built on the Ethereum network can create their native tokens.
Let’s know the important features that make Polkadot an interesting Crypto Investment:
Polkadot Has Low Transaction Fees
In the blockchain world, there’s a lot of room for improvement. As they are today, blockchains are inefficient, expensive, slow, have a poor user experience, high transaction fees, and limited interoperability.
It is where Polkadot comes in to save the day! Polkadot is a general-purpose open-source ecosystem that makes the decentralized web a reality by providing solutions to these problems against most other blockchain projects on the market today.
Polkadot provides low transaction fees for its users compared to Ethereum’s high gas prices. Its fee structure lets people decide how much they want to bid on each transaction and thus compete with one another by offering more DOT towards their bid. It also means that you can get it done dirt cheap if you don’t care about processing your transaction quickly!
Therefore, now is the moment to seal in Polkadot if you haven’t already. Get details and learn about DOT. For example, these questions should be answered like what is DOT and how to buy DOT from a leading cryptocurrency exchange.
Polkadot Connects Heterogenous Blockchains into a Single Network
You have a dog, and your dog doesn’t get along with other dogs. In this scenario, each blockchain is a different dog, and what Polkadot does is build bridges to connect them all.
The idea of these bridges is to make it easier for different blockchains to communicate with each other. In addition, it allows for interoperability and scalability between blockchains that would not usually be able to work together.
Polkadot is a protocol that allows you to create these bridges between chains to solve common problems in the crypto world like scalability, interoperability, and shared security. Moreover, the bridges are open source, and anyone can create them, so there’s no need for permission or approval from any central authority.
Polkadot Will Have Staking Rewards
Because Polkadot is a relatively young project, it has not released staking rewards yet due to the network still being in its infancy. But when they are available, they will work like this:
- Staking rewards will be generated by the network and distributed to those who risk their DOTs.
- The minimum staking period is one year.
- The staking rewards are proportional to your share of the overall stake (the number of DOTs you hold) and the period you have locked up to your DOTs. In other words, if you lock up your DOTs for five years instead of one year, your reward will be larger than if you had only staked them for one year.
- Your staking rewards will be paid out in DOT tokens, not in any other cryptocurrency like Bitcoin or Ethereum. You can then trade these DOTs on exchanges or sell them back to people who want to buy them (maybe even among our readers!).
Multiple Parachains Collaborate to Make a Robust Network
Polkadot will have multiple parachains that work together to make the network more robust.
A Polkadot-based blockchain is composed of multiple parachains connected by a relay chain, and these parachains can each have their own token. The parachains will be able to handle transactions, and smart contracts with high security utilize it for governance and staking.
Parachains can also specialize in certain functionality, such as privacy or asset transfers. So when you send tokens from one chain to another, they might not move from one chain to another but stay on their home chain, ensuring maximum speed and efficiency.
Furthermore, if you’re building your app on Polkadot, you can create your parachain! It would allow you to customize your use case without having to worry about security and scalability at the same time since that’ll all be taken care of by Polkadot itself.
Polkadot is a Sharded Blockchain
Polkadot is a sharded blockchain. Sharding is a scaling solution that breaks up data into smaller pieces to be stored and processed parallel (on different chains or shards). For example, suppose you divide an extensive database of transactions into smaller (shards), each containing only the transactions it needs to process. In that case, the chain can process many transactions in parallel instead of serially. It means faster transaction times and lower fees. Sharding helps blockchains scale by allowing them to handle more traffic than they could with just one chain.
The Polkadot protocol has multiple relay chains, but each relay chain doesn’t have its EVM (Ethereum Virtual Machine for executing applications). Instead, all EVMs are on one relay chain, which makes cross-shard transfers much more straightforward (though still not trivial).
Polkadot has Low Transaction Fees
In the blockchain world, there’s a lot of room for improvement. As they are today, blockchains are inefficient, expensive, slow, have a poor user experience, high transaction fees, and limited interoperability.
It is where Polkadot comes in to save the day! Polkadot is a general-purpose open-source ecosystem that makes the decentralized web a reality. It provides solutions to these problems against most other blockchain projects on the market today.
Polkadot provides low transaction fees for its users compared to Ethereum’s high gas prices. Its fee structure lets people decide how much they want to bid on each transaction and thus compete with one another by offering more DOT (the network’s cryptocurrency) towards their bid. It also means that you can get it done dirt cheap if you don’t care about processing your transaction quickly!
Staking Rewards are Proportional to Stake Deposited and Lockup Length
There are several ways you can earn rewards by staking DOT, which we’ll cover below. The rate at which you earn rewards depends on the amount of DOT you bet and the length of time you choose to stake it. When you gamble your DOT, they’re locked into a staking contract (i.e., they’re no longer available in your wallet) and used to help secure the Polkadot blockchain. Staked DOT provides consensus for block production and relay chain validation. Users who participate in this process receive a reward for helping improve network security and earn additional DOT over time as compensation for their contributions!
Tips are proportional to both stake deposited (the number of DOT) and length of lockup:
- The more tokens one stake, the greater their expected return per unit.
- The longer a user holds onto their staked funds before withdrawing them from the network again (or until they expire). This, too, leads to more significant returns due to compounding gains over time with continuous participation during periods.
Exchanges Accept Dots for Trading
You can buy and sell DOT on the most significant cryptocurrency exchanges. Some of the best exchanges for trading DOT are OKX, Binance, Kraken, and Huobi Global. These four exchanges have the highest trading volumes of any cryptocurrency exchanges where DOT is listed. For example, in April 2021, Kraken had a trading volume of USD 2 billion for DOT trades which was the base currency. At the same time, Huobi Global had a trading volume of USD 1.8 billion over the same period. Together they account for nearly half of all daily dollar-denominated trading volume on exchanges that list DOT as one of their assets.
Polkadot has Good Potential for Growth in 2022 and Beyond
Polkadot is an innovative protocol that can change the way blockchains work together. It has a lot of potential for growth in 2022 and beyond. Polkadot’s recent price performance is a good time to buy DOT.
Investors looking to capitalize on a potentially lucrative space like cryptocurrency can find DOT on several exchanges, including Binance and Kraken. Once you’ve acquired your coins, you can transfer them to your wallet or keep them in the Exchange (although this puts them at greater risk of theft).