Guide to Earning from Polkadot

Guide to Earning from Polkadot

Share this article

Jonathan
Jonathan

An editor at Coincrop


08 Aug 2022 | 22 min read
23,213 views

T

here are lots of altcoins in circulation to snatch away Bitcoin’s dominance. Nonetheless, only a few cryptocurrencies stand out to make a difference. Also, it’s difficult for newer assets to establish a solid ground. That’s where Polkadot, another altcoin, set the exception with unbelievable market growth.

However, Polkadot (DOT) isn’t exactly an altcoin dedicated to killing Bitcoin or Ethereum. Ethereum has to come up whenever Polkadot hits the picture. Instead, DOT keeps introducing innovative, helpful techs to change the game. Many enthusiasts termed it the future of the next-gen blockchain network.

Disclaimer: All of the information written on Coincrop is without influence and based on our analysis. No guarantee is offered concerning the accuracy of this information and therefore, any individual following up on it does as such completely at their own risk. Rates are correct at time of publication.

What is Polkadot?

Polkadot is primarily an open-source, scalable, interoperable, sharded, and permission-less blockchain network. And the decentralized cryptocurrency developed by the network is known as Polkadot (DOT). The multi-chain protocol delivered one of the most complex yet trusted cryptocurrencies to this date.

The fully interoperable network is considerably different from most of the well-established altcoins. Its fundamental purpose is to set the ground for the next stage of internet evolution or Web 3.0. The featured multi-chain program even allows arbitrary data to be transferred along with the crypto assets.

Polkadot also aspires to set a connection between public and private blockchain networks. It includes getting connected to other decentralized applications like Oracles. However, Polkadot’s native crypto DOT is to serve three purposes – handing over the staking, bonding, and governing rights to the users.

What is the history of Polkadot?

The crypto unit is relatively new, despite its notably large market share. Polkadot’s history is closely related to Gavin Wood, one of the co-founders of the top altcoin, Ethereum. He introduced the crypto project in 2016 after parting ways with Ethereum. His departure triggered a media storm at the time.

Rumors say Wood was dissatisfied with the slow development of ETH 2.0. He set up his own company to deliver what Ethereum could not provide. DOT raised more than $140 million during its initial coin offering (ICO). And it enlisted Polkadot as one of the most well-funded blockchain projects to date.

Robert Habermeier and Peter Czaban joined Gavin to publish Polkadot’s whitepaper in late 2016. That’s when Parity Technologies, Web3 Foundation, and the Rust community came under one roof. Their initial project was in full swing to raise millions from the mentioned offerings in October 2017.

But the project had a serious setback following Parity Tech’s hack, causing a $150 million loss. And 60% of the fund came from the project ICO. But DOT delivered a strong return in 2018 associated with Web 3.0 details. It launched the BBQ Birch testnet to demonstrate the capability of Web Assembly smart contracts.

The firm reached a new milestone by launching Alexander testnet after completing PoC-3. All the new developments introduced an improved governing mechanism with some additional features. But 2020 came with the breakthrough for the platform. Crypto, DOT started trading in the market by August 2020.

Its promising features attracted the attention of renowned investors. DOT managed to become the no. 9 cryptocurrency by total market capitalization. It remains in no. 11 with a total market cap of $7,059,387,756. And 987,579,315 DOTs are in circulation against a total supply of 1,103,303,471 DOTs.

How is Polkadot created?

It’s difficult to explain and understand the mechanism of blockchain technology. And Polkadot needs further elaboration due to its sheer complexity. Still, you can look at the oversimplified details.

The highly complicated network features in-depth mathematical links to make it work. It has four core components – Relay Chains, Parachains, Parathreads, and Bridges. However, the Relay Chain and Substrate are the two fundamentals. And parachains are blockchains to enable connection to Polkadot.

A substrate is a blockchain-based tool and framework designed by Parity Technologies. A blockchain with the Substrate can set a link directly to the Relay Chain. This can connect other blockchains to the Polkadot ecosystem. But substrate-prior blockchains like BTC/ETH needs a bridge to connect to the Relay Chain.

Again, two extra key factors to make the consensus mechanism work are GRANDPA and BABE. GRANDPA stands for – GHOST-based Recursive Ancestor Deriving Prefix Agreement. And BABE stands for - Blind Assignment for Blockchain Extension. The 1st mechanism is a PoS (Proof of Stake) technique, whereas the latter is a PoW (Proof of Work) technique.

Systematically linked GRANDPA BABE works in parallel. And this working mechanism directly depends on the client’s actions. There are four fundamental categories to justify the network user actions –

    • Validators: DOT network users can become validators by staking tokens. PoS makes the nomination to allocate the tokens randomly. They examine parachain transactions to add them to the Relay Chain.

    • Collators: Collators are to construct blocks on the Relay Chain’s parachains. The blocks contain the most recent transactions taking place on a specific parachain. A winning block’s transactions get added to a Relay Chain Block.

    • Nominators: Nominators choose the validators by delegating DOT tokens to validators. For network simplicity, they receive block rewards proportional to the transaction numbers verified by parachains.

    • Fishermen: The network’s law enforcement force stakes a minimum amount of tokens. Reporting any irregularity by keeping an eye on validators/collators can earn fishermen a handsome amount in DOT.

The entire system also concerns a technology called ‘sharding’. Layer 1 blockchain adapts the tech from the distributed database industry. The method breaks down a network into small-sized distinct database blocks called ‘shards’ for easy management. It enhances the overall processing capacity of a network.

How do I purchase Polkadot?

Buying DOT shouldn’t be a problem for interested investors. Almost all major crypto exchanges feature the asset for trading. However, you can opt for the following exchanges to invest in DOT:

    • eToro

    • Coinbase

    • Kraken

    • Uphold

    • OKEx

    • Crypto.com

    • Binance

    • Huobi Global

    • KuCoin

    • WazirX

    • iTrust Capital

You can invest in Polkadot through an IRA by choosing iTrust Capital. However, eToro is currently the best exchange to spend your money on DOT. But individuals with no investment experience can choose Coinbase. Meanwhile, WazirX is more suitable for Indian users than Western clients.

How do I store Polkadot?

Opening an account should provide a primary facility for storing the purchased crypto. You’re to make deposits in supported fiat currency to buy DOT. It should remain in your account within the exchange.

Polkadot platform itself has an official option to store the coins – Polkadot JS Wallet. It consists of two sections – Controller and Stash. The former can issue network orders, whereas the latter enables storage for a large amount of DOT. And users don’t have to pay any fee or charges to open or keep the wallet.

Also, you can check for some smartphone wallet apps to store the crypto. Polkawallet App is one of the most popular among everyday users. Hardware wallets are excellent for holding many cryptos as a long-term investment. For DOT's cold storage, you can consider Ledger Nano S or Ledger Nano X.

What are the advantages of Polkadot?

    1. Interoperability for Data Transfer

What makes DOT unique is its absolute and certain interoperability. The crypto assets act like different islands with no connection. The absence of data transfer makes trading complex and costly to a significant extent. But Polkadot network can exterminate the gap, allowing easy data transfer between chains.

    2. Public and Private Chain Connection

Establishing a connection between permissioned and permission-less chains is also a drawback. Bubbles in the crypto world need the connection for further enhancement of interaction. You can transfer data from public chains to private ones. And only DOT seems to have a defined system for that to happen.

    3. Lightning-Fast Process for Trading

Despite being highly complex in mechanism, the processing is incredibly fast. It gave a head start for DOT when it debuted in the 2020 market. Also, the parachain mechanism helps reduce processing congestion. Multiple parallel techs activated in the system take minimal time to complete the trades.

    4. Maximization of Decentralization

A decentralized economy without any 3rd party involvement is the main focus of cryptos. And the platform keeps introducing new techs to take the approach to newer levels. The process concerns information or records from DOT trades. Also, maximizing decentralization helps to push the stores of value.

    5. Low-Cost Temporary Connections

Existing exchanges and platforms often impose a high fee for temporary data transfer. But the problem is no longer your concern with the network’s superior interoperability. It even includes enjoying a temporary blockchain connection without significantly costing you.

Polkadot vs. Ethereum

Dr. Gavin Wood’s direct influence ties two top altcoins, Ethereum and Polkadot. And he was motivated to bring things to the world that ETH couldn’t do. That’s why many crypto investors and enthusiasts often look into the comparison of the two assets.

    • They share similar features like the consensus model using the PoS protocol. But DOT uses a more advanced Nominated PoS or NPoS.

    • Ethereum 2.0 is solely developed on Solidity as the programming language. Rust is the programming language for DOT, developed by Substrate.

    • The Relay Chain doesn’t support smart contracts; only parachains do that in Polkadot. Meanwhile, Ethereum 2.0 supports non-changeable smart contracts. Every new data creates a new smart contract in its active ecosystem.

    • The beacon chain holds the entire Ethereum structure in one piece. And it’s the Relay Chain with the associated parachain for DOT to hold the ground. 

    • Sharding is available on either crypto platform as a common feature. It promotes further scalability and superb transaction throughput.

    • DOT handles 166K transactions per second (166K TPS) against its estimated 1M TPS capacity. However, the approximate speed in ETH 2.0 is nearly 100K TPS. Even the maximum transaction speed is considerably lower for Ethereum.

    • Governance is still under debate for Ethereum as it applies to off-chain procedures to make a decision. But DOT enables on-chain governance with different means to issue a proposal.

Market condition is also very different for the two from the start. ETH is considered to be the potential competitor of Bitcoin. Its price, supply, market cap, domination – everything is superior to Polkadot.

Should I Invest in Polkadot?

You can choose DOT above other altcoins for a long-term investment. The crypto market is incredibly volatile and prone to sensitive news. Polkadot is no exception to the fact anyway. But its mechanism for futuristic development makes a solid stand.

Experts expect the asset to grow further considering the overall performance in its 2-year market life.   The cryptocurrency will likely exceed its previous $55 record by 2022.

Polkadot’s innovative blockchain network intrigues many in the industry. The involvement of Wood, the creator of Solidity, also gives the platform a positive point. Its engagement with the Web3 Foundation for perfection should soothe any potential investor.

Polkadot price chart

How much can I earn from Polkadot?

The following table lists centralised saving organizations that will pay a rate of interest on Polkadot assets on a flexible terms basis:

OrganizationDeposit assetsReward assetsAPY Rate
BlockFi

Saving

Deposit PolkadotPolkadot (DOT)

Earn PolkadotPolkadot (DOT)

15.0% - flexible

Finblox

Saving

Deposit PolkadotPolkadot (DOT)

Earn PolkadotPolkadot (DOT)

14.3% - flexible

Okcoin

Saving

Deposit PolkadotPolkadot (DOT)

Earn PolkadotPolkadot (DOT)

13.8% - flexible

Kriptomat

Saving

Deposit PolkadotPolkadot (DOT)

Earn PolkadotPolkadot (DOT)

13.5% - flexible

The following table lists centralised saving organizations that will pay a rate of interest on Polkadot assets on a fixed terms basis:

OrganizationDeposit assetsReward assetsAPY Rate
Everstake

Saving

Deposit PolkadotPolkadot (DOT)

Earn PolkadotPolkadot (DOT)

15.0% - fixed (7 days)

Trofi

Saving

Deposit PolkadotPolkadot (DOT)

Earn PolkadotPolkadot (DOT)

11.0% - fixed (30 days)

Crypto.com

Saving

Deposit PolkadotPolkadot (DOT)

Earn PolkadotPolkadot (DOT)

11.0% - fixed (90 days)

CoinDCX

Saving

Deposit PolkadotPolkadot (DOT)

Earn PolkadotPolkadot (DOT)

9.01% - fixed (7 days)

More sophisticated investors can potentially earn more yield by staking their Polkadot:

OrganizationDeposit assetsReward assetsAPY Rate
OKEx

Staking

Deposit PolkadotPolkadot (DOT)

Earn PolkadotPolkadot (DOT)

17.5% - fixed (15 days)

Bitcoin Suisse

Staking

Deposit PolkadotPolkadot (DOT)

Earn PolkadotPolkadot (DOT)

16.3% - fixed (28 days)

OKEx

Staking

Deposit PolkadotPolkadot (DOT)

Earn PolkadotPolkadot (DOT)

13.1% - fixed (90 days)

Moonstake

Staking

Deposit PolkadotPolkadot (DOT)

Earn PolkadotPolkadot (DOT)

12.6% - flexible

Conclusion

Polkadot has yet to answer many in-depth difficulties related to the cross-chain interaction. Still, it’s the pioneer of taking action to overcome the barriers.

DOT’s consistent growth also indicates the keen interest of investors, experts, and enthusiasts. A stabilized mechanism makes the platform less prone to severe decline.

Crypto investment seems like a good bet as it's slightly lower volatility. But the upcoming internet revolution can skyrocket the asset’s value soon enough.

Polkadot FAQs

Different, complex, authenticate mechanism makes crypto a safe asset. It’s one of the few digital currencies without any major scam. However, you must store and trade DOT from a secure exchange or trading platform. And its market price remains subtle most of the time to suffice your investments.

The journey started by trying to get what ETH couldn’t accomplish. DOT’s superior technology is indeed a plus compared to ETH 2.0. And there are chances for Polkadot to overcome Ethereum like Cardano, Solana, and Flow. But the reality still stands on Ethereum’s side with strong community support.

Governance is well-defined and handed over to the user for complete trading transparency. A built-in multilayered governance model allows simple protocol updates without conducting hard forks. There are two main groups to enable the on-chain system – Technical Committee and Council Members.

The platform itself isn’t precisely risky as a promising technical innovator. But dealing with DOT or its native coin is uncertain. The crypto market is volatile and sensitive, being highly unpredictable. Still, many good reasons exist for the cryptocurrency to avail its value and make considerable profits.


Jonathan

Jonathan

An editor at Coincrop
View articles

Jonathan is a Crop Crop staff writer based in the UK, covering the best rates for cryptocurrency earning and borrowing products. When not at work, he's likely sailing.


Our sponsor

CoinLoan combine the best of traditional and novel finance helping you borrow, swap and grow your assets.

Compare over 42,421 CeFi and DeFi products across more than 208 organizations here