Why Polkadot is key to your crypto portfolio

Why Polkadot is key to your crypto portfolio

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Jonathan
Jonathan

An editor at Coincrop


03 Apr 2022 | 8 min read
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P

olkadot is a next-generation blockchain protocol that brings together multiple blockchains into one network. Polkadot sets out to address many of the limitations (such as scalability and high gas fees) that are associated with other blockchains.

In this guide:

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 can best be described as a sharded bridge-like protocol which aims to maintain value transfer, communication and bringing together the security of blockchains. Blockchains can work with each other in a parallel fashion by unifying them into one network.

The developers have described Polkadot as a project “by developers for developers”. Its objective is to connect private and public chains, Dapps, oracles and services. Ultimately it seeks to be the “plumbing” for the Web3 Internet.

The governance model

The Polkadot governance model is well defined and on-chain. It has been purposively designed to include all stakeholders in the governance council. If a user wants to participate in the system’s decision-making, they simply need to hold the native $DOT token.

At present, Polkadot’s Council and Technical Committee are setup such that its direction is the responsibility of $DOT holders. If someone wants to make a modification to the protocol then a proposal if submitted by the Council – these proposals are then voted on by $DOT holders.

The Polkadot advantage

The bridge-like framework that is constructed around the Polkadot protocol brings a number of advantages:

    • “Upgradeability” – It is possible to upgrade Polkadot without the need to implement hard forks in the code.

    • Pooled security – A unifying security umbrella facilitates the securing of blockchains.

    • Establish governance – The process of governance is well defined.

    • Adaptable consensus mechanism – Polkadot has the ability to execute on multiple consensus mechanisms.    

    • Scalability without limitation – By using para-chains, Polkadot can in theory support an infinite number of blockchains.

The Polkadot token

The Polkadot token is denoted by the symbol $DOT – it is the native asset of the Polkadot platform. There are three purposes of the token: bonding, staking and governance.

The total supply of the Polkadot token is 10 million units.

 

At the time of writing, the Polkadot token is priced at $DOT - $9.31

Polkadot bonding

Bonding is the function of setting aside $DOT in order to create new para-chains. It is further extension of proof of stake.

Polkadot staking

In order to ensure that only valid transactions are confirmed, decentralised networks use consensus mechanisms. Holders of $DOT tokens have the option to participate in staking.

In return for staking $DOT (and risking your holdings for the validation of the network), individuals are paid a reward. This process acts as a disincentive for bad actors as they would otherwise lose their stake if they acted inproperly.

The following are reward rates paid for staking your Polkadot:

OrganizationDeposit assetsReward assetsAPY Rate
Bitcoin Suisse

Staking

Deposit PolkadotPolkadot (DOT)

Earn PolkadotPolkadot (DOT)

18.1% - fixed (28 days)

OKEx

Staking

Deposit PolkadotPolkadot (DOT)

Earn PolkadotPolkadot (DOT)

17.5% - fixed (15 days)

P2P Validator

Staking

Deposit PolkadotPolkadot (DOT)

Earn PolkadotPolkadot (DOT)

15.0% - flexible

Stakin

Staking

Deposit PolkadotPolkadot (DOT)

Earn PolkadotPolkadot (DOT)

14.2% - fixed (28 days)

Staked

Staking

Deposit PolkadotPolkadot (DOT)

Earn PolkadotPolkadot (DOT)

14.1% - flexible

Polkadot governance

Holders of $DOT have the right to participate in governance of the protocol. Governance issues include issues around auctions, para-chain schedules, auctions, network fees etc.

Earning with Polkadot

Holders of Polkadot token $DOT who are prepared to lend it to organizations can currently earn the following by saving:

OrganizationDeposit assetsReward assetsAPY Rate
Nexo

Saving

Deposit PolkadotPolkadot (DOT)

Earn NexoNexo (NEXO)

15.0% - flexible

BlockFi

Saving

Deposit PolkadotPolkadot (DOT)

Earn PolkadotPolkadot (DOT)

15.0% - flexible

Everstake

Saving

Deposit PolkadotPolkadot (DOT)

Earn PolkadotPolkadot (DOT)

15.0% - fixed (7 days)

Finblox

Saving

Deposit PolkadotPolkadot (DOT)

Earn PolkadotPolkadot (DOT)

14.3% - flexible

Kriptomat

Saving

Deposit PolkadotPolkadot (DOT)

Earn PolkadotPolkadot (DOT)

13.5% - flexible

Polkadot FAQs

Polkadot can be purchased from centralised exchanges such as Binance or Coinbase.

The simplest way to stake your Polkadot is to use a centralised organization such as P2P Validator, Chorus or Staked.

Polkadot was founded by Gavin Wood, Peter Czaban, and Robert Habermeier.

The inflation rate is approximately 10% per year.

The Genesis block of the Polkadot network was launched on May 26, 2020 at 15:36:21 UTC.

Summary

Currently there are over 130 blockchain development teams around the world, building and launching their own parachains in Polkadot's ecosystem. This is down to the distinct advantages within the parachain model over alternative technologies.

Polkadot is in its infancy, to me it’s not a Shiba that will mushroom by millions of percent, only to collapse as quickly. But it is a long-term project that will show go growth over a long period, it will be reliable and robust investment.

Don’t forget that you can also use your stored Polkadot to gain addition income from purely holding it and then investing it by either Staking, Yield farming or savings.


Jonathan

Jonathan

An editor at Coincrop
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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.


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