Why Polkadot is key to your crypto portfolio
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:
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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:
| Organization | Deposit assets | Reward assets | APY Rate |
|---|---|---|---|
| Bitcoin Suisse Staking |
|
| 18.1% - fixed (28 days) |
| OKEx Staking |
|
| 17.5% - fixed (15 days) |
| P2P Validator Staking |
|
| 15.0% - flexible |
| Stakin Staking |
|
| 14.2% - fixed (28 days) |
| Staked Staking |
|
| 14.1% - flexible |
Polkadot (DOT)
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:
| Organization | Deposit assets | Reward assets | APY Rate |
|---|---|---|---|
| Nexo Saving |
|
| 15.0% - flexible |
| BlockFi Saving |
|
| 15.0% - flexible |
| Everstake Saving |
|
| 15.0% - fixed (7 days) |
| Finblox Saving |
|
| 14.3% - flexible |
| Kriptomat Saving |
|
| 13.5% - flexible |
Nexo (NEXO)Polkadot FAQs
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
An editor at CoincropJonathan 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.
