Polkadot (DOT) - Neural Trading

Altcoin of the week

Why Polkadot this week?

This altcoin is one of the most conceptually interesting and technologically ambitious blockchains in the whole cryptocurrency ecosystem. Polkadot might be a great case study for beginners because it brings something different from the usual “fast Layer-1” picture. Its difference resides in it’s interoperability that translates by the ability for the blockchains to talk to each other.

Instead of trying to beat the market with something cheaper to buy now, the creator of Polkadot aim to develop a network of blockchains. It could be seen as some sort of “internet of blockchains” where all kinds of specialized chains can coexist, sharing the same security.

That project’s objectives are credible and long standing, beginner friendly, active in a large ecosystem and brings something technologically different to the game.

What is Polkadot (DOT)?

Polkadot is a Layer-0 blockchain protocol that has been founded by Gavin Wood, one of the co-founders of Ethereum. The idea is complex yet simple. Instead of using a single blockchain, Polkadot acts as a central point relay that connects multiple specific and specialized blockchains called Parachains. Their whole network shares the security, the interoperability, the framework of governance and the resources to scale.

To keep it simple, Polkadot is not one blockchain, it’s a network of chains that work together.

Utility and Use Cases

Shared Security

To improve the security of the network, the Parachains, our specialized blockchains, plug into the Polkadot network and benefit from the whole chain’s security. Not only it improves the security, it reduces the cost of launching new blockchains.

Interoperability

Different entities can send messages and assets to one another. Let’s say you have a gaming blockchain in the network, you could send assets to a DeFi chain without any external bridges.

Staking

Like most, token holders can stake DOT to participate in the security of the network and earn rewards over time.

Governance

DOT holder can vote on upgrades and adjustments to the network.

Parachain Slot Auctions

Every new project in the network has to bid for a limited number of Parachain available within the Polkadot network.

Customizable Blockchains

Each blockchain in the network can be built for the needs and desires of their developers once the slot is acquired.

Tokenemics (Supply and Demand, Emissions, Unlock)

The Polkadot network runs on an inflationary model, this means that new DOT are continuously mined for staking rewards and network stimulation.

This means:

The supply is dynamic.
The annual inflation as the writhing of this article is around 7-10% depending on participation.
There is always a supply circulating within the network.
Some rewards are earned by staking.
Most major unlocks are believed to be behind us but the ecosystem is still growing significantly.
During auctions, large amounts of DOT can be locked for 96 weeks in a row limiting their supply temporarily.

Their Roadmap and Development

The Polkadot ecosystem is a transparent on-chain governance system called OpenGov, that will allow to continually upgrade. Their roadmap include but is not limited to:

Asynchronous Backing: A major upgrade to drastically increase the transaction throughput in all the ecosyste.
The Parachain Ecosystem Expansion: Launching more chains to get access to more specialized uses such as gaming, privacy and DeFi.
Enhancements of the Cross-Chain Messaging (XCM): The protocol that enable the chains to communicate with eachother.
Deep Substrate Integration: Tools that will allow the developers to build and upgrade their Parachains fast.

Strengths and Opportunity

The network allows developers to create blockchains with their own flavor while still be connected to the Polkadot ecosystem.
Gavin Wood was involved in the Web3 foundation and gives it alot of credibility and authority.
It’s a network and not only 1 blockchain.
Staking is enabled for security and reward earnings.
It’s actually an innovative product and not just another blockchain that tries to compete on the market.

Weakness and risks

There are some serious competition such as Ethereum, Cosmos and Avalanche with multi-chain ecosystems.
The architecture can be daunting for beginners.
As DOT is inflationary, the long term holders really depend on staking yield to offset the dilution.
It’s less often named in headlines as it is somewhat less known.
The demand on Parachain auctions varies alot and may reduce the lock-ups, which would increase the instant supply.

Main competitors

Here is a short list of direct competitors that Polkadot should keep an eye on:

Ethereum (ETH): Of course presently the largest that grows in the Layer-2 networks.
Cosmos (ATOM): Polkadot’s closest “technological twin” competing in the multi-chain frameworks.
Avalanche (AVAX): Not directly the same technology but their subnets are still creating a layered ecosystem.
Cardano (ADA): A strong technology-driven ecosystem that had a multi-layer design.

Approcahes traders can investigate

Spot trading: small amounts or even leveraged trades can be lucrative. If you know what you are doing.
Dollar Cost Averaging: A classic approach, more appropriate to true beginners in crypto.
Staking: It’s available to everyone and gets you rewards kind of dividends in the stock market.

Where beginners can but DOT?

I personally use and recommend a beginner-friendly option to purchase DOT which is Coinbase. It supports DOT directly and is very simple and intuitive to use. It also has very solid security features.

Use this referral link for easy onboarding:
https://coinbase.com/join/5Q6TFZN?src=referral-link

Conclusion

Polkadot is one of the most ambitious blockchain networks there is right now. It does not focuses only on speed but on interoperability and a multi-layer ecosystem. It can become a good entry gate to introduce yourself to the blockchain networks.

With their development always working hard, the backing of very smart people working for themselves, Polkadot gives a vast value for education on both trading and investing avenues.