Polkadot (CCC:DOT-USD) is a major cryptocurrency that is well 0ff its highs but is looking to recover by the end of the year. So far this year, the DOT crypto token is up 76.7% from $9.29, where it closed on Dec. 31, to $16.42 as of the time of publication.
Nevertheless, it is down 65.7% from its peak on May 14 of $47.96 per DOT token. Even if the crypto were to recover half of that loss, it would mean a huge gain from today’s price of $16.42.
There are several reasons why DOT crypto has a good chance of recovering.
Why Polkadot Can Recover
Given Polkadot’s mission to be a “platform of platforms” to upgrade Ethereum (CCC:ETH-USD) and overcome its many drawbacks, there is a good chance it can recover. For one, Polkadot is designed to connect the different “dots” of other blockchains. It is often referred to as a multi-chain network, according to Decrypt online magazine. So once other crypto prices begin to recover, Polkadot could gain as much or more, given its leverage to many blockchains.
The simplest explanation that I have heard to describe Polkadot is that it acts “like how HTML allows sites, browsers and servers to interact with each other.” It cleans up the messy crypto-mining processes of many blockchains and allows for DApps (decentralized apps) and smart contracts to be created.
Second, given its reputation as a linking crypto blockchain, Polkadot hopes to catch up to Ethereum in terms of popularity as a smart contract platform. This includes the ever-popular DeFi (decentralized finance) applications.
Where This Leaves Polkadot Now
Polkadot is a major cryptocurrency, ranking number nine by Coinmarketcap.com in terms of market capitalization at $15.6 billion. Polkadot started in late 2016 with a white paper written by Gavin Wood, also a co-founder of Ethereum. A company called the Web3 Foundation had an ICO (initial coin offering) in 2017 that raised over $140 million and several other offerings subsequently.
Over 80% of DApps (decentralized apps) are built on Ethereum today, according to Hackernoon.com. But Polkadot is trying to making inroads. For example, the article in Hackernoon cited above shows five different smart contract platforms that operate on Polkadot.
Reading through that article, it is clear that the DOT crypto offers certain advantages over Ethereum for developers. The primary benefits of basing an app on Polkadot rather than Ethereum are speed and transaction costs.
Ethereum has issues today with network congestion, high transaction fees and a lack of scalability. It is hoping to do away with a lot of these problems, as I have written about recently with several upcoming changes. But until then, Polkadot offers a much cleaner and faster solution.
Forkast News recently published a very informative history of how Polkadot started. It discusses the recent evolution into one of the “hottest blockchains right now.”
This includes its recent rollout of “parachains,” which are standalone, independent blockchains hosted on the Polkadot platform. By paying a fee to Polkadot’s development firm, Parity Technologies, parachains can start up and operate their own privately governed blockchains quickly and efficiently. This enhances their ability to set up smart contracts and Dapps. Gavin Wood, the founder of Polkadot, announced on May 17 the formation and purpose of parachains in his recent blog on Medium.
What to Do With the DOT Crypto Token
Polkadot is developing a platform that provides an alternative to Ethereum with scalability, governance and lower costs. There is a very good chance it can succeed, especially if it can garner a growing percentage of the smart contract and DApp market.
Investing in DOT crypto is a speculative investment, and it’s not for everyone. But if you want to hedge your exposure to Ethereum, this is a good way to do it.
On the date of publication, Mark R. Hake held a long position in Ethereum. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Mark Hake writes about personal finance on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.
