Interest in Polkadot (CCC:DOT-USD) should begin with a 10,000 foot view. It is that sort of understanding which makes it interesting to watch. Its broad utility fundamentally separates it from get-rich-quick scam coins.
Let’s get into the broader ideas behind Polkadot which are very much worth understanding.
When trying to understand any cryptocurrency, it’s worthwhile to simply consider utility. What a token does or how a crypto project will be applied matters. Remember, these are nascent technologies.
We understand what the internet is today. But prior to its inception, it was those who understood its value first that capitalized most. The same is true for any technology. The more you understand about its utility and the earlier, the more you stand to gain.
In the case of Polkadot, that means understanding that it could be a fundamental piece of the greater cryptocurrency narrative.
The best way I’ve heard that explained is to suggest that Polkadot is analogous to HTML. HTML, or HyperText Markup Language, is the code and symbols that determine how files are displayed on the internet. It tells your browser how to display the data encrypted within it. As this article put it, “HTML enables sites, browsers, and servers to interact with each other.”
As Polkadot notes on its website, “Polkadot is a network protocol that allows arbitrary data—not just tokens—to be transferred across blockchains.”
This doesn’t mean that Polkadot is similar to HTML in that it does exactly the same things. But rather, what this means is that Polkadot can transfer data from private blockchains to public blockchains.
That allows applications to be built using permissioned data that is then sent to a public chain. So, if a financial firm wants to build an app based on some set of private data, it could be done via DOT and then shared in a permissionless manner.
In that theoretical example, developers would simply write the code in the Rust, C++, and Golang languages, resulting in an application that shares data across blockchains.
Not a Scam Coin
In other words, interoperability is the name of the game. That also sets Polkadot apart from scam coins, as I noted earlier.
If nothing else, look for utility when considering whether to invest in a cryptocurrency. The Shiba Inus (CCC:SHIB-USD) and Dogecoins (CCC:DOGE-USD) of the crypto world lack it. Those projects find fame first and then try to build utility around their projects. Projects like Polkadot do the opposite: build utility first and then find fame.
The former might be a great traders tool, but is really little else. The latter is a much better long-term investment. Look for cryptocurrencies with a plan. That’s what Polkadot has.
Polkadot has created a roadmap for its future and is currently in the Parachain Rollout phase.
Referring to the website, “Parachains are the last piece of core functionality to be delivered as outlined in the Polkadot whitepaper, and will allow Polkadot to realize its scalable multi-chain architecture. After a period of testing, optimization and auditing, parachains will be ready for launch on Polkadot.”
In fact, those parachains are now known. That’s because the auction winners for the first slots on Polkadot’s main blockchain have already been announced. The winners are “focusing on a variety of topics from decentralized finance, to investments and loans, as well as smart contracting. They are Acala, Moonbeam, Parallel Finance, Astar, and Clover. They will be able to lease a slot on Polkadot’s Relay Chain for up to 96 weeks at a time.”
What to Do With Polkadot
The rubber is hitting the road for Polkadot. No one can say whether it will be successful or not, but the case for investing based on its utility is clear.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.