- Polkadot (DOT-USD) is a $17.4 billion market cap cryptocurrency that is ranked as the 13th-largest.
- DOT crypto is on the move up again after hitting a trough on Feb. 22 at $16.01.
- New parachains based on Polkadot are making waves, including Acala (ACA-USD), Moonbeam (GLMR-USD) and Astar (ASTR-USD).
A number of new Ethereum (ETH-USD)-compatible altcoins on the Polkadot (DOT-USD) blockchain platform are slowly gaining attention and popularity. This could end up pushing the value of DOT crypto higher as well.
The Polkadot ecosystem underperformed other layer-1 networks in 2021, according to Cointelegraph magazine. It started out at $8.30 at the end of 2020 and ended at $28.58 on December 31, 2021. That is a gain of 244%, which, actually, was much lower than the 416% gain in Ethereum.
The reason is that its parachain auctions and mainnet launches took a good deal of time to roll out. Polkadot is known as a “Layer Zero” protocol and parachains are the actual layer 1 blockchains. These parachains are now launching their apps and use cases on the Polkadot blockchain platform.
So far this year, DOT crypto is down to $17.31 from $28.58 where it ended last year. That is a YTD return of almost negative 40%. But as these parachains are slowly gaining popularity and usefulness, the value of DOT crypto could return to its former heights, over a period of time.
Polkadot-Based Parachains Growing
Starting in mid-March numerous projects in the Polkadot ecosystem saw their prices climb higher after users began to engage with their networks. Polkadot plans to launch at least 80 parachains on its blockchain platform, according to CryptoPotato online magazine.
One of the first and largest was the Acala network, which is now launching its core financial products, according to Cryptopotato magazine. As I wrote in a recent article, it has teamed up with eight other parachains and several supporting venture funds. They plan to launch a $250 million “aUSD” Ecosystem Fund.
In addition, Moonbeam (GLMR-USD) and Astar (ASTR-USD) are two Polkadot parachains focused on bringing multichain compatibility with Ethereum other networks. Moonbeam is a smart contract parachain whose goal is to help people use Ethereum developer tools.
One of Moonbeams’ unique features is that it has also enabled balance transfers and Ethereum Virtual Machine (EVM) on its platform. The transfer feature will allow users to stake and start claiming rewards. This makes it a genuinely decentralized finance (DeFi) app. The Daily Hodl magazine calls it “one of the first fully operational parachains on Polkadot.”
Astar is a multichain DApp protocol, formerly known as Plasm. Its function is to support two virtual machines on its Polkadot parachain. These are The Ethereum Virtual Machine (EVM) and WebAssembly (WASM). A virtual machine (VM) is a program that emulates a computer system. It has a virtual CPU, memory and storage and appears, from the outside, to be no different than a physical machine with the same hardware.
According to CoinTelegraph magazine, these two EVMs operate on the Polkadot parachain. Astar helps their “interoperability.” It allows all three software paradigms to work together.
Where This Leaves DOT Crypto
Polkadot’s parachain blockchain transactions don’t compete against all other smart contracts in the same ecosystem. It has room for 100 parachains, and allocations are made through auctions that will guarantee a slot for up to 96 weeks (i.e., almost 2 years.)
It seems clear that DOT has probably bottomed out. As Polkadot releases new parachains on its blockchain, they bring utility and attention to the layer 1 blockchain, just like Ethereum has many blockchains based on its platform. Similarly, the DOT crypto token price will eventually make a comeback as the combined potential of its parachains and its layer 1 base work together to build Polkadot’s value.
It makes sense for investors that want to diversify among the top 10 or so cryptos to consider DOT crypto. Polkadot is one of the few cryptos, like Ethereum and Cardano (ADA-USD) that built a layer zero blockchain platform. Other blockchains can build their specific use cases on top of them.
On the date of publication, Mark Hake did not hold (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.
