Polkadot is a unique cryptocurrency created by Gavin Wood, the co-founder of Ethereum. It uses the DOT token as its native token. Polkadot aims to expand the functionality of older cryptos like Bitcoin and Ethereum by building a decentralized internet.
Since its creation, Polkadot has gained massive popularity, with some experts predicting that it might take over Ethereum.
The Polkadot token is an open-source project run by the web3 foundation. The main aim of Polkadot is to eliminate slow communication between blockchains. It aims to not only transfer tokens across blockchains but also actual data.
Blockchains thrive as separate islands of data which is a significant drawback in the crypto market. And this is what Polkadot aims to solve. Through the integration of technologies, Polkadot has been able to facilitate communication between public and private blockchains. And it is because of this feature that it became popular from the word go. So is Polkadot a Good Crypto?
How Does Polkadot Work?
Just like its predecessors, Polkadot is a blockchain-powered network. However, it is more scalable than Bitcoin and Ethereum. It does not live as a single blockchain but as an ecosystem of connected blockchains.
Below are the components of Polkadot:
1. Relay chain
The relay chain is the centre of Polkadot functionality and provides security and consensus of the network. Note that they achieve consensus in two mechanisms. The first one is responsible for block production, while the second works towards finality.
2. Parachains
Parachains are powerful blockchains. They have their own networks and you can optimize them for specific purposes. For example, storage, financial services, or transparency. The advantage of parachains is that they are free to create, and they operate without affecting other parachains.
3. Parathreads
Parathreads operate like parachains, but their networks operate on a pay-as-you-go basis. Therefore, they are not suitable for blockchains that need continuous network connectivity to function.
4. Bridges
Bridges make the last piece of the puzzle because they allow Parachains and parathreads to connect and communicate to external networks. Polkadot provides for communication between networks that cannot communicate.
Advantages of Polkadot
Since their creation, Bitcoin and Ethereum have suffered scalability issues. This means that their transactions are very slow. Polkadot came in to solve the scalability and speed issue. So far, it is ahead of other networks in terms of speed.
It makes use of parachains to process more transactions in parallel. Wood, the creator, hopes that the network will be able to support 1 million transactions per second as they launch their first parachain at the end of this year.
Is Polkadot a Good Crypto Investment?
Experts agree that Polkadot is a viable long-term investment. This is especially after considering the current crypto market where all cryptocurrencies are rising. However, it is important to keep an open mind because the crypto market is very volatile. No one can predict what the future of Polkadot will look like. It can increase its price very quickly and go down as fast.
It is difficult to say whether it is right to invest in Dot today because it is still very young. However, with the promise to solve the interoperability problem and its steady growth, the future of Polkadot seems bright.