What is Polkadot (DOT)?

The cryptocurrency story of 2020 was Polkdadot (DOT) and most people missed it.

To explain, CoinMarketCap began tracking Polkadot (DOT) at $3.00 on 20 August 2020. By 26 January 2021, Mr. Market was paying a $16.61 Coin Price for Polkadot.

On 26 January 2021, CoinMarketCap estimates Polkadot had a $15202 billion Market Capitalization, and a $2.847 billion 24-Hour Market Volume. Thus, Polkadot has become one of the fastest-growing cryptocurrencies around. CoinMarketCap based these estimates on a circulating of 904.287 million DOT and a Total Supply of 1.038 billion DOT.

Incredibly, CoinMarketCap named Polkadot (DOT) the fourth largest cryptocurrency on 25 January 2021. Yet the cryptocurrency is only six months old.

Meet Polkadot (DOT)

So what is Polkadot (DOT) and why it is growing so fast? Polkadot’s creators describe the cryptocurrency as a “network protocol that allows arbitrary data—not just tokens—to be transferred across blockchains.”

The creators also claim “Polkadot can transfer this data across public, open, permissionless blockchains as well as private, permissioned blockchains.” Thus I think Polkadot is an interface between the blockchain and the internet. To explain, Polkadot could move data or funds between the internet and a blockchain.

In addition, I suspect Polkadot could serve as an interface between different blockchains. For example, Polkadot could allow you to spend Bitcoin (BTC) on an Ethereum platform. In addition, Polkadot could enable an interface between EOS (EOS) and Ethereum (ETH).

An obvious use for Polkadot could be to build new stablecoins. To explain, a stablecoin is a cryptocurrency that contains a digital robot that makes payments in a fiat currency from a bank account. Thus, a stablecoin requires a fast and stable interface such as the technology behind Polkadot.

However, none of this explains why Polkadot is so popular. There are several Bitcoin technologies out there that offer similar capabilities. For instance, EOS (EOS) which drives the EOSDT stablecoin.

How Polkadot (DOT) works

Several kinds of blockchains and constructs drive Polkadot. Those chains include Relay Chains, Parachains, Parathreads, and Bridges.

Relay chains enable cross-chain operations. Parachains are sovereign blockchains with their own tokens, for example, a branded blockchain and token offered by a bank. Parathreads are a simpler and more economical blockchain that offers continuous connectivity. Bridges connection parachains and parathreads with other blockchains such as Bitcoin, Ethereum, and EOS.

Polkadot’s mission is to build a blockchain web that is completely decentralized. The hope is to create a web with no centralized authority. Thus, Polkadot could drive cryptocurrencies that are harder to track, regulate, and tax.

The web3 Foundation in Switzerland is building Polkadot. The Foundation’s mission is to create “cutting-edge applications for decentralized web software protocols.” The hope at web3 is that those protocols will enable a “decentralized and fair internet where users control their own data, identity and destiny“

The Foundation calls this “decentralized and fair internet” Web 3.0.  

Why is Polkadot (DOT) so popular?

I think Polkadot is popular because they base it in Switzerland. To explain, speculators view Polkadot (DOT) and web3 as neutral and not American.

The hope is that the web3 Foundation can build an alternative internet not centered in the United States. I think the decline of faith in the United States is driving Polkadot’s growth.

To explain, during the six months of Polkadot’s growth, the United States has experienced an out-of-control coronavirus pandemic, civil unrest, violence, economic decline, and a chaotic election. For example, Worldometers estimates there were 28,214 new COVID-19 cases in the United States on 24 January 2021.

In contrast, there were 12,897 coronavirus cases in India on the same day. India had a population of 1.38 billion while the United States had a population of 331.003 million in January 2021, Worldometers estimates.

Is America’s Decline Driving Polkadot’s success?

Moreover, the world saw that self-proclaimed superpower with the world’s most powerful military was incapable of protecting its seat of governments from a mob of ignorant cosplayers. Consequently, people have no faith in America and they fear America’s probable replacement as the world’s leading power; the People’s Republic of China.

Remember, the People’s Republic of China is a Leninist dictatorship ruled by a corrupt Communist Party. The Chinese government is more competent than America’s but it has no clear goals beyond enriching Communist Party leaders or visible desire for world leadership.

In that environment, speculators are searching for blockchain products that are not Chinese or American. Remember the two most visible cryptocurrencies, Ethereum (ETH) and Bitcoin (BTC) have American roots.

Is Polkadot (DOT) a Good Cryptocurrency?

I think Polkadot is too new to be a good cryptocurrency. I advise speculators to avoid Polkadot because it has grown too fast.

There is no evidence that any of the Web3 Foundation’s technologies work or that of the claims about Polkadot are true. Instead, speculation and hype drive Polkadot’s growth. My advice for speculators is to avoid Polkadot until they prove the claims about it.

Originally published at https://marketmadhouse.com on January 25, 2021.