If you're like most cryptocurrency investors, you've probably started thinking about making your cryptocurrency wallet crash-proof, the same way you try to crash-proof your stock portfolio in tough times. The good news is that there are some smaller, more affordable cryptocurrencies that are likely to hold their value during a bear market. One cryptocurrency to watch out for right now is Polkadot (quotation DOT), which has reached a market capitalization of $ 2020 billion since its launch in May 10 and is now one of the most important cryptocurrencies in the world according to CoinMarketCap.
Polkadot use scenario
Above all, Polkadot passes the "use case" test. It is relatively simple to describe what Polkadot does and understand its value. Simply put, DOT is a fast blockchain that helps connect other blockchains so they can talk to each other and exchange data. It can be visualized as a system of hubs and spokes, with DOT as the hub and the other blockchains as spokes connected to this hub. DOT is capable of processing over 1.000 transactions per second, with the goal of reaching 1 million transactions per second, making it one of the fastest blockchains in the world. By comparison, Visa claims to handle 65.000 transaction messages per second.
Most importantly, Polkadot is highly scalable, which means it can continue to add more and more blockchains to its overall architecture. As a proof of concept, Polkadot held a public auction in late 2021, with bidders vying to become customizable and project-specific blockchains (or “parachains”) linked to the main Polkadot blockchain. Whenever a new blockchain gets a parachain slot on the Polkadot blockchain, the overall value of the DOT is expected to increase. High profile auction winners include Moonbeam (GLMR), which provides an interoperability solution for Ethereum (ETH). In other words, thanks to Moonbeam, Ethereum and Polkadot can now talk to each other.
Does Polkadot have long-term potential?
The big caveat is that Polkadot is very new. The first public version was released in May 2020, so we don't have a long series of data on Polkadot's performance in the past. In fact, many cryptocurrency investors may never have heard of Polkadot. They may also be skeptical that Polkadot can do everything he claims he is capable of. At least in the case of Bitcoin (CRYPTO: BTC), they say, the cryptocurrency has been around for more than a decade. Long-term investors have seen Bitcoin bounce continuously, market crash after market crash, steadily heading towards new, unexplored levels. So even though some investors are reconsidering their holdings in Bitcoin right now, many others are still holding on to their original investment thesis, patiently waiting for Bitcoin to finally go to the moon.
Ultimately, however, Polkadot is not just a cryptocurrency, but a blockchain platform for building the next generation of the web. Imagine a world where every blockchain can talk to every other blockchain seamlessly and instantly, and where every blockchain can specialize in what it does best. This is a very strong value proposition. The founder of Polkadot is Gavin Wood, one of the co-founders of Ethereum, so there is impeccable academic power behind this project. Indeed, as early as 2020, Bloomberg had defined Polkadot as a potential “killer of the Ethereum blockchain” because, conceptually, it could do much more than Ethereum.