What is Polkadot (DOT)? How it Works & Where To Buy It?

Polkadot is an innovative crypto project that aims to address the fundamental issues of other blockchains. In recent years, the project has garnered immense attention and high-profile investors, including Nirvana Capital, PolyChain Capital, and BlockAsset Ventures.

The DOT token launched in 2020 and has quickly grown to become the 11th largest cryptocurrency by market cap.

How Polkadot (DOT) Works

Polkadot consists of a core network (relay chain) and parallel networks called parachains.

Simply put, the Polkadot relay chain is responsible for upholding the network’s security, the interoperability between chains (cross-chain interoperability), and how consensus is achieved.

The execution of any transactions in the network is finalized by the relay chain, as well as network participant connectivity.

Think about the relay chain as having only primary responsibilities – it was only built to coordinate the system and parachains. It doesn’t support smart contracts.

Parachains can be understood as being independent blockchains. They benefit from the security and interoperability of the core network (relay chain). Developers can thus easily deploy custom-specific blockchains that are connected to Polkadot.

Essentially, parachains reap the benefits of the security and fast transactions of the Polkadot network – while remaining sovereign blockchains.

However, limited space means that parachains need to lease ‘slots’ to participate in the network. There are three ways to allocate a slot: common good parachains, pay-as-you-go parathreads, or bidding to get your auction-granted parachain a slot.

What Is Polkadot (DOT) Used For?

Dot tokens are what power the Polkadot network. Essentially, they help Polkadot work, function, and maintain the network.

The DOT token has three main purposes, which are critical to the Polkadot protocol.

1. Polkadot Governance – The entire governance of the Polkadot protocol is reliant on DOT holders. Much like miners receive rewards and privileges, DOT holders (relay chain participants) receive DOT rewards. Additionally, they are responsible for major decisions regarding fixes and upgrades of the network.
2. Staking – The Polkadot ecosystem and other ecosystems require multiple participants to work together collectively to make the system flourish. The primary issue to address is ensuring that all participants work in the best interests of the system.

   Polkadot uses nominated proof-of-stake (PoS) and, like other PoS blockchains, applies game theory to ensure the security and integrity of the Polkadot network on an economic level.

   Essentially, ‘good actors‘ are rewarded for actions that work in the system’s best interests – ‘bad actors’ lose their stake in the Polkadot network.

3. Bonding – Through bonding tokens, new parachains are added. To remove parachains that are no longer optimal or are outdated, bonded tokens need to be removed. Dot tokens are used to facilitate the creation and removal of bonds.

Where To Buy Polkadot (DOT)?

Polkadot (DOT) has quickly grown to become one of the major cryptocurrencies. Polkadot is currently the 11th largest cryptocurrency in the world by market cap.

DOT can be purchased on several centralized crypto exchanges. But, before you can purchase DOT, you’ll need to deposit funds on the crypto exchange and sequentially purchase the DOT tokens by placing an order.

The crypto exchanges below are the safest place where you can buy, sell and store the DOT cryptocurrency.

Five of the most popular crypto exchanges are:

1. Binance
2. Coinbase
3. KuCoin
4. HTX
5. Gate.io

All of the above exchanges allow users to buy, sell, transfer and store Polkadot (DOT) in a digital wallet on the exchange. You can use your debit or credit card to purchase DOT.

If you intend on transferring your DOT tokens to a wallet off of the exchange – you can choose to send them to a wallet such as Ledger Nano X or other compatible wallets.

How long has Polkadot existed?

Polkadot was founded in 2016 by Dr. Gavin Wood. He is a former co-founder of Ethereum who later went on and created Polkadot.

Additionally, he’s known for dubbing the term Web3.0 and is currently serving as the president of the Web3 Foundation.

What’s controversial about Polkadot and DOT?

Polkadot has had its fair share of controversy over the years. Let’s take a look at 2 of the top controversies surrounding Polkadot (DOT)

1. Donation Contribution During Russia Ukraine War – Gavin Wood came under scrutiny on Twitter recently. A Ukraine government organization tweeted addresses for people to send crypto for donations. Among the addresses were BTC and ETH – not DOT.

   Wood commented that he would personally contribute $5M in donations if a DOT address were added. Many criticized him for choosing to ‘market’ DOT during such a trivial time – many called it disgusting and distasteful. He did later go on to donate $5.8 million.

2. Hackers Have Previously Exploited The Code – The founders of Polkadot have had their wallets hacked twice already. Although the funds were frozen, it still raised considerable concern amongst the community.

How many DOT tokens are there?

At the time of writing, DOT has a circulating supply of 987,579,314.96 DOT.

The total supply of DOT is not available.

Can DOT be mined?

DOT can’t be mined. Polkadot uses a nominated proof of stake consensus protocol, unlike Bitcoin, which uses a proof of work consensus protocol.

Individuals can stake DOT to receive rewards, similar to how people mine, but it doesn’t require extreme computing power or any mining software – instead, tokens are locked up for a duration of time.

What is the market cap of Polkadot (DOT)?

The market cap of Polkadot (DOT) is:

Polkadot (DOT) market cap = total amount of coins in circulation x current market price of DOT

Polkadot (DOT) Market Cap = 987,579,314.96 x $23.20 = $22.91Bn (11th largest cryptocurrency in the world).

The market cap fluctuates according to circulating supply and market price – adjustments are made as new DOT tokens enter the market.

 

Biggest Competitors Of Polkadot (DOT)

Polkadot has a significant amount of competitors. Crypto projects that aim to serve the same role as DOT can be considered competition.

These include projects that have larger market caps, more active daily users, lower transaction fees, higher transactional capability, and have ecosystems with a larger TVL than DOT.

The top 3 competitors of DOT are:

1. Ethereum – Market cap of $422 billion. More than 500,000 active daily users. TVL (total value locked) of $125 billion.
2. Solana – Market cap of $44.69 billion. The capability of processing 65,000 transactions per second. TVL of $8.22 billion.
3. Avalanche – Market cap of $26.24 billion. The capability of processing up to 4,500 transactions per second. TVL of $10.51 billion.

What are the future plans for Polkadot?

There are currently several new partnerships being formed and multiple investors coming on board. There are also many teams actively building Polkadot into one of the most formidable blockchains on the market.

The release of parachains without hindering Polkadot’s established security is an indication of an exciting journey ahead. It’s deemed a resilient network that has an innovative and hard-working team behind it.

As crypto adoption grows, Polkadot aims to be at the forefront of shaping the crypto space.

Pros and Cons of Polkadot Blockchain, Relay Chain, and the Polkadot Network

Pros

• Parachains Optimize Speed – Among the biggest pros for Polkadot is the implementation of parachains. They alleviate congestion and optimize network speed.
• Polkadot Has The Lowest Carbon Footprint – According to a recent Bloomberg report, Polkadot has the least carbon footprint (energy consumption) of the major blockchains. It has a total kWh energy consumption per year of 70,237 kWh – Solana‘s is 1,967,930 kWh.
• Parity Technologies Substrate – Developers can easily use specific components because the parachains are application-specific. The bridges facilitate connections between external networks like Bitcoin and Ethereum.
• Interoperability With Other Chains – Polkadot was designed to integrate with other networks, allowing developers to build decentralized applications (DApps) that used other blockchain networks.
• 1,000 Transactions Per second – Polkadot can process 1,000 transactions per second which is much more than Bitcoin (7tps) and Ethereum (up to 30tps). Although it is not capable of processing the same capacity as Solana (65,000 tps), it is still more equipped than Ethereum and Bitcoin.
• DOT Has Increased By More Than 800% – DOT started off trading at $2.76 in 2020 and has already grown by more than 800% to $22.08 in 2022. It also reached an all-time high of more than $49 in 2021.

Cons

• Significant Competitors – Although DOT has performed incredibly well since its launch, it still faces a significant amount of competition from existing blockchains such as Ethereum. Furthermore, emerging blockchains like NEO and EOS are gaining traction in the crypto space.
• Limited Amount Of Parachains – Currently, there are only a selected number of parachain ‘slots’ available. The process of obtaining a slot can be seen as increasingly exclusive and might force out smaller upcoming projects.

Polkadot User Reviews

Review Summary

Recent Reviews

Submit a Review