In this educational guide, we’re going to explore the altcoin and blockchain named Polkadot (DOT). We’ll cover its fundamentals and planned roadmap, so you can use it to make your own price prediction.
What is Polkadot and how does it work?
Polkadot is a newer blockchain network that is focused especially on interoperability within the blockchain ecosystem. The chain is designed to support application-specific sub-chains that are referred to as “parachains.” Polkadot refers to the entire ecosystem of parachains that plug into a single base platform referred to as the Relay Chain. The Relay Chain is used for security and consensus for the Polkadot network.
The creator of Polkadot is Dr. Gavin Wood, who was one of the original co-founders of Ethereum and inventor of Solidity, the smart contract programming language. Dr. Wood originally had his own idea to create a sharded version of the Ethereum chain and the Polkadot whitepaper was first released in 2016.
The entity in charge of developing and researching for Polkadot is the Web3 Foundation. The Web3 Foundation is a Swiss nonprofit entity that also oversees Polkadot’s fundraising. The development framework for Polkadot is called Substrate, and each chain built within Polkadot uses the Substrate modular framework. This allows developers on Polkadot to select the specific components that suit their application-specific chain the best.
Polkadot also maintains its own “test network” called Kusama. Kusama is an early, unaudited, and unrefined release of Polkadot, and it is designed to serve as a “canary” network for Polkadot to test changes to governance, staking parameters, and sharding under real life economic conditions and network demand.
The earliest version of Polkadot, launched in May of 2020, operated as a Proof-of-Authority (PoA) network, managed by six validators that were in the Web3 Foundation. The network later transitioned to a Nominated PoS (Proof-of-Stake) system in June of 2020. This allowed DOT token holders to claim validator slots and saw the introduction of staking rewards. The network then followed additional steps of its multi-phase rollout procedure, like governance functionality in July of 2020.
As far as technological components that Polkadot uniquely features, its structure offers several advantages over other major blockchains on the market today.
- Relay Chain: This part, built with Substrate, helps map addresses to account information, coordinates communication of the ledger, and provides consensus through a pooled security mechanism that utilizes Proof-of-Stake (PoS). All validators stake their DOT tokens and produce blocks directly on the relay chain. However it should be noted that the relay chain itself does not support smart contracts; it only supports transaction finality. The relay chain delegates large portions of computational work to the parachains, below.
- Parachains: These are the application-specific chains built on top of Polkadot that use the relay chain for finality and process transactions themselves across multiple chains, which helps increase transaction throughput.
- There are no constraints on parachain design—parachains can be application-specific or also support a particular feature such as privacy. Each parachain must generate a proof regularly so that a Polkadot validator can verify and reconcile its past transactions.
- Cross-parachain communication is a unique interoperability feature of Polkadot - this means that parachains can communicate with each other via sending messages such as transactions and data without the need for smart contracts
- Polkadot Runtime Environment (PRE): The PRE consists of network interactions, state storage, the consensus engine, and a virtual machine.
- Bridging: The long term plan is for Polkadot to be able to connect to outside blockchains such as Ethereum and Bitcoin via a series of specialized bridge contracts or modules. This will be achieved via bridge contracts, which are smart contracts connecting Polkadot’s relay chain to external chains, and in-built bridging modules that are purpose-built to help external chains connect with Polkadot.
Polkadot’s DOT Token
The DOT token is the Polkadot network’s native token. It functions as a payment token for fees on the network, for governance, for interoperability, and lastly for bonding.
For example, when messages are sent between two blockchains on the network, the DOT token is used to pay for fees for doing so. DOT holders play a part in managing significant events by voting on protocol upgrades and changes.
One unique function of how the DOT tokens plays a part in Polkadot development is that DOT tokens must be bonded to create a new parachain. This ensures that there is an incentive alignment with DOT holders and developers, as well as the greater market need for the parachain.
DOT tokens can be staked and anyone can be a nominator (“staker”) by bonding their DOT tokens to a dedicated validator. However, validating on the Polkadot network requires expensive hardware to do so. Bonding (“staking”) DOT helps make the network more resilient to attacks, and DOT holders who are bonding are rewarded with newly minted DOT tokens.
Token Distribution
The Polkadot network targets a stake rate of 75%, which accounts for a 10% inflation rate, providing an annual staking return of about 20%. Bonded tokens remain locked for 12 weeks and may be subject to slashing in the event of validator misbehaviour or offline status.
The first token sale for DOT happened in Oct of 2017 by the Web3 Foundation. It was partly a private sale and partly a public sale. There is no fixed supply for Polkadot, however 10 million DOT were created at genesis. There was a vote later on that increased token account balances by 100X as a cosmetic change.
The total supply of Polkadot as of April 2022 is noted as 1.186M DOT tokens. The circulating supply is noted as 1.1M DOT tokens.
The DOT token distribution is as follows:
- 50% of DOT is allocated to token sale investors
- 5% is allocated to the 2019 private sale investors (SAFT)
- 3.4% is allocated to the 2020 token sale investors (private sale)
- 11.6% is allocated to the Web3 Foundation for future fundraising efforts
- 30% is allocated to the Web3 Foundation for use to develop the network and other activities
DOT is an inflationary token with an unfixed total supply.
It is important to note that there was an exploit that saw over 500,000 in ETH raised from the Polkadot ICO become frozen. It is still unclear what will happen to these funds but this will not affect the development roadmap of Polkadot according to the team.
Polkadot (DOT) Price History & Technical Analysis
As of the time of writing, in April 2022, the price of DOT is at $18.93, with a market capitalization of $18.7 billion USD.
The total value of the DOT token and other associated ecosystem tokens in turn grows as the user adoption of the Polkadot network and its parachains continues to grow by both developers and users as per Metcalfe’s Law.
Metcalfe’s Law states that the value of a network is directly related to the number of users of that network. This is especially the case for Polkadot given the parachains that are built on top of it.
As long as Polkadot and the Web3 Foundation continue to innovate with the unique development roadmap and technological advantages, the DOT token will continue to do well, especially as there is more demand for the token on the open market. DOT is also one of the most commonly held crypto assets by investment funds and institutions in crypto at this time.
What Expert Analysts Say About Polkadot:
- Wallet Investor takes a bullish stance on Polkadot, saying that “based on our forecasts, a long-term increase is expected, the price prognosis for 2027-04-17 is 69.276 US Dollars. With a 5-year investment, the revenue is expected to be around +266.04%. Your current $100 investment may be up to $366.04 in 2027.”
- Coinpedia gives a bullish outlook for the next few years. “Over the next three years, Polkadot could emerge as a tough contender. Certain perpetual contracts by exchanges may lead to the growth of the currency towards a new all-time high. The community might further extend collaborations to more prominent blockchain networks. With mere buys and sells, the trading price may strike an average value of $74.39.
With further upgrades of PoA and higher parachain rollouts, the price may close the trade for 2025 at $84.897. However, if the network falls prey to another hacking attempt anytime like it already did, then the price may also drop to $62.53.” - DigitalCoinPrice gives a bullish DOT price prediction as well for the year 2022: “As per the forecast data analysis, the price of DOT is expected to cross the level of $23.57. By the end of the year, Polkadot is expected to reach a minimum fee of $23.14. In addition, the DOT price is capable of getting a maximum level of $24.66.”
Polkadot Partnerships
Since Polkadot is the brainchild of Dr. Gavin Wood, it has received a lot of institutional interest and as such has also forged significant partnerships.
Polkadot’s partnerships with other notable crypto projects include Chainlink, for use of its oracle network. This means that Chainlink is set to become the primary oracle and data provider for the entire Polkadot network, which will also increase the adoption of the Polkadot network itself. Another partnership includes that of Ank, which allows DOT token holders to stake their crypto and earn rewards through the Ankr parachain.
Partnerships with other companies are also many to note. One of them is with T-Systems MMS, a subsidiary of Deutsche Telekom. The company is participating in the security and maintenance of the Polkadot network.
Polkadot’s parachains are its own suite of decentralized applications (dApps) and can be found on the site https://parachains.info/. Some top parachain auctions that have raised the most funds include Moonbeam, Acala, Phala Network, and Astar. Polkadot currently features 14 parachains and 6 crowd loans at the time of writing in April 2022. There are currently 129M+ DOT tokens and over $2.44B (11% of the total DOT supply) locked, or bonded, in parachains. The network’s canary network, Kusama, currently features 29 parachains of its own, 4 crowd loans, and 31% of its total supply locked. This is overall an extremely bullish sign for long-term growth of the DOT token.
Polkadot Price Prediction: 2022-2026
Polkadot’s DOT token first saw significant bullish price pressure during the beginning of 2021, like much of the crypto market did. It set a peak of above $48 in May of 2021, amidst much volatility and volume during the 2-3 month period leading up to that.
The summer of 2021 was not kind to DOT, similar to the rest of the crypto markets, and the DOT price settled in at a support area of around $12-15, which has since not been breached. Stunningly, DOT went on to later set a brand new high in the fall of 2021, hitting above $50 for the first time. This signified that investors were still exceedingly excited about DOT and used the opportunity in the summer to scoop up cheap DOT.
Since then, the crypto markets have been turbulent during 2022, and the price of DOT has somewhat suffered but has held the $15-20 price area, now forming some support there.
As of the time of writing, the price of DOT remains in this macro area between $17-18. On the weekly chart shown above, DOT continues to maintain support and should see price appreciation to come as long as the low in the $12-15 area is held.
As long as the DOT price remains above the $12 area, it is likely that DOT will regain price strength and continue to set new all-time highs until the trend changes, though this may take several months and even into later in the year 2022.
It’s uncertain to say when investors can expect the previous all-time-high to be breached again, and fundamental factors will also have a play in this, since DOT is a major contender blockchain. It is also possible that a greater economic contraction will occur that leads to overall losses in the cryptocurrency markets. If a contraction occurs and the DOT price loses the $12-15 area, we expect it to take even longer for a new high to be reached, and it could see $8 or lower in the meantime.
Polkadot Price Prediction 2022
Some analysts predict that DOT will see beyond its previous all-time high during 2022 itself, since the price action was very strong during 2021 and price came back from the lows to create a new high, so it may be a matter of time before this happens again.
We think it is reasonable that if bullish price pressure for DOT remains despite the overall lull in the crypto markets at this time, DOT can see higher prices. But to do so, it will first have to take out the last high on the weekly chart above at the $31 area.
Polkadot Price Prediction 2023
If DOT’s parachain auctions continue, which they are actively doing at the time of writing in April 2022, and it becomes a popular blockchain for users of DeFi and NFTs alike, and remains a top holding for funds and institutions alike, then DOT can see a target of potentially $40-50 by 2023.
Polkadot Price Prediction 2024
The overall growth of the cryptocurrency markets will contribute to DOT’s growth, as well as the greater trend of blockchains that are competing with Ethereum in some way, even though DOT is not necessarily intending to fully replace Ethereum. It should be noted that the growth of Layer-2 scaling solutions as well as scaling technology from the upgrade of Ethereum 2.0 has the potential to eat into DOT’s competitive growth still, but Polkadot also has major venture investors and funds interested in its success long term.
The market capitalization remains at $18.6 billion in April 2022, and a reasonable but still relatively large 4-5x to reach $74.4-93 billion in market cap by 2024 would put the DOT price at $75-$94 price range or higher by 2024.
It’s not unreasonable to see DOT hit these prices or higher by 2024 or even earlier potentially with continued innovation and development of the network and its continued parachain auctions.
Polkadot’s further planned upgrades and development roadmap can be read here. These updates include upgrades to its cross-chain messaging system and the launch of parathreads.
Of course, positive price pressure in turn is also provided the overall crypto market remains bullish and we can avoid an economic downturn and bear market overall. In this scenario, it is even possible that Polkadot sees the sort of growth that Ethereum saw from 2016-2022 due to high interest from institutional investors, parachian auctions, and crowd loans alike.
Polkadot Price Prediction 2025
2025 is still far away at the time of this writing and longer term blockchain and interoperability trends are impossible to predict, much less the exact trajectory of parachain auctions. However, the growth of user adoption of blockchain overall, of crypto, and the market’s need for greater throughput and interoperability solutions that Polkadot solves will only increase.
We predict we will see DOT at $100-110 or above by 2025 provided no catastrophic economic events happen in the meantime.
Polkadot Price Prediction 2026
The crypto market overall could be worth $10T or even as high as $15T in total market capitalization by 2026. Depending on regulations and the overall economic cycles, we may see DOT as high as $130-$150 by 2026, provided development and innovation of Polkadot continues.
None of these predictions are financial advice, and are educated guesses as to where DOT’s price may be at each time interval. It should be noted that any black swan events such as a catastrophic failure of the Polkadot consensus, another major hack, a cease in development, or other black swan events could impact these predictions significantly.
Polkadot (DOT): Conclusion Price Prediction
Polkadot is a major blockchain developed by a leader in the industry who was partly responsible for the creation of Ethereum and the inventor of the Solidity programming language. As such, Polkadot is a highly esteemed project and already boasts a growing parachain auctions ecosystem.
Polkadot enjoyed very bullish price action throughout 2021 and it clearly offers some significant technological advantages over other blockchains such as Ethereum and Bitcoin, which help increase interoperability and communication, throughput, and usability for both developers and users alike.
DOT continues to hold price support near the $17-20 area which looks bullish and is still above its summer 2021 lows, though its current all-time highs are still far off relatively. It is actively still seeing user growth, new partnerships, and more key innovations that are planned, along with continued parachain auctions scheduled for the rest of the year.
Of course, the long term outlook of any cryptocurrency is hard to say for certain, however provided that DOT sees continued development and user growth, it is likely to remain a strong choice of investment for the foreseeable future.
Some may be hesitant to commit their money into an asset for an extended period of time due to the extreme volatility and risk of the cryptocurrency markets. Plus, it is impossible to say for certain which blockchain will win the scaling wars longer term, or if they all have a place in different sectors of the market. Polkadot investors should keep tuned to the platform’s parachain auction trends and successes.
FAQs
How is Polkadot gaining traction?
The DOT token is gaining traction thanks to the growth of the Polkadot blockchain due to the unique interoperability problems it solves, the growth of its parachain auctions, and its very talented and strong foundation team.
Investors and market participants were interested in its token, DOT, due to the innovation the protocol offers, and many other reasons that will contribute to the growth of the Polkadot blockchain. DOT is one of the most commonly held crypto assets by crypto funds and other institutional investors at this time as well.
Where can I buy Polkadot (DOT)?
DOT can be purchased and traded on many exchanges including Coinbase, Binance, FTX, KuCoin, Kraken, Bitfinex, Bybit, and others.This means that both US and international investors can invest in DOT.
In comparison to other cryptocurrencies, how can Polkadot secure privacy?
As far as privacy goes, DOT is a public blockchain so privacy should not be expected. All transactions are recorded in the Polkadot ledger of transactions on the relay chain. Privacy is not guaranteed, especially in comparison to other cryptocurrencies or blockchains that are especially known for securing privacy, such as Monero. There do exist parachains on Polkadot that can focus on privacy specifically such as Phala Network, however the Polkadot blockchain as a whole does not guarantee privacy.
Is it possible to stake Polkadot (DOT) tokens?
Yes, DOT tokens can be staked for DOT token rewards that are given to stakers and validators contributing to the consensus of the Polkadot blockchain.
Why is Polkadot on the rise?
DOT has been on the rise most notably during all of 2021, and again in the fall of 2021, thanks to the growth of crypto and DeFi as a whole, but also thanks to the continued growth of Polkadot’s parachain auctions, and that of its canary or test network as well, Kusama (KSM). Due to the current lack of interoperability solutions in the blockchain industry, this has made many investors seek out DOT as an investment thanks to the unique solutions it provides for application messaging across blockchains.
Is Polkadot completely anonymous?
No, Polkadot is not fully anonymous to use, since it is a public blockchain. It is, however, pseudonymous, but depending from where users obtain their DOT tokens, blockchain forensics can track the user’s identity.
Is Polkadot considered a currency?
Yes, the DOT token is considered a currency that is used on the Polkadot network for the purpose of payments for transactions. It can be bought or sold for fiat or other cryptocurrencies and its value may fluctuate.
Is it possible to generate profits with Polkadot?
Yes, assuming the DOT tokens increases in price over time with the continued development of the Polkadot blockchain, the growth of parachains and their auction, and given its partnerships and funding initiatives continue to expand, plus as more users and developers are onboarded onto the network, the DOT token should do very well in turn.
All of this combined will lead to greater user adoption and transaction activity on Polkadot, which creates higher demand for the DOT token itself.
All investors must do their own research, due diligence, and ensure that they are comfortable with the amount of risk they are taking. All cryptocurrencies are extremely volatile and risky. Always proceed with caution.
Why do people believe in Polkadot?
Many analysts and investors believe that Polkadot brings unique interoperability and technological solutions to the blockchain industry with its parachains. People also believe in the founders of Polkadot, of which the most notable is Dr. Gavin Wood, who was one of the original co-founders of Ethereum, among other accomplishments.
Investors in Polkadot believe in Polkadot’s development roadmap that continues to focus on expanding its interoperability capabilities with other blockchains such as Ethereum and Bitcoin as well.
Is Polkadot supply limited?
No, the DOT token supply is not capped or limited. It is an inflationary token and the current token supply sits at 1.1B tokens. By 2026, this total supply will reach over 1.9B tokens at the current rate of inflation and supply hitting the open market.
How does the Web3 Foundation or Polkadot team investigate suspicious or fraudulent transactions?
It is not clear how the Web3 Foundation or team investigates suspicious transactions at this time, but fraudulent or suspicious activity can be noted on any Polkadot blockchain explorer, since all activity is performed on a public ledger. Blockchain forensics agencies such as Chainalysis can use methods to surveil public blockchains such as Polkadot. Security audits have been performed on the Polkadot network code successfully to ensure attack vectors are minimized.
DISCLAIMER
This is not financial advice, only observations and speculation. All investors should do their own research and due diligence. The crypto markets are extremely volatile and losing your investment is possible.
