Bitcoin
This Cryptocurrency Is Poised for an Incredible Run
Cryptocurrencies are waking up after another long sleep. Ethereum (CRYPTO:ETH) has gained 92% in the last year, while Bitcoin (CRYPTO: BTC) rose 128% more. From the introduction of new crypto-based investment vehicles to upcoming halving of Bitcoin mining rewardsmany forces combined to thaw the last crypto winter.
But not all cryptocurrencies have been invited to the party yet, even though their growth prospects appear at least as promising as those of Bitcoin or Ethereum. In particular, Polka dot (CRYPTO:DOT) appears undervalued and poised to break out in a market outperformance run. The official Web3 Foundation blockchain network is not receiving the market respect it deserves.
Polkadot’s low price stands out like a stubbed toe if you agree that a decentralized, personalized Internet is the future.
I’m not saying you should sell all your Bitcoin and Ethereum to reinvest them in Polkadot today. A diversified portfolio always makes more sense, even in the uncharted waters of the crypto industry.
But in case you haven’t yet considered adding Polkadot, let me explain why this token is in prime position to beat the stock and crypto markets in the coming years.
Image source: Getty Images.
After all, what is Polkadot?
Polkadot is a blockchain network designed to solve a fundamental problem in the crypto world: different blockchains cannot easily communicate with each other. Imagine a world where your Litter iPhone was unable to connect directly to a Samsung Galaxy device – this is the old reality of blockchain. Polkadot acts as a translator and bridge, allowing blockchains with different purposes and designs to communicate and share data seamlessly.
Web3’s vision for the Internet involves decentralization and user control. Polkadot makes this possible by allowing custom blockchains (so-called “parachains”) to be connected to its network. These parachains can be adapted for specific uses, such as gaming, finance or social media, creating an interconnected ecosystem where value and information flow freely.
This programming ecosystem supports the quick and easy development of applications and programs that leverage the best features across multiple blockchains. Polkadot makes it easy to store monetary value in Bitcoin, run Ethereum smart contracts, collect real-world data from Chain link (CRYPTO: LINK) and much more.
And the DOT token (commonly referred to as Polkadot) is the lifeblood of this decentralized system, transmitting data between different blockchain networks with ease while ensuring the security of data transfers. Additionally, its multichain design allows many transactions to be processed quickly, avoiding bottlenecks of less scalable blockchains.
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How the DOT blockchain makes money
Executing transactions through Polkadot’s proof-of-stake ecosystem generates a small fee to the validation nodes that process each request. This toll fee for traveling on the next generation information superhighway serves as an incentive to help the system function.
In this way, increased usage of the Polkadot network directly translates into greater demand for DOT tokens, as they are needed to pay transaction fees. As the ecosystem grows and more value flows through Polkadot, the underlying DOT token becomes more valuable.
The current reward rate for staking your Polkadot tokens is 17.3%. This is quite high in order to motivate more DOT owners to stake their tokens and take a more active role in the system. Less than 53% of all DOT tokens are staked today, below the target rate of 60%. Therefore, the reward rate may change over time as the staked portion increases or decreases. Staking also allows DOT holders to participate in network governance, further influencing the value of their holdings.
Additionally, this is the gross reward rate for people running their own nodes on the DOT network under ideal conditions. The fee will be lower if your chosen crypto trading service takes a portion of the betting revenue for itself. For example, my Coin base The (NASDAQ:COIN) account currently shows a 6.9% win rate for DOT token staking.
These mechanisms ensure that the value of DOT is tied to the growth and success of the Polkadot network.
Polkadot price chart
Polkadot has room to grow, but many market makers haven’t realized it yet
DOT’s 14% gain over the past year pales in comparison to the returns of Bitcoin and Ethereum. However, these larger crypto names operate in different, often less dynamic market segments.
With its focus on interoperability, Polkadot is at the forefront of Web3 innovation. Market caps are often imperfect metrics in rapidly evolving industries, and DOT’s $10.5 billion market cap is expected to grow much larger in 2024 and beyond.
It seems like a gross undervaluation given Polkadot’s pivotal role in the emerging decentralized Internet. Astute investors may see this mispricing as an opportunity to buy a leading piece of Web3 infrastructure at a significant discount.
Should you invest $1,000 in Polkadot now?
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Anders Bylund has positions in Bitcoin, Coinbase Global, Ethereum and Polkadot. The Motley Fool has positions and recommends Apple, Bitcoin, Chainlink, Coinbase Global and Ethereum. The motley fool has a disclosure policy.
Forget Bitcoin and Ethereum: This Cryptocurrency Is Set for an Incredible Run was originally published by The Motley Fool