We haven’t even closed two months in the calendar and it already looks like it Bitcoin (CCC:BTC-USD) will be the biggest financial story for 2021. While BTC offers many potential long-term opportunities, you can’t help but notice that the original cryptocurrency is a very mature asset. In other words, for a $ 50,000 asset to double, it would have to reach $ 100,000 – a major challenge. This is why alternative crypto coins like Speckle (CCC:DOT-USD) have aroused the interest of investors.
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First and foremost, it’s in the numbers. Bitcoin has gained around 67% since the beginning of the year. That’s a great feat, but it pales in comparison to Polkadot, where the underlying DOT coin is up 255%. Additionally, at the time of writing, it is priced at around $ 33. Psychologically, this is far more attractive than the $ 50,000 or even the price of BTC ether (CCC:ETH-USD) $ 1,600 entry point of the token.
Of course, psychology plays an important role in determining which assets will soar, particularly in the current environment. The narration for polkadot is not entirely narrative, however. In fact, there is a fundamental case for DOT – at least when it comes to cryptocurrencies.
A quick rundown of why polkadot is important
As the first cryptocurrency, Bitcoin introduced the world to the concept of blockchain. The definition of the textbook is a decentralized, publicly distributed ledger. But what exactly does that mean?
I know I’ll insult blockchain purists, but the practical explanation is that a blockchain is simply a method of recording that is available to the public. Conceptually, it’s no different from a Google Doc that you share with your work colleagues.
However, one of the main differences in blockchain is its immutable nature. As soon as transactions are blocked in the blockchain, there is no turning back and no change. In addition, the ability to enter data into a standard blockchain system is not limited to a central authority. Rather, data entry requires consensus between nodes or computers that store the blockchain’s transaction history.
Hence, the Bitcoin blockchain facilitates peer-to-peer financial transactions without the need for a human intermediary. In essence, the blockchain architecture acts as its own trustworthy, immutable, and perfect digital intermediary.
But as with other first-to-market technologies, the original blockchain had flaws, most notably difficulties in scaling and inefficient protocols. To solve these problems, the Ethereum team developed their own blockchain that offers the scope and efficiency that developers crave.
In addition, Ethereum’s unique innovations led to smart contracts. Instead of focusing solely on payments, other business transactions such as real estate deals or litigation can benefit from digital intermediaries, eliminating the middleman.
However, Ethereum also has its problems. In short, the platform can become a nuisance for developers building complex projects. This is how the concept of Polkadot was born. Polkadot is known as the blockchain for blockchains and opens up new efficiency advantages for developers by allowing several different blockchain systems to work together.
I am not doing justice to the concept. To be quite simple, Polkadot allows developers to stack multiple blockchains together while maintaining harmonious interoperability, rather than building a single unwieldy, complicated and expensive blockchain project.
Is Utility Alone worth $ 30 billion alone?
Avid supporters of the cryptocurrency will argue that Polkadot, not Ethereum, will be the real Bitcoin alternative. It is possible that Polkadot is the most useful blockchain system there is. But is the benefit alone worth $ 30 billion?
Because that’s the market capitalization of the underlying DOT token that raises some interesting questions. After a robust debut specialist in artificial intelligence and big data Palantir Technologies (NYSE:PLTR) currently has a market cap of $ 49 billion, not far from DOT’s valuation.
Is Palantir’s actual goodwill only worth a 63% premium over Polkadot’s innovation? Maybe it is, maybe it isn’t.
Or consider a content delivery network provider Fast (NYSE:FSLY). It serves a critical need, especially during this pandemic, when people are working from home. FSLY has a market cap of just over $ 8.5 billion. Is polkadot really worth almost four times as fast?
I believe the main problem with attempting fundamental analysis of cryptocurrencies is that the traditional market doesn’t value platforms as much as what companies do with those platforms to solve real-world problems.
And this is where Polkadot gets tricky – how many blockchain projects do we need? Because it’s one thing to have the technology; It is quite a different thing to do with it.
A game of chance and an interesting one at that
Here’s my brutally honest take on polkadot – I think it’s a long term buy.
However, it’s not because I think his blockchain will change the world for blockchain innovation. Because of the open source nature of blockchain technology, someone will always come up with something better.
Rather, the DOT token is pure speculation based on sentiment for the cryptocurrency market. Despite the severe crash of Bitcoin, the token has increased steadily and surprised me personally. With this strong demand, you’ll likely want to add Polkadot tokens to your digital portfolio just in case.
At the time of writing, Josh Enomoto was long in BTC and ETH.
Josh Enomoto, former senior business analyst at Sony Electronics, has helped broker major contracts with Fortune Global 500 companies. In recent years he has provided unique, critical insights into the investment markets as well as various other industries including law, construction management and healthcare.