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Forget Bitcoin and Ethereum – this cryptocurrency is poised for an incredible ride
Bitcoin and Ethereum are on the rise, but so far this powerful cryptocurrency has remained stagnant. This blockchain project is ready to power the future of the Internet.
Cryptocurrencies are waking up after another long sleep. Ethereum (ET 1.84%) has gained 92% in the last year, while Bitcoin (Bitcoin 3.36%) rose 128% higher. From the introduction of new cryptocurrency-based investment vehicles to the next halving Bitcoin mining rewardsmany forces came together to untie the last one crypto winter.
But not all cryptocurrencies have been invited to the party yet, even if their growth prospects seem at least as promising as those of Bitcoin or Ethereum. In particular, Polka dot (POINT 3.80%) appears undervalued and ready to erupt into a bull market run. The official blockchain network of Web3 The Foundation is not getting the market respect it deserves.
Polkadot’s low price stands out like a freshly severed 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 in Polkadot today. A diversified portfolio always makes more senseeven in the uncharted waters of the cryptocurrency industry.
But in case you haven’t yet considered adding some Polkadot, let me explain why this token is in a prime position to beat both the stock and cryptocurrency markets in the coming years.
Image source: Getty Images.
What is Polkadot, anyway?
Polkadot is a blockchain network designed to solve a fundamental problem in the cryptocurrency world: different blockchains cannot easily communicate with each other. Imagine a world where your Apple The iPhone was unable to connect to AA directly SAMSUNG Galaxy device: This is the old blockchain reality. Polkadot acts as a translator and bridge, allowing blockchains of different purposes and designs to communicate and share data seamlessly.
The Web3 vision for the Internet is centered on decentralization and user control. Polkadot makes this possible by allowing custom blockchains (so-called “parachains”) to connect 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 apps and programs that leverage the best features of many different blockchains. Polkadot makes it easy to store monetary value in Bitcoin, execute Ethereum smart contracts, collect real-world data from Chain shirt (CONNECTION 2.08%) and more.
And the DOT token (commonly referred to as Polkadot) is the lifeblood of this decentralized system, easily passing data between different blockchain networks while ensuring the security of data transfers. Additionally, its multi-chain design allows many transactions to be processed quickly, avoiding the bottlenecks of less scalable blockchains.
How the DOT blockchain makes money
Making transactions using Polkadot proof-of-stake ecosystem generates a small fee for the validator nodes that process each request. This toll for traveling on the next-generation information highway serves as an incentive to keep the system going.
In this way, increased usage of the Polkadot network directly translates into increased 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 a high value, in order to motivate more DOT holders to stake their tokens and take a more active role in the system. Today, less than 53% of all DOT tokens are staked, 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 the governance of the network, further influencing the value of their holdings.
Furthermore, this is the raw reward rate for people running their own nodes on the DOT network under ideal conditions. The rate will be lower if the chosen crypto trading service keeps a portion of the staking revenue for itself. For example, mine Coinbase (CURRENCY -0.35%) currently shows a profit rate of 6.9% for staking DOT tokens.
These mechanisms ensure that the value of DOT is tied to the growth and success of the Polkadot network.
Polka dot price data of YCharts.
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. Yet these larger cryptocurrency names operate in different, often less dynamic market segments.
With its focus on interoperability, Polkadot is at the forefront of Web3 innovation. Market capital they are often imperfect metrics in rapidly evolving industries, and DOT’s $10.5 billion market value is expected to rise significantly in 2024 and beyond.
This seems like a serious underestimation given Polkadot’s key role in the emerging decentralized internet. Astute investors may see this pricing error as an opportunity to purchase leading Web3 infrastructure at a significant discount.
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.