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What Is Polkadot?

Date Modified: 06/08/2023

What is Polkadot and how is it traded?

Polkadot has certainly left an impact in the crypto world, with many even calling it "the Ethereum killer", but what is it exactly and how can you trade it?

Polkadot symbol.

Polkadot (DOT) is an open-source sharded multichain protocol that connects between blockchains. To put it simply, sharding is a technique used in blockchain technology and it essentially refers to the divergence of a large database into smaller fragments called shards. The intention behind this process is to ease the load experienced on the database by distributing it to different servers. This, in turn, facilitates the process and quickens the execution of the query time. In other words, sharding streamlines the cross-chain transfer of data and interpolates between various blockchains.

Accordingly, Polkadot’s mission is to connect, secure, and facilitate the cross-chain data, tokens, and assets transfer in order to enable interoperability across multiple blockchains. Polkadot, therefore, was created with the aim to enable a scalable, secure, and trustworthy transaction of information across several chains in parallel, a process called “parachains”.

What might distinguish Polkadot from other networks is the fact that it utilizes bridges (connecting layers) that allow the transfer of data between blockchains and can also be connected to non-blockchain databases. It also uses parachains (parallel chains), relay chains, and parathreads. These four components combined allow for scalability, speed, connectivity, and flexibility.

Compared to its predecessors, the Ethereum and Bitcoin networks, Polkadot can process much more data within a second. While the Bitcoin network can process about 7 transactions per second and the Ethereum network can process about 30 Ethereum per second, Polkadot can process over 1000 transactions within the same timeframe.

A walk down Polkadot’s history

Polkadot was the product of Ethereum’s co-founder, English computer scientist Dr. Gavin Wood, who released the first white paper for Polkadot in 2016. Following the draft, in 2017, Dr. Wood partnered with Peter Czaban to found the non-profit Web3 organization which aimed to provide research and development grounds for Polkadot and hosted the initial token sale (ICO) for Polkadot. The ICO in 2017 rendered fruitful gains of over $140 million. 5 million DOT tokens were also sold in 2017.

As of May 2022, this token has an astounding market capitalization of over $14 million and there is a large circulation of over 987.58 million DOT coins.

Polkadot and Crypto

Like Axie Infinity, Polygon, and Ethereum, Polkadot has a native token called DOT which is used for staking. In other words, it is used to verify transactions and create new DOT tokens on the Polkadot network. Additionally, DOT is a governance token. Governance tokens grant ownership in decentralized protocols. Thus, DOT token holders get voting rights on changes that can occur on the Polkadot blockchain in the future. Traders who want to gain exposure to Polkadot (DOT) can do so through trading CFDs with a regulated provider like Plus500. By trading CFDs on cryptocurrencies, you can trade on downward and upward Polkadot prices with leverage. Leverage means that you get to potentially maximize your gains if the prices align with your trading position. Simultaneously, you should be aware of the fact that leverage can also potentially increase your losses if the prices move against you.

Trading crypto CFDs allows you access to the crypto market without granting you actual ownership of the cryptocurrencies. This means that you don’t have to worry about storing the cryptocurrency in a safe crypto wallet in order to shield it from possible hacking attempts, nor do you need to wish for its price to only go up, since you can also trade on its falling prices.

In conclusion, the crypto market keeps expanding and traders who want to seek access can do so through trading CFDs on crypto. As for what the future may hold for cryptocurrencies like Polkadot, it remains to be seen. Nonetheless, in the meantime, the imprint this digital coin has left on the market cannot be taken for granted.

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