Polkadot is among the best cryptocurrencies on CoinMarketCap: find out why here
Cryptocurrency Polkadot (DOT) took multiple crypto market enthusiasts by surprise by suddenly entering the Top 10 cryptocurrencies by market capitalization (data from CoinMarketCap). With a capitalization of almost $4.5 billion, DOT suddenly displaced other long-standing cryptocurrencies, such as Bitcoin Cash and Litecoin. Find out here the reasons why the unknown Polkadot became one of the most important cryptocurrencies on the market overnight.
Capitalisation surge: Polkadot jumped more than 2,000 positions in the cryptocurrency ranking
As bitcoin.com reported at the end of August, Polkadot’s market capitalization soared. Soon after the report was published, Polkadot had not gone through the verification process of CoinMarketCap to confirm the veracity of the capitalization, which left it in position 2,172 of the ranking of cryptocurrencies.
However, it only took a few days for CMC to do the same for DOT’s capitalization to go from $0 to a peak of over $5.23 billion. This ascent caused Polkadot to leave behind other industry leaders TRON, EOS, Cardano and Binance Coin.
However, a price hike wasn’t exactly what made Polkadot rise to prominence in recent weeks. Despite a significant increase in price — with gains of more than 100% — a critical move by the team behind Polkadot is responsible for her sudden capital appreciation.
Redenomination: the key to understanding the rise of Polkadot
To understand the progress Polkadot has made this year, it is important to understand two points. Polkadot’s creators call it a “web 3.0 platform for blockchain interoperability”. This allows for the creation of blockchains in only a few minutes through the Substrate Network for “true blockchain interoperability”.
Another key point in the functioning of the ecosystem is decentralized governance, which gives voting power to the “stakers” or owners of DOT coins. Thus, decisions about the development of this project are left to the “stakeholders” themselves. Important advancements in 2020 include the launch of the Polkadot mainnet in May, whereby the mainnet became no longer dependent on Ethereum, meaning that DOT was not an ERC20 token.
However, the real trigger for the DOT rise was the so-called “redenomination” of tokens, a concept similar to the stock split that traditionally occurs on the stock market. In the case of DOT tokens, the community’s own vote decided to redenominate DOT coins in a 1: 100 ratio on August 21. In other words, a ‘New DOT’ is 100 times smaller than its previous version.
In turn, this multiplies the circulating supply of coins by 100, meaning that there are now up to 1 billion DOT tokens circulating on the market. Although this does not change the price of the coins, it does make them more attractive to smaller investors due to the perception that the coin is more affordable, which will hypothetically increase liquidity.
Furthermore, the community decided that DOT token transferability would be possible on public markets or exchanges, a decision for which early investors had to wait almost three years.
Patience has rewarded 1,000s of investors who participated in the Polkadot ICO in 2017
However, Polkadot is nothing new in the world of cryptocurrencies. Some of those involved in the ‘mainstream’ explosion of the crypto market in 2017 may recall DOT’s initial coin offering (ICO) — the fundraising event prior to the launch of the tokens — was held that same year. It was one of the largest collections of the ICO fever in 2017: the tokens offered were sold out in just three days and the group managed to capitalize more than $144 million for the development of the project.
Polkadot’s DOT token is valued at $ 5.35 as of the publishing date of this article. When compared with the price during the ICO stage (close to $ 0.29 according to CoinCodex), the return on investment of the participants of the initial offer amounts to more than 1,700% in less than three years.
The launch of the tokens did not occur until the third quarter of 2019 and, although investors already had the DOTs in their possession, the issued tokens had a non-transfer clause. Finally, the tokens were released on block number 1 205 128 of its blockchain, allowing investors to collect their substantial profits after almost 3 years of waiting.
The DeFi Revolution and the Future of Polkadot
Another factor driving Polkadot has been the DeFi cryptocurrency revolution. Projects based on decentralized finance have gained traction this year, becoming the fastest growing and most coveted crypto niche.
An example of this has been Chainlink, another of the cryptocurrencies with substantial growth that this year also sneaked into the top 10 of the CoinMarketCap ranking. Now though, LINK has ceased to be the leader of the DeFi space after the rise of Polkadot. Although CMC does not yet name DOT as a DeFi coin, this could happen soon.
As CoinDesk reports, Polkadot will have an ecosystem available for the issuance of tokens under a simple and fair protocol. The token issuance mechanism will be similar to Ethereum’s ERC20 standard, making Polkadot a threat, or at least a competitor, to the leader in the decentralized development arena.
The Polkadot (Polimex) liquidity mechanism system will be launched by the team that handles the KILT identification blockchain protocol and poses a positive forecast for Polkadot in the near future.
Where can I invest in Polkadot?
The cryptocurrency has recently reached the most important exchange platforms around the world. The most popular exchanges to buy Polkadot are listed below: