In August 2020, the Hawaii Division of Financial Institutions launched a 2-year pilot program allowing up to 15 crypto exchange companies to operate in Hawaii.
Since then, Hawaiians have been heavily investing in cryptocurrencies — in fact, in 2021 alone, there were more than 53,000 crypto owners. Polkadot is one of the 56 cryptos in Hawaii, and its consumer community is growing day by day.
However, before investing, you should understand the basics of the Polkadot platform. In this guide, we’ll discuss Polkadot’s ins and outs, from the meaning of its name to whether it’s a good investment. Moreover, we’ll provide detailed instructions on how to become a DOT owner and where to obtain it.
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What Is Polkadot?
Since it was created in 2017, Polkadot has garnered a lot of attention. Currently, it is among the top 20 cryptocurrencies in the world. But it is certainly not an ordinary one.
Polkadot is a multi-chain application environment created by the Web3 Foundation. Gavin Wood, one of the co-founders of Ethereum, created Polkadot with the vision to design an advanced version of ETH. Its native coin is the DOT token.
But why Polkadot? Because it resembles the polka dot fabric consisting of an array of circles of the same size. They represent the blockchains, while the entire pattern symbolizes the entire crypto world.
Polkadot aims to enhance the interoperability that the entire blockchain sector is facing. It connects individual blockchains that are running within the Polkadot network simultaneously. These are called parachains. This way, people can send any data across any type of blockchain. Furthermore, the data can even be sent across public, open, and permissionless blockchains, which exploits the best aspects of each network. The Polkadot protocol improves interoperability, security, and scalability in this manner.
The Polkadot network is verified through a proof-of-stake system. People connected to the network can verify transactions to receive new tokens.
How Does Polkadot Work?
Polkadot functions uniquely by uniting a network of heterogeneous blockchains called parachains and parathreads. Polkadot Relay Chain connects these chains to each other and secures them. In some cases, they are connected to external networks called bridges, which only adds to Polkadot’s flexibility.
For better understanding, you need to familiarize yourself with the main components of the network:
- Relay Chain — This is the core of Polkadot’s functionality. This mechanism connects all the individual chains, solving the interoperability issues between them organically. The Relay Chain mechanism keeps the addition and validation transactions separate to achieve better transaction speed. This is precisely why this network can process more than 1,000 transactions per second.
- Parachain — Parachains stand for parallel chains running through the Polkadot network. Each network has its tokens. Every parachain can design its governance mechanisms without affecting other chains. This network ensures seamless transactions and data processing because it is divided into singular segments.
- Bridge Chain — This chain connects parachains and parathreads to various blockchains that don’t use Polkadot’s governance protocols. This way, they expand the network operability by allowing people from other blockchains to exchange tokens directly, without any crypto exchanges as mediators.
- Parathreads — They are similar to parachains, and they run on a pay-as-you-go model. This model secures more savings for blockchains that don’t need a constant connection to the network to function properly.
How Does Polkadot Rank?
Polkadot is among the most popular cryptocurrencies. It has undoubtedly seen highs and lows since its inception. Its value has fluctuated from $4.4 in August 2020 to its all-time high — $53.88 in November 2021. Currently, the value of the DOT token is $16, but that could change in a matter of minutes.
Unlike Bitcoin, whose maximum token supply is known, for Polkadot, this information is unavailable, as there is no limit. Its circulating supply goes over $987 million, with an almost $16 billion market cap.
In August 2020, Polkadot underwent redenomination. Namely, the number of coins each holder had was increased by the factor of 100. The redenomination was undertaken to avoid using small decimals and make calculations easier.
Why You Should Buy DOT Tokens
Remember that all cryptocurrencies, not just Polkadot, are highly volatile by nature. This makes it hard to predict a coin’s price in a couple of hours, let alone talk about long-term estimates.
Although Polkadot is a relatively young cryptocurrency, its steady growth and scalable business model are what investors are drawn to. This system rewards DOT owners by allowing them to have governance rights over the entire platform. They can also vote on creating or removing parachains, network fees, and upgrades. Another great thing about Polkadot is that the system eliminates bad investors by releasing the DOT tokens into the ecosystem.
Another benefit of Polkadot’s unique business model is that, besides transferring tokens, the users can transfer various data and assets via parachains. On top of that, Polkadot uses a proof-of-stake (POS) consensus mechanism. It allows you to buy and stake the DOT coins with the possibility to reap the interest from the staked tokens.
Where to Buy Polkadot in Hawaii?
Thanks to the regulated US cryptocurrency market, the people from Hawaii can trade cryptocurrencies just like everybody else across the country. They have two options to purchase DOT — through a reliable crypto exchange or directly from another Polkadot owner. Let’s explain both in greater detail.
Centralized Cryptocurrency Exchanges
Centralized cryptocurrency exchanges are one of the essential tools for digital currency investors. These online platforms allow you to sell, buy, and trade cryptocurrencies. Hawaiians can check out some of the most popular exchanges offering DOT tokens, such as Kraken, Gemini, Coinbase, and Binance.
You can access thousands of cryptocurrencies through hundreds of platforms worldwide. However, if you want to find the right one, you will have to decide on the features that matter to you the most. These are some of the essential things to consider before choosing a cryptocurrency exchange:
- Availability of DOT in Hawaii — You may be prevented from buying and selling crypto on certain exchanges due to state regulations. That is why you should check if an exchange is available in the area you live in.
- Safety and security — There are no exchanges immune to malicious activities such as hacks, but some are safer than others. You need to ensure the exchange utilizes state-of-the-art firewalls and knows how to handle malware and hackers.
- Supported tokens — Make sure the exchange you opt for supports the DOT tokens.
- Payment options — The more payment methods an exchange offers, the more trading options you will have. Many feature cryptocurrencies, bank transfers, credit/debit cards, and Paypal.
- Fees — Fees differ among exchanges. Some have fixed charges, whereas others take a percentage of your trade. They also vary depending on whether you are a seller or a buyer. Still, most exchanges charge trading fees and payment fees.
- User interface — This is especially important if you are a beginner in this process. The last thing you want to deal with is a cluttered interface.
- Liquidity — Trading volume is one of the key components. As a result, the higher the trading volume levels, the lower the volatility and market manipulation on that exchange. Since these transactions take time to be completed, the price of one coin can change from the moment of transaction initiation to the time it is finished. However, with faster transactions and higher trade volumes, this fluctuation can be eliminated.
- Trading limits — Another vital thing to check is a limit on how many tokens you can buy or sell over a certain period.
- Reputation — We suggest that you scour the internet, read all the comments, and see what people have to say about the exchange you have chosen. Reliability and trustworthiness are crucial factors.
Acquiring Polkadot Directly
Aside from obtaining DOT coins through a crypto exchange, you can also buy them directly from another DOT owner. There is no doubt that this way is riskier, as there is a high chance for you to get scammed. Still, if you are determined to do it, you can at least buy the coins from someone you trust and finalize the trade in a public place.
Step-By-Step Process of Buying Polkadot
Buying and selling DOT tokens through an exchange is a pretty straightforward process. Still, here is a step-by-step guide on how to open an account and become a Polkadot owner:
- Set up a wallet: Your DOT tokens will be stored in a wallet, so you’ll need to find the one that suits you. The best way to make a good choice is to visit the official Polkadot website and select one of the supporting wallets.
- Pick an exchange: You can choose one of the exchanges we’ve recommended earlier in this guide or find another. Either way, make sure your preferred exchange ticks all the essential boxes.
- Create an account: Go to the exchange’s official website and create an account. After the verification process, you’ll be able to start trading.
- Make a deposit: Determine the amount you want to spend on purchasing DOT tokens. Then, choose one of the available payment methods. Don’t forget about transaction and conversion fees.
- Buy DOT: Select the desired amount of Polkadot tokens and click on the Buy button. After the transaction is over, you can store them in your wallet.
We hope that this guide has helped you understand the basics of Polkadot and how it works. It is recommended that you do your own research before making any decisions, though. Also, consider the latest market trends, and seek an expert’s advice. It is important to remember that past performance is no guarantee of future results, and you should never invest more than you can afford to lose.
However, there is no doubt that Polkadot is here to stay, regardless of whether you view it as a currency or as a blockchain and computing technology. With its 100% decentralized networking system, Polkadot already contributes to the future of Decentralized Finance (DeFi).