Launched in 2017, Polkadot is a relatively new blockchain platform striving to achieve complete interoperability and facilitate cross-chain transactions. In addition to that, it also has its own utility token that has raised a lot of dust among crypto investors.
If you’re interested in buying Polkadot (DOT) in New Jersey, you should know that the state has favorable crypto laws, allowing you to buy and trade cryptocurrency safely.
This guide will tell you all about the Polkadot blockchain and its token, including what it is, how it works, how it came about, and where and how to buy it in New Jersey. Read on!
Polkadot (DOT) Explained
Before we discuss the main Polkadot features, we need to emphasize one of the biggest problems of the current crypto universe. Namely, as advantageous as the existing blockchains are, they can still barely communicate with each other, making the transfer of information and assets difficult, if not impossible.
This is where Polkadot comes in. It aims to revolutionize the crypto world by providing a platform that would allow complete interoperability between individual blockchains. Polkadot’s ultimate goal is to create a completely decentralized web called Web3, which is also the company’s name.
The project’s enormous potential has been recognized by many crypto enthusiasts, which led to the unwavering popularity that it enjoys today. For this reason, buying DOT, the system’s main coin, has been regarded as a viable financial investment opportunity.
A huge part of DOT’s attraction is that, rather than being just another cryptocurrency, it is also a utility token. This means that it allows its holders to perform the following actions on the blockchain:
- Govern — Polkadot (DOT) holders participate in a digital democratic system, so to say, where they can take part in governing the network. They can vote on proposed changes in the blockchain — the more tokens they have, the greater the power their vote holds.
- Stake — Holders can improve the security of the blockchain by locking their tokens in as collateral. This is called staking, and the users receive money for participating in it.
How Polkadot (DOT) Works
Now that we’ve discussed what DOT can do let’s dive into more detail about the operating mechanisms behind it.
Namely, Polkadot works on a different principle compared to other blockchains. For instance, Bitcoin utilizes proof-of-work consensus that requires a lot of energy to be spent by the participating computers.
On the other hand, Polkadot works on a proof-of-stake principle, relying on holders staking their tokens and performing some other functions within the network. This is a much more energy-efficient approach.
Therefore, in contrast to many other blockchains where all participants are validators, Polkadot offers four different “roles” its holders can assume. These functions vary in their degree of responsibility and, consequently, in the amount of rewards holders who perform them can receive.
These so-called roles in the Polkadot system include:
- Validator — Validators perform a crucial function in the Polkadot network. They can add new blocks to the chain and verify the transactions being done on it. Since this is a very important role, validators receive the highest rewards. To become a validator, you must have ample technical knowledge and stake a specific amount of DOT, which is usually high.
- Nominator — Holders who don’t want to stake a lot of DOT or don’t have the needed technical knowledge can become nominators. Nominators essentially “nominate” a validator to stake the tokens for them. Choosing a good validator is important because nominators receive a percentage of the validator’s reward, which depends on their performance.
- Collator — Collators collect the reports on how the smaller blockchains within the network behave and send them back to the validators on the main chain or the “relay chain.”
- Fisherman — The fishermen serve as the network police. They monitor the events on the blockchain, reporting and stopping invalid transactions and other misconduct.
Short History of Polkadot
The inception of the Polkadot project dates back to 2016 when three industry experts — Gavin Wood, Robert Habermeier, and Peter Czaban began implementing the plans for its realization.
The most important figure in the bunch is Gavin Wood, whom you might recognize as one of Ethereum’s founders. His credentials and expertise are the main features that added credibility to Polkadot and convinced the interested parties that it is worth investing in.
In 2017, Polkadot saw its first Initial Coin Offering, with the price of a single token set at $0.29. The company raised serious capital as the investors bought a whopping $2.24 million DOT.
However, the public learned about the Polkadot network only in 2020. The companies behind Polkadot, Web3, and Parity also introduced a new software product called Substrate. This software’s purpose is to allow its users to create smaller blockchains on the Polkadot main chain.
The same year the company had its second Initial Coin Offering, with the token’s price raised to $1.25. This time, the total number of DOT sold amounted to 340,000.
The token underwent a serious change in the meantime, making it more attractive to investors. Namely, the Polkadot community changed the denomination of DOT by a factor of one hundred. This made the number of Planck, DOT’s smallest unit, more constant and easier to calculate.
Where to Buy Polkadot in New Jersey
New Jersey residents can buy Polkadot tokens safely and legally. The options at their disposal include buying DOT on a centralized crypto exchange and buying it directly from another holder.
While we’re here, we must make a clear distinction between centralized and decentralized crypto exchanges, as it may confuse some. As the name suggests, decentralized exchanges do not have single operators and intermediaries participating in transactions. They are perfect for exchanging cryptocurrencies.
On the other hand, centralized exchanges have a specific operator and are licensed to sell cryptocurrency in different jurisdictions. It is also important to note that, on a decentralized exchange, you can’t buy a cryptocurrency using fiat money. This is only possible on its centralized counterpart.
Centralized Cryptocurrency Exchanges
One of the best options for buying Polkadot in New Jersey is centralized crypto exchanges, especially if you’re just embarking on your crypto journey. Many of these exchanges are licensed in the Garden State, but you should still be careful how you choose the one to trade on.
Here are some of the most important criteria we apply when assessing the qualify of centralized crypto exchange:
- Cryptocurrency availability — One of the main prerequisites for an exchange is that it offers Polkadot.
- New Jersey legality status — The platform can be a perfect choice for trading DOT, but you need to be sure it legally caters to New Jerseyans. Otherwise, it’s not of use to you.
- Safety — The safety of your information and money is a priority. Therefore, making sure that the exchange uses foolproof safety measures is a must.
- Track record — Checking different crypto forums and reviews from other customers and experts can tell you a lot about the trustworthiness of an exchange.
- User interface — You should choose an exchange depending on your current knowledge about the crypto world. If you’re a beginner, pick one with a simpler user interface.
- Payment methods — Different exchanges allow the use of different payment methods. Make sure to check this info to match the payment methods you intend on using.
- Fees — Buying DOT on crypto exchanges usually comes with trading fees. Learn about this feature before buying to avoid spending more than you need to.
Buying Polkadot Directly
The most old-fashioned option for buying Polkadot in New Jersey is doing so directly from another holder. However, this option is also the riskiest one as there is no guarantee that you’ll actually get what you’re buying. To avoid scams, make sure you’re buying only from people you absolutely trust.
Step-by-Step Guide to Buying Polkadot in New Jersey
Once you find the perfect cryptocurrency exchange, you can use it to buy Polkadot in a few straightforward steps. Here is the breakdown of the process:
- Get a DOT wallet — Download the desired Polkadot software on a device of your choice and set up an account. Don’t forget to write down your credentials, as these will let you access your funds.
- Register on an exchange — Provide the required info to create an account.
- Deposit funds — Deposit a desired amount of money using one of the available banking options.
- Buy DOT — Find the DOT section, enter the amount you’d like to buy, and confirm the transaction.
- Withdraw DOT to your crypto wallet — While you can certainly keep your Polkadot on the exchange, we recommend you transfer it to your wallet for security reasons.
As time passes, more people realize the positive implications of the Polkadot system, allowing its token popularity to rise. Luckily, New Jersey residents can hop on the bandwagon by buying DOT from licensed crypto exchanges. We hope this guide answers some of the questions you might have had about buying Polkadot tokens and helps you get into the trading game effortlessly.