Minnesota isn’t that different from many other states in the US regarding cryptocurrency regulation — no law pertains explicitly to digital currencies. Therefore, as a Minnesota resident, you don’t need a special permit to buy or sell cryptocurrencies, including Polkadot.
In fact, Polkadot has turned the heads of many crypto enthusiasts and investors from Minnesota, thanks to its unique goal — to achieve complete blockchain interoperability. Because of how high Polkadot aims, it’s often called the Ethereum killer, and there’s a good reason for that.
In this article, we’ll explore what Polkadot is, how it works, and, most importantly, how to buy its token, which is also called Polkadot (DOT). Read on.
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Polkadot (DOT) Explained
Polkadot is a blockchain-based open-source project that aims at achieving maximum interoperability. You see, there are plenty of blockchain networks out there, but none of them can communicate with each other. Polkadot seeks to change that and make it possible to transfer assets from different blockchains, effectively paving the way for Web 3, which is expected to be an entirely decentralized network.
Here are some of the core components of Polkadot that make it so attractive:
- Relay Chain — This is the main chain on Polkadot, and it is responsible for the interoperability and security of other chains. Its consensus mechanism is used on all other chains.
- Parachains — The “other chains” mentioned above are called parachains in Polkadot. They are independent chains bonded by the Polkadot network, even though they work as separate blockchains and are project-specific.
- Parathereads — These are used to help with the overall security, as they sometimes let parachains take part in Polkadot’s security.
- Bridges — Polkadot uses bridges to connect its parachains with exterior blockchains. In other words, they let the Polkadot ecosystem communicate with other blockchains.
How Polkadot (DOT) Works
Polkadot is a utility token, which means it’s not used just as a payment method on the platform. As a matter of fact, you can stake DOT on the network and create an opportunity for a passive income.
Namely, Polkadot uses an upgraded Proof-of-Stake consensus mechanism called Nominated Proof-of-Stake. Instead of everyone who stakes being considered a validator, Polkadot offers several “roles,” and here they are:
- Nominators — Nominators can stake their coins without assuming too much responsibility in the network. Instead, they can “nominate” a validator by staking with them. In a way, they support specific validators and can make a profit if validators do an excellent job.
- Validators — Validators have the power to verify transactions and add new blocks to the blockchains. They have all the rights that miners have in the Proof-of-Work consensus mechanism.
- Collators — Collators generate state transition proofs of parachains and report them to the relay chain. They send reports to the main chain on how the parachains are performing.
- Fishermen — Fishermen are also full nodes, but they don’t produce anything. Think of them as the “police” that stops invalid state transactions.
Short History of Polkadot
Peter Czaban, Robert Habermeier, and Gavin Wood came up with the idea to create Polkadot and started working on the project in 2016. Wood is especially significant for the project as he is a co-founder of Ethereum, and his name was one of the many things that attracted investors.
Polkadot held its first ICO in October 2017, with a single DOT priced at $0.29. A total of 2.24 million DOT were sold as part of the ICO.
The project remained relatively unknown until 2020, when a major upgrade took place, and the relay chain was introduced to the public. Moreover, the team behind Polkadot launched a piece of software called Substrate, which effectively allowed users to build parachains on Polkadot.
Polkadot had a second ICO held in 2020, and one DOT was priced at $1.25 this time. It was a successful ICO, with more than 340,000 DOT sold.
What’s important is that the token was redenominated, meaning one DOT became equivalent to a hundred new tokens. The change was implemented to make the token more visually appealing and make the math behind it easier.
Since then, the popularity of Polkadot started skyrocketing, and its potential has been recognized by many investors who are seeking to buy DOT. Some of these investors are from Minnesota, and if you’re one of them, you’ll find how to do it in the tutorial below.
Where to Buy Polkadot in Minnesota?
In Minnesota, you have two options, also available in all other states in the US:
- Buying Polkadot on a centralized cryptocurrency exchange
- Buying Polkadot directly from another person
Before discussing these in detail, it’s important to distinguish between centralized and decentralized exchanges. The centralized ones are licensed and operated by a highly-centralized group, much like any bank (or any other organization, for that matter).
Decentralized exchanges are developed in true blockchain fashion, as no individuals or organizations act as intermediaries, so using them is more in the spirit of crypto and blockchain.
However, to buy Polkadot with fiat money, you’ll have to use a centralized exchange, as their decentralized counterparts don’t accept fiat — only crypto.
Centralized Cryptocurrency Exchanges
Centralized crypto exchanges are the most popular option for buying and trading cryptocurrencies, and traders in Minnesota commonly use them. You can think of them as a crypto marketplace and a great way to enter the world of cryptocurrencies.
Choosing the best exchange isn’t rocket science, yet you still have to consider some things. Here are some of the most critical aspects we examine before selecting an exchange platform:
- Accepted cryptocurrencies — First of all, you need to check if your platform of choice accepts Polkadot and other cryptos you’d like to buy/sell.
- Availability in Minnesota — Check if you can legally open an account on the crypto exchange you selected, as many platforms aren’t available in the US.
- User interface — Check if the interface suits your current skill level. If you’re new to crypto trading, find a beginner-friendly platform.
- Safety — Check whether the centralized crypto exchange has all the security protocols in place.
- Privacy — It’s no secret that some online crypto exchanges have tighter KYC regulations than others. Some won’t let you trade much before verifying your identity.
- Overall reputation — Check exchange reviews written by professionals and users. Search forums to learn more about the overall reputation of the site.
- Payment methods — If you’re going to use fiat money, make sure you can use one of the payment options to make deposits and withdrawals.
- Fees — Each crypto exchange charges for its services, so make sure to learn more about trading fees and other costs before buying Polkadot.
Buying Polkadot Directly
Another option for buying Polkadot in Minnesota is finding someone willing to sell it directly. You just need to send them money and receive DOT to your crypto wallet. Please remember that crypto transactions are immutable, meaning there’s always room for scams. Therefore, you have to be 100% sure the person will send your DOT before referring to this option.
How to Buy Polkadot in Minnesota — Step-by-Step Tutorial
Purchasing Polkadot on online crypto exchange platforms is a relatively straightforward process. Here’s a step-by-step guide on how to do it.
- Set up a Polkadot wallet — Find a software wallet that accepts Polkadot and set it up on your device. Make sure to write down your private and public keys.
- Select an exchange — Pick one of the recommended online crypto exchanges or find one yourself.
- Open an account — Register on the platform of your choice.
- Make a deposit — Deposit fiat funds using one of the accepted payment methods on the platform.
- Buy Polkadot — Find an option to buy DOT and simply enter the amount you’d like to purchase. Confirm your transaction.
- Withdraw your funds from the exchange to your wallet — Once you successfully purchase DOT, it will be stored in your exchange balance. However, we recommend withdrawing your DOT to your crypto wallet for maximum security.
Buying DOT in Minnesota is as easy as ABC. If you already have some knowledge about crypto, you shouldn’t take more than a couple of minutes to register and buy DOT. The biggest part of the DOT-buying process is finding the perfect cryptocurrency exchange for you.
Once you get your hands on DOT, it’s up to you to decide what to do with it. You can sell it, trade it, “hodl,” or stake it on the platform.