Virtual currencies have taken the world by storm. In most US states, including Vermont, there has been an upsurge in their popularity. In fact, during the pandemic, the number of crypto transactions in Vermont rose over 400% — reaching $83.7 million in 2020 alone.
While Bitcoin still holds first place in terms of popularity, other cryptocurrencies are gaining momentum, too. For instance, Polkadot has been doing well, probably because of the mission its founders had in mind while creating it.
If you’re from Vermont and interested in investing in Polkadot, you’re in luck. This article will explain what Polkadot is, explore the tokenomics behind the Polkadot project, and discuss where you can buy Polkadot’s native crypto — DOT — in the Green Mountain State.
What Is Polkadot?
Polkadot is a blockchain-based project launched and led by a team of experts, including Gavin Wood, Ethereum’s former CTO. Its aim is to connect all blockchains into a unique network and tread a path toward the creation of Web3.
Now, if you’re new to the industry, all of this probably sounds like a bunch of big, unfamiliar words thrown together. So, we’ll start from the basics and explain how the crypto industry functions to give you a full picture of Polkadot and reveal its significance on the market.
Namely, all cryptocurrencies have their own individual blockchains. Each of these blockchains was developed from scratch to serve a specific purpose. So, each one is also isolated from others and cannot interact or exchange any type of data with them.
The Polkadot project strives to resolve these problems. Its mission is to create one large blockchain that would connect all other smaller blockchains into a single network. The existence of such a network would make the blockchains within it easy to build, interoperable, and more secure than before. This innovative network of blockchains is also meant to serve as a basis for Web3 — a completely decentralized internet.
If you’re wondering how this is possible, the answer lies in the way the Polkadot protocol is structured and organized. The following paragraphs will explore that topic.
How Does Polkadot Function?
Polkadot is a system built out of several components. The main chain, which we’ve already mentioned above, is called the Relay Chain. This chain represents the basis for the development of all other smaller chains in Polkadot’s ecosystem.
The smaller chains are called parachains. Their name stems from the phrase “parallel chains” — after all, that is how they function in the network: parallelly with the Relay Chain. This makes transactions in the network significantly faster and more scalable.
The Relay Chain helps developers construct their blockchains by providing them with the necessary tools and resources. This way, developers won’t waste time building their blockchains from scratch. Instead, they can focus on adding value to their projects.
The parachains in this system can communicate with one another through links called bridges. These bridges will not only connect parachains within the network to one another but also allow them to interact with blockchains and non-blockchain databases outside Polkadot’s ecosystem.
The Relay Chain also establishes security on the network and allows blockchains to participate and add to that protection. Parathreads — another relevant component of Polkadot’s ecosystem — help make this possible.
What Is DOT and How Can It Help Me Invest in Polkadot?
You can invest in this project through the use of DOT — Polkadot’s native cryptocurrency. DOT is a utility token, which means it has more functions than regular cryptos like Bitcoin, for instance.
DOT allows its holders to participate in the governance of the Polkadot project. Their participation depends on the amount of DOT they hold and their involvement and contribution to the project.
Polkadot uses a consensus mechanism called Nominated Proof-of-Stake to function. Instead of computer power, Polkadot relies on staking to achieve this consensus. DOT holders can help the project work and develop by staking their DOT.
The process of staking involves holders locking their coins as collateral and receiving rewards in the form of passive income in return.
Polkadot owners differ from one another depending on the way they choose to stake DOT. They can be validators, nominators, collators, and fishermen.
Validators have a central role in the project. They stake DOT, verify transactions, and add new blocks to the chain. Nominators select (nominate) validators to participate in the process of staking on their behalf by assigning a certain amount of DOT to them. Collators are in charge of relaying new blocks and state-transition-proofing them to the validators. Fishermen monitor the entire network and report misconduct.
All of them receive rewards for their participation in the project according to merit. Validators are granted the biggest prizes since their role requires the most technical knowledge and carries the largest responsibility.
Vermont Crypto Regulations
Vermont Money Services Act (VMSA) classifies cryptocurrencies as property instead of money. To be more precise, VMSA defines virtual currencies as digital units of value that can serve as substitutes for money, have monetary value, and be exchanged for money.
Moreover, the state recognizes cryptocurrencies as permissible investments. However, those who intend to sell, buy, or exchange them still need a Vermont-issued money transmitters license.
So, you can invest in Polkadot in Vermont as long as you are a holder of a valid license that outlines your rights to engage in this kind of transmission.
Where Can I Buy Polkadot in Vermont?
As in many other US states, if you plan to purchase Polkadot in Vermont, you have two options. You can buy DOT through a crypto exchange platform or from a DOT holder interested in selling you the coins.
We’ll discuss both options in the paragraphs that follow so that you can get a better idea about how you’d like to acquire your first Polkadot tokens.
Centralized Cryptocurrency Exchanges
Cryptocurrency exchange platforms are some of the places where you can obtain DOT legally in Vermont. These platforms can be centralized and decentralized. The former accept fiat currencies, while the latter only work with virtual currencies.
So, if you don’t have any cryptocurrencies that you can exchange for DOT, you’ll have to join a centralized crypto exchange. The good news is that they’re very common, so you shouldn’t have trouble finding one that suits your needs.
You can make sure you’re choosing the right platform by checking whether the one you’ve decided to join boasts the following characteristics:
- Vermont license — Before you look at what the exchange you’re considering offers, check whether it holds a valid Vermont-issued MTL. You won’t be able to buy DOT through it legally otherwise.
- Crypto availability — Your next step is to check the list of cryptos that the platform you’re planning to join accepts. You should be able to buy, sell, or exchange your money for a wide selection of other cryptocurrencies, besides Polkadot.
- Security measures — Don’t forget to look into the security protocols each exchange platform uses. You can also do some research on their history and find out whether they have ever been a target of cyber-attacks and, if so, how they have dealt with the consequences.
- Liquidity — None of the other characteristics matters if the platform you’ve chosen doesn’t allow you to trade as soon as you place the order. So, make sure to check how popular the platform is with traders before you make a final decision.
- Payment options — Available payment methods are another relevant aspect of crypto exchanges. You should have a wide choice, such as credit cards, bank wire, and e-wallets.
- Fees and limits — All exchange platforms impose fees and limits on their conversions and transactions. So, remember to check whether they fit your budget and your plans.
Buying DOT Directly
If joining crypto exchanges seems like too much of an ordeal, you can also buy DOT directly from a seller in Vermont. However, we must warn you — this might not be the safest option.
Namely, the Vermont Department of Financial Regulation (DFT) received an increasing number of complaints regarding cryptocurrency scams in the state in the past year. In response, DFR released a statement urging all investors to learn about the risks of investing in cryptos and try to avoid unregistered cryptocurrency securities.
How to Purchase DOT in Vermont — Step-by-Step Guide
Here’s a guideline you can follow if you’re planning to buy DOT using a crypto exchange:
- Choose a crypto wallet — Crypto wallets are online platforms where you can store coins you’ve purchased. Before you join a crypto exchange, read about crypto wallets online and find a reputable one you can use.
- Pick a crypto exchange — Select a crypto exchange you like best, following the advice we’ve provided above.
- Open an account — Visit the exchange’s official website and join the platform by filling in the registration form and going through its KYC procedure.
- Fund your account — Use one of the payment methods the exchange platform offers to deposit money into your account.
- Purchase DOT — Use the fiat money to buy DOT and trade them or send them to your crypto wallet.
As you can see, buying Polkadot in Vermont is not a difficult process. You can do it in a safe and legal way if you select a reputable exchange that holds a valid MTL and follow our step-by-step guide. Good luck!