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This cryptocurrency is ready for an incredible run
Cryptocurrencies are waking up after another long sleep. Ethereum (CRYPTO:ETH) has gained 92% over the past year, while Bitcoin (CRYPTO: BTC) soared 128%. From the introduction of new crypto-based investment vehicles to the next Bitcoin mining rewards halvingmany forces combined to thaw the last crypto winter.
But not all cryptocurrencies have yet been invited to the party, even if their growth prospects seem at least as promising as those of Bitcoin or Ethereum. Especially, Peas (CRYPTO:DOT) looks undervalued and poised to break out in a market-beating run. The official Web3 Foundation blockchain network is not getting the market respect it deserves.
Polkadot’s low price stands out like a freshly stubbed toe if you agree that a decentralized, personalized internet is the future.
I’m not saying you should sell all your Bitcoin and Ethereum to reinvest in Polkadot today. A diversified portfolio always makes more sense, even in the uncharted waters of the crypto industry.
But in case you haven’t considered adding Polkadot yet, let me explain why this token is in a prime position to beat the stock and crypto markets over the next few years.
Image source: Getty Images.
By the way, what is Polkadot?
Polkadot is a blockchain network designed to solve a fundamental problem in the crypto world: different blockchains cannot easily communicate with each other. Imagine a world where your Apple The iPhone was unable to connect directly to a Samsung Galaxy device: This is the old blockchain reality. Polkadot acts as a translator and bridge, allowing blockchains with different goals and designs to communicate and share data seamlessly.
The Web3 vision for the Internet is based on decentralization and user control. Polkadot makes this possible by allowing custom blockchains (called “parachains”) to connect to its network. These parachains can be tailored for specific uses such as gaming, finance or social media, creating an interconnected ecosystem where value and information flow freely.
This programming ecosystem supports the quick and easy development of applications and programs that take advantage of the best features of many different blockchains. Polkadot makes it easy to store monetary value in Bitcoin, execute Ethereum smart contracts, collect real-world data from Chain link (CRYPTO: LINK), and more.
And the DOT token (commonly known as Polkadot) is the lifeblood of this decentralized system, easily transmitting data between different blockchain networks while ensuring the security of data transfers. Additionally, its multi-chain design allows many transactions to be processed quickly, avoiding the bottlenecks of less scalable blockchains.
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How the DOT blockchain makes money
Executing transactions through Polkadot’s proof-of-stake ecosystem generates minimal fees for the validating nodes that process each request. This toll for traveling on the next generation information superhighway serves as an incentive for the system to function.
In this way, increased usage of the Polkadot network directly translates into higher demand for DOT tokens, as they are needed to pay transaction fees. As the ecosystem grows and more value flows through Polkadot, the underlying DOT token becomes more valuable.
The current reward rate for staking your Polkadot tokens is 17.3%. This is quite high, in order to motivate more DOT owners to stake their tokens and take a more active role in the system. Less than 53% of all DOT tokens are staked today, below the target rate of 60%. Thus, the reward rate could change over time as the amount staked increases or decreases. Staking also allows DOT holders to participate in network governance, further influencing the value of their holdings.
Additionally, this is the raw reward rate for people running their own nodes on the DOT network under ideal conditions. The rate will be lower if your chosen crypto trading service keeps part of the staking revenue for itself. For example, my Coinbase (NASDAQ:COIN) currently has a 6.9% win rate for staking DOT tokens.
These mechanisms ensure that the value of DOT is tied to the growth and success of the Polkadot network.
Polka Dot Price Chart
Polkadot has room to grow, but many market makers haven’t noticed yet
DOT’s 14% gain over the past year pales in comparison to the returns of Bitcoin and Ethereum. However, these big crypto names operate in different, often less dynamic, market segments.
With a focus on interoperability, Polkadot is at the forefront of Web3 innovation. Market caps are often imperfect measures in rapidly changing industries, and DOT’s $10.5 billion market value is expected to grow much more in 2024 and beyond.
This appears to be a gross undervaluation given Polkadot’s central role in the emerging decentralized internet. Savvy investors may view this mispricing as an opportunity to acquire a stake in a leading Web3 infrastructure at a significant discount.
Should you invest $1,000 in Polkadot right now?
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Anders Bylund has positions in Bitcoin, Coinbase Global, Ethereum and Polkadot. The Motley Fool holds positions and recommends Apple, Bitcoin, Chainlink, Coinbase Global and Ethereum. The Motley Fool has a disclosure policy.
Forget Bitcoin and Ethereum: This Cryptocurrency is Ready for an Incredible Run was originally published by The Motley Fool