Polkadot (DOT) was jointly developed by Gavin Wood, Peter Czaban, and Robert Habermeier in 2016. The three are also co-founders of Ethereum. It is a cryptocurrency that can be traded on exchanges such as Coinbase and Kraken. More importantly, DOT is a decentralized protocol that connects different blockchains that were previously independent of each other, aiming to develop the "DOT ecosystem".
Although DOT's price has fallen sharply due to the Federal Reserve's (Fed) high-pressure interest rate hikes, DOT did show a rapid growth trend when it was first listed in 2021. At that time, the increase exceeded 1,700%. The market is still highly optimistic about DOT's excellent qualities such as interoperability, scalability, community autonomy, and non-fork upgrades.
Binance Exchange - the world's largest Bitcoin exchange, register to receive a 20% commission rebate.
Binance Registration:https://www.binance.com/zh-CN/join?ref=LKN3CTB3(20% commission rebate)
1. What is Polkadot?
DOT is a public chain composed of multiple chains. It uses multiple chains to solve the scalability and speed that a single chain cannot achieve. Moreover, each chain in DOT can achieve self-management, cooperate and upgrade with each other, maintaining the autonomy and diversity of each chain, making the entire DOT ecosystem stronger.
General blockchains only have one main chain, and it is not so convenient to transfer or register with other chains across chains. However, the goal of the DOT ecological chain is to become a cross-chain network protocol, making the transfer and calculation of cross-chain tokens easier.
DOT positions itself as the next-generation blockchain protocol that can connect multiple professional chains into a universal network. It is therefore often referred to as a multi-chain network because DOT can connect networks together, unlike networks like Bitcoin, which only run independently.
2. Polkadot has five major features, aiming to build the Polkadot ecosystem
1. Interoperability
In blockchain architecture, since each project specializes in different areas, all blockchains have to make trade-offs to support different functions and use cases.
For example, one chain might be optimized for identity management, while another might be optimized for file storage, meaning blockchains can provide better services while also improving efficiency and security by eliminating unnecessary code.
2. Scalability
Isolated blockchains can only handle limited traffic, but because DOT is a multi-chain network ecosystem, it can process many transactions on several chains at the same time, which eliminates the bottleneck of traditional blockchains that require transactions one by one. At the same time, this ability to process transactions synchronously greatly improves future scalability.
3. Community autonomy
DOT is an open community governance system that coordinates network upgrades through on-chain governance to ensure that the development of DOT reflects the value of the community.
The community on DOT can manage the ecosystem in a way that users see fit, experiment with new ideas, or exchange pre-built modules to speed up deployment. The blockchain governance model can even be continuously improved and upgraded as needs and conditions change.
4. No fork upgrade
DOT is designed to be a truly resilient network, able to adapt and upgrade itself without forking, whereas traditional blockchains require a so-called “hard fork” to increase interest rates, creating two separate transaction chains, which can split the original cryptocurrency community in two and often requires months of work.
But DOT is different from traditional blockchains. DOT can achieve forkless upgrades on its own, allowing blockchains to easily develop and adapt when better technologies emerge. This allows DOT to more easily adapt to technological changes on the blockchain and upgrade itself when better technologies emerge.
5.NPOS consensus protocol
In the consensus protocol of DOT, a system similar to POS is adopted, and the system mainly has two roles: "Nominator" and "Validator".
In NPoS, the roles of "nominator" and "verifier" are extremely important. The verifier is responsible for verifying transactions, while the nominator is responsible for proposing a trust list of verifiers.
To become a nominator, you must hold DOT, propose a list of trusted validators, and delegate your coins to them. When the validators you trust correctly verify the transaction, the nominator can also receive rewards.
When a transaction occurs, the network will randomly select a validator to verify it. The validator pledges DOT to obtain the right to verify, just like the general proof-of-stake mechanism.
Other roles include "proofreaders" and "fishermen". The former maintains the parachain by collecting users' transactions on the parachain and providing state transition proofs to validators.
The latter is similar to a monitoring role. If a validator who does not report honestly is found and successfully reported, he or she will receive a reward.
3. DOT has unlimited potential for future development, but we need to pay attention to regulatory risks
Based on a multi-chain network and ecosystem, the development potential of DOT is unlimited. Because DOT can gather the power of many blockchains, it can process far more transactions than Bitcoin and Ethereum. Therefore, Polkadot is expected to unify various cryptocurrencies in the foreseeable future, allowing different cryptocurrencies to be exchanged without the need for a central exchange.
In addition, DOT’s management system is mature, all stakeholders have a say, and network upgrades are coordinated and autonomously promulgated on-chain, ensuring that DOT’s development reflects the community’s values and avoids stagnation.
However, the legal environment for DOT and other cryptocurrencies is still evolving, and regulators in countries around the world may enact regulations to regulate transactions involving cryptocurrencies. Although the current focus of regulation is on traditional cryptocurrencies such as Bitcoin and Ethereum, if DOT continues to develop, it will inevitably attract regulatory attention in the future.
Therefore, in the long run, if companies or individuals intend to take advantage of the huge potential of DOT, they should seek further legal advice on the content of the DOT smart contract to pay attention to the legal and regulatory risks that may arise from DOT transactions in advance.
4. How to trade DOT
In the cryptocurrency market, investors have two trading methods to trade cryptocurrencies.
The first trading method is to buy directly on a cryptocurrency exchange. For example, buying Polkadot (DOT) on the Binance exchange is trading Polkadot (DOT) spot. This trading method is mostly used to hoard spot coins and wait for the price to soar before selling them for profit.
The second trading method is to choose cryptocurrency contracts for difference (CFDs) and speculate on the price changes of cryptocurrencies.
Contract for Difference (CFD) is a popular derivative financial product. CFD allows users to trade long or short cryptocurrencies through margin without actually holding the assets.
Investors can choose to open a CFD long order (predicting price increases) or a short order (predicting price decreases). For example, they can choose the DOT/USD trading currency pair to speculate on the price trend of DOT. Since the CFD contract has a short term, this trading method is very suitable for short-term operations and is also suitable for spot hedging.
What is the biggest difference between the first trading method, "buying cryptocurrency spot", and the second trading method, "investing in cryptocurrency CFD"?
First of all, the first trading method will store the purchased cryptocurrency in the wallet, while CFD trading is a position in the account, which is regulated by financial regulators.
CFD trading is not restricted by trading assets. What you buy/sell is just a contract, so it has greater flexibility. CFD is a mature financial product under regulation.
5. Advantages and Disadvantages of Using CFD to Trade Polkadot (DOT)
Advantage 1: As mentioned above, long and short two-way transactions can be carried out for hedging
Advantage 2: With leverage, you can trade with a small amount of money. OANDA's Polkadot is up to 10 times.
Disadvantage 1: Spread will occur
Disadvantage 2: Holding positions overnight will incur overnight interest
6. Choosing OANDA to participate in the Polkadot (DOT) trading process:
Polkadot (DOT) is available for trading as a CFD (Contract for Difference) at OANDA.
1. Open an account
Simply fill out the online application form and you can open an OANDA trading account for free on the same day. You do not need to provide proof of identity or address to open an account.
> Click here to view the tutorial on opening an OANDA account
2. Deposit
After successfully opening an account, you can deposit money into your account. OANDA provides a variety of deposit channels: credit card, bank wire transfer, Skrill and Neteller. Among them, credit card deposit is usually the most convenient and can be deposited instantly.
>Click here to view OANDA credit card deposit tutorial
3. Install trading software
Polkadot (DOT) can be traded on MT4, MT5, and fxTrade trading software (platforms) provided by OANDA. After downloading and installing, enter the login information to successfully log in to the trading platform.
> OANDA MT5 trading platform download, installation and login tutorial
> OANDA MT4 trading platform download, installation and login tutorial
> Download, install and log in tutorials for the iPhone version of fxTrade trading platform
4. Start trading
After completing the login, you need to transfer the previously deposited funds to the trading account through "internal transfer", which is usually immediate. When the amount is displayed in the trading account, you can participate in Polkadot (DOT) transactions on the trading platform.
