Polkadot
Polkadot Returns vs S&P
-41.90%
Versus S&P
•
an hour ago
-41.90%
Versus S&P
•
an hour ago
6m High
6m Low
Polkadot
$6.74
$3.15
S&P 500
60.26
46.10
Polkadot
S&P 500
Does not follow the stock market
Sources: SPX, DOT
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Highlights
Good For
High risk, high return
Time Horizon
3-5 years
Diversification
Environmentally Friendly
Bitcoin was the first cryptocurrency in the world, offering the ability to store and transfer value in a trustless manner. Then Ethereum came along and offered the ability to perform more complex tasks through smart contracts. But Ethereum's popularity has been a double-edged sword that resulted in high transaction fees and network congestion. Not to mention, it is still cumbersome to move crypto assets between blockchains like Bitcoin, Ethereum and others. Polkadot (DOT) is a “layer 0” blockchain that intends to make other blockchains more scalable and interoperable through its Relay Chain, Parachains and Bridges. Additionally, Polkadot is a Proof-of-Stake (PoS) blockchain, meaning that investors can generate passive income by staking their DOT. While Polkadot has a lot going for it, it is competing within a space that is saturated with many other promising smart contract platforms.
Did you Know
Polkadot was founded by Dr. Gavin Wood, who also co-founded Ethereum and helped develop Ethereum’s Solidity programming language.
Polkadot had an initial maximum supply of 10 million tokens, which the community voted to increase to 1 billion DOT in 2020.
The Polkadot team raised $145 million in their 2017 Initial Coin Offering (ICO) but lost about 60% of those funds due to a wallet vulnerability now known as the Parity bug. To make up for this devastating loss, the team had to hold two more private sales in the following years.
Considerations
Polkadot (DOT) is a “layer 0” blockchain that intends to make other blockchains (e.g. Bitcoin, Ethereum) interoperable. This way investors will be able to swap crypto assets across blockchains without the use of an exchange.
While Polkadot has a solid value proposition, many other blockchain projects are implementing similar features (e.g. bridges, sharding) to address interoperability and scalability.
Polkadot does not have the best track record when it comes to security, as millions of dollars have been hacked from the founding team’s wallet during their early days.
Reasons to Invest
Polkadot’s development was kicked off in 2017, but it only became fully operational in 2020. Compared to a platform like Ethereum, Polkadot is not tried-and-tested.
While Polkadot has a solid value proposition, many other blockchain projects are implementing similar features (e.g. bridges, sharding) to address interoperability and scalability.
Polkadot does not have the best track record when it comes to security, as millions of dollars have been hacked from the founding team’s wallet during their early days.
Drawbacks
How You’re Taxed
Income Tax
Capital Gains
In the U.S., any time an investor sells or swaps their crypto, they owe capital gains taxes. The exact rates vary: with short-term capital gains taxed as income (ranging from 10% to 37%), and long-term capital gains ranging from 0% to 20%. While simply holding DOT does not incur any taxes, receiving DOT from staking rewards is taxed as income.