Decentralized finance, DeFi, has seen massive growth in 2020. Many of the initial coin offerings (ICO) of 2017 are beginning to deliver on promises made at their launch in 2017.
Ethereum drove the original DeFi buzz by providing projects a platform to develop their project and a coin, Ether, that allowed investors the chance to invest in those projects.
Unfortunately, Ethereum has a scalability problem. This problem became apparent when the network drastically slowed in mid-2020 due to network congestion.
After that network slowdown, many questioned if Ethereum had scalability issues. It was even questioned if Ethereum had what it took to support the many projects operating on its platform.
This is where Polkadot entered the picture. The project was launched on May 26th, 2020 by Ethereum cofounder Dr. Gavin Wood.
Polkadot almost immediately jumped into the top 10 cryptocurrencies when ranked by market cap.
In other words, it had a lot of buzz around it. And for good reasons.
Ethereum has scalability problems that it will have to resolve if DeFi becomes as popular as many believe it will. Not to mention that Dr. Wood and his team at Polkadot have done a great job explaining how they will resolve the problems that plague Ethereum.
Anyway, this article will cover why Polkadot has a big chance of becoming the next Ethereum.
Polkadot has Parachains
The main difference between Polkadot and Ethereum is that Polkadot has parachains. That is short for parallel blockchains.
Parallel blockchains are a huge improvement from Ethereum’s single blockchain for one reason:
Parallel blockchains reduce network congestion. As mentioned earlier, Ethereum has had problems with network congestion in 2020, which is a bad sign for the future. Ethereum has not even come close to the amount of traffic that many expect when DeFi becomes more popular.
With all that in mind, Polkadot seems much more suited to handle the massive network usage that will inevitably occur when DeFi becomes more popular.
Substrate Allows Easy Development
The same company that developed parachains for Polkadot, Parity, has also developed a tool that allows developers to develop apps for Polkadot.
That tool is called Substrate – it’s entire purpose is to make app development easy on Polkadot. Ethereum has tools for developing apps on the blockchain, but none of the apps are internalized the same way as Substrate.
Apps on Polkadot are called dApps. And the ease with which developers can develop on the blockchain offers a substantial improvement from app development on Ethereum.
Ethereum has Leadership Problems
The other problem with Ethereum is that it has leadership. That is not to say the leadership is bad, but the structure mostly revolves around the founder.
So far, it works, but this type of leadership structure can lead to problems when issues inevitably pop up with a cryptocurrency.
Polkadot, on the other hand, has a flatter leadership structure that is better able to handle any potential problems that arise.
Now, this point might sound insignificant and minor, but a cryptocurrency is only as strong as its leadership. And the leadership structure of Ethereum leaves a lot to be desired.
Investors Love Polkadot
It’s an objective fact that investors love Polkadot. All you have to do is look at the market cap of Polkadot.
Polkadot officially released their coin, DOT, in August 2020. The coin immediately jumped to the Top 10 of the coins by market cap. The market cap currently stands at $841 million at the time of writing, which is ways off from Ethereum’s market cap of $28 billion.
However, Polkadot has been around for a few months. A massive jump in market cap after only a few months is a great sign for the future of any cryptocurrency. It’s also a strong indicator that investors like the cryptocurrency.
Is Polkadot really an Ethereum-killer?
Many in the cryptocurrency community have coined Polkadot as an “Ethereum-killer.” This moniker is not entirely baseless. As mentioned previously, Polkadot does everything that Ethereum does better, which does raise the question of whether Polkadot can overtake Ethereum.
However, the founder of Polkadot, Dr. Gavin Wood, has stated that he does not view Polkadot as an “Ethereum-killer.”
Instead, Dr. Wood views Polkadot as a natural progression of Ethereum and even supports Ethereum. Basically, he views Polkadot as the next generation of Ethereum that will solve problems that Ethereum is unable or unwilling to solve.
Is Polkadot a good investment?
Yes, Polkadot is a great investment. The price is still relatively low at about $5.00/coin, which is low when compared to Ethereum’s price of about $600. And many claim that Polkadot will eventually replace Ethereum.
Additionally, it’s possible to stake Polkadot instead of just letting it sit in your wallet. This allows you to earn money while you hold your investment.
In fact, many believe that most of the Polkadot being held is actually being staked. Staking, in our opinion, is one of the main benefits of holding Polkadot compared to other cryptocurrencies that do not allow staking.
Where can I buy Polkadot?
Unfortunately, Polkadot is not available on many exchanges at the moment. Remember, it’s a very new cryptocurrency.
Now, this might sound bad, but it’s actually great from an investment perspective. The price of Dot will most likely increase after it is listed on Coinbase.
That’s partly why we recommend investing now before it becomes too readily available.
Anyway, you can purchase Dot on Binance and other altcoin focused exchanges. The downside is that you must use Bitcoin for these purchases, which is not too difficult to figure out.
Overall, Polkadot has an excellent chance of becoming the next Ethereum. It’s faster, more developer friendly, and has an excellent team led by a co-founder of Ethereum.
As the founder of Polkadot has stated, Polkadot is the next logical step in the Ethereum project. We view Polkadot as a long awaited update to Ethereum. And this update will be critically important if DeFi takes off to even a fraction of the extent that many proponents of DeFi predict.