DOT

Should You Buy Polkadot (DOT) While It's Less Than $11?

The Polkadot (CRYPTO: DOT) cryptocurrency has climbed from less than $6.50 to more than $10.50 per token in six short weeks. It's trading at prices not seen since the spring of 2022. Is it too late to jump aboard the Polkadot bandwagon, or does the cryptocurrency have greater gains ahead?

There's no such thing as a guaranteed winner in any investing market, and particularly not in the volatile cryptocurrency class. That being said, I'm convinced that Polkadot is only starting a long and lucrative success story. In fact, Polkadot is the largest holding in my crypto portfolio, and I'm still tempted to buy more.

How Polkadot works

The Polkadot ecosystem has a crystal-clear mission statement: "Polkadot will enable a completely decentralized web where users are in control."

Founded and maintained by the Web3 Foundation, the Polkadot network and its DOT token -- also commonly known by the Polkadot name -- are poised to revolutionize how the world wide web works. Designed to pass information and monetary value between different blockchain ledgers, Polkadot helps app developers take full advantage of each cryptocurrency's individual strengths in a seamless application.

The network's very name is a big hint. Think of each hyper-specialized cryptocurrency as an individual dot in a lovely polkadot pattern. Each one is entirely separate from the others, but they can interact thanks to the Polkadot fabric that ties them together. So if you want to manage your app user's wealth in Bitcoin with smart contracts running on the Ethereum network, reacting to real-world data from the Chainlink oracle coin, Polkadot's development framework makes it easy.

The DOT token serves several functions in this system. It passes data from one crypto system to another in Polkadot transactions. Investors who stake the token earn rewards in exchange for enhancing the network's security. They also have a say in where the Polkadot network will go next, voting to approve technical changes and parachain projects.

Early Web3 examples

So Polkadot should have a bright future if the Web3 revolution ever gains traction. Again, the future is never guaranteed but you can't stop technical progress. Social networks wrested the online experience away from simple web servers without interactive functions. Likewise, the even more personalized Web3 architecture seems destined to supplant ad-supported social networks fairly soon.

Early examples include the Brave web browser, which pays the user for watching ads in a privacy-boosted version of the Chrome browser. The Uniswap decentralized finance (DeFi) protocol lets you exchange cryptocurrencies from one digital wallet to another, without a bank or trading exchange between the two parties. Decentraland is the digital infrastructure of a virtual world with unique experiences, content presentations, and virtual real estate.

Polkadot has a basic presence in each of these early Web3 systems. The Polkadot corner of Decentraland shows prices of DOT and a few popular parachain tokens. Brave supports Polkadot transactions in its built-in crypto wallet, and Uniswap also offers Polkadot swaps. But their dotted experiences are quite simple so far and much more can be done in the long run.

The integration will grow deeper over time, as more developers get involved with next-generation content experiences and DeFi apps. And that will multiply the number of DOT transactions, boosting the value of the whole Polkadot ecosystem in a maturing Web3 market.

Patience, young Polkadot grasshopper

None of these game-changing moves are firmly scheduled in 2024 or 2025. Time will tell how quickly the Web3 era rolls out, and how much fuel that sea change brings to Polkadot's value-creating fires.

So patience is a virtue for Polkadot investors, but I'll be stunned if the generational shift never happens. In other words, I expect Polkadot to gain plenty of value as the Web3 revolution plays out, probably exceeding the returns in more mature systems such as Bitcoin and Ethereum. On that note, Polkadot has become the largest holding in my diversified crypto wallet -- and you may want to follow suit with at least a small, speculative Polkadot position.

Should you invest $1,000 in Polkadot right now?

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Anders Bylund has positions in Bitcoin, Ethereum, and Polkadot. The Motley Fool has positions in and recommends Bitcoin, Chainlink, Ethereum, and Uniswap Protocol Token. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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