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Dear DEFI TIMES community,
There is never a boring week in the crypto industry! Do you remember the last SUNDAY THOUGHTS episode where I talked about all the trash talkers who predicted the Bitcoin dump? A big shout out to all of them: we slightly touched Bitcoin’s all-time high last week! I hope they predicted this as well :)!
However, there were several exciting news stories this week: Visa announced they would open their network to USDC, US representatives want to regulate stable coins, and ETH 2.0 launched successfully! What a week! Nevertheless, there is one development that many crypto investors overlook or ignore: the prosperous ecosystem of Polkadot! Many Polkadot projects pumped like crazy in the last week. Therefore, it is necessary to have a closer look at them.
In today’s SUNDAY THOUGHTS episode, I will explain to you why I am bullish on Polkadot projects and how they will revolutionize DeFi!
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First of all, what is Polkadot? Polkadot is one of the biggest and most important blockchains in the space. It is a so-called “sharded blockchain” which enables better interoperability and scalability. This is possible because Polkadot is a sharded blockchain. Polkadot consists of one relay chain and many parachains. The relay chain is responsible for the blockchain's security and operability, while parachains are blockchains that depend on the relay chain. These blockchains can have their own token and can optimize their functionalities for specific use cases. Precisely this is the reason why Polkadot is currently way more scalable than Ethereum. On Polkadot, transactions can be executed parallelly on each parachain, while on Ethereum, all transactions are conducted on a single blockchain. This is why Polkadot is currently way more efficient. However, Ethereum will switch to a sharded blockchain as well after updating to ETH 2.0.
Considering these technical details, many people in the space claimed that Polkadot was “An Ethereum Killer”.
Well, this is completely wrong! Polkadot is designed to interact with other blockchains - for example with Ethereum! If Ethereum “died” also Polkadot would be damaged because it would rob one of the most significant components of the blockchain. Besides, it doesn't seem that the two blockchains are in competition because several projects, both on Ethereum and Polkadot, are designed to improve interoperability of the space.
Now, let's have a throwback to summer 2020: DeFi coins pumped, however, almost every interesting project was built on Ethereum. This was a huge problem - in short: Ethereum reached its scalability limits last summer. After finally upgrading to ETH 2.0 this problem may disappear in the future, but DeFi would not be decentralized if everything was built on one single blockchain. So, we need more diversity! This is where Polkadot comes in.
Polkadot offers a great ecosystem for developers. They simply can set up a parachain on Polkadot with individual functionalities and use cases. Let's have a closer look at two projects: Darwinia and Polkastarter.
Darwinia is an open cross-chain bridge. The protocol aims to unify the space and improve interoperability.
Among other features, Darwinia offers a decentralized exchange and an NFT market place on its protocol.
As a cross-chain bridge and part of the Polkadot ecosystem, Darwinia is able to connect different blockchains. Additionally, Darwinia has decentralized backing, which is a technology that supports parachains.
Furthermore, it is possible to stake the native token of Darwinia, the RING token, which creates a financial incentive to protect the ecosystem. Darwinia may be a small project today, but it aims to tackle a monumental problem: connecting the whole crypto industry! Therefore, I believe that Darwina’s potential is huge.
Polkastarter is a decentralized exchange that enables cross-chain transactions with very low fees. It allows projects to raise capital on their platform. All of this is built on the decentralized and interoperable ecosystem of Polkadot. So, you have to imagine Polkastarter as an upgraded version of Uniswap where you can trade tokens from many different chains.
This summer was great for all Ethereum investors and for everyone who invested in DeFi protocols. And although the DeFi bubble burst in September we are still very early. Even in August 2020, it was quite challenging to keep an overview of all the different protocols and projects. Now imagine what could happen when Polkadot and Etherum connect and protocols on both blockchains interact with each other - endless potential!
All in all, Polkadot diversifies the DeFi sector enormously. Therefore, Polkadot is already an essential part of the crypto space. Polkadot could become as big as Ethereum - maybe even bigger. And in case you are a passionate DeFi investor, you should keep an eye on at least some Polkadot projects!
I do not care which blockchain becomes the biggest; however, I am excited about the future. Especially, when I see all the interesting Polkadot projects. Honestly, I am getting even more excited when I remember that the prosperous Polkadot ecosystem will interact in harmony with the established and upgraded Ethereum network one day! No matter which institution or country wants to regulate or ban cryptocurrencies. No matter who says that cryptocurrencies will go to zero! The fundamentals of this industry are stronger than ever.
All information presented above is meant for informational purposes only and should not be treated as financial, legal, or tax advice. This article's content solely reflects the opinion of the writer, who is not a financial advisor.
Do your own research before you purchase cryptocurrencies. Any cryptocurrency can go down in value. Holding cryptocurrencies is risky.