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Polkadot is a top ten crypto project. It achieved this feat not only because of its market cap. The project has also made significant progress due to its unique role in enabling a decentralized web.
Founded in 2016 by Dr. Gavin Wood, Polkadot aims to make it possible for blockchain platforms to communicate with one another.
In the last 24 hours, the value of the protocol’s governance token DOT has nose-dived, but this should not impact your decision if you want to buy DOT.
This article will look at the value proposition of the fabled ‘Ethereum killer’ and if this may be a good time to buy DOT for the long haul.
Polkadot: Heterogeneously Sharded Multi-Chain Solution
Created to herald in the decentralized web, Polkadot is the brainchild of the famous Solidity language developer Dr. Gavin Wood.
According to Wood, Polkadot is meant to deliver on the promises the Ethereum network could not bring into reality.
Sporting a tweaked version of the popular proof-of-stake protocol called nominated proof-of-stake (NPoS), Polkadot is a heterogeneously-sharded multi-chain crypto protocol that enables the building of smart contracts and new blockchains and tokens.
In addition, these blockchains hosted on its Relay Chain will be interoperable, meaning they will exchange information and value.
This sharded-design approach will make the blockchain network upgradeable without a network fork, making it future-proof.
Polkadot is an open-source project by the Web3 Foundation and Parity Technologies.
It is built on Substrate, which allows the trustless distribution of information.
The DOT token serves as the governance token for the network. DOT holders have the privilege to vote on proposals in the network. It is also used for network fees in the Polkadot ecosystem.
Blockchain platforms looking to join the Polkadot protocol can choose between launching on its parachain structure or its parathread architecture.
Parachains are independent chains that have their tokens operating in the Polkadot ecosystem. A parachain spot is secured in an auction. Parathreads are also similar to parachains, but it operates under a ‘pay-as-you-go’ model, making them a short-term offering.
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DOT: Threading The Bearish Tide
The bears have overrun the crypto market in the last few months. With cryptocurrencies coming under more regulatory scrutiny, market confidence has been at an all-time low. Large-cap cryptocurrencies like Bitcoin have struggled in the $35,000 mark for months now.
Along with other crypto protocols, DOT has seen its price action sit in the red zone for some time now. At press time, the multi-chain token sits at a low of $12.624, down 3.60% in the last 24 hours. This could be a great time to buy DOT for a bargain.
The reason is due to DOT’s historical price performance in the first five months of the year. Trading at $8.8 on January 1, DOT surged 5,000% to $48.36 on April 17.
It retested this price action and rose to an all-time high (ATH) of $48.68 on May 15.
However, this was before the May crypto market crash, which saw DOT dip more than 50% to $15.49 a month later. Even though it has continued to struggle, it has not been able to break above the $17.04 resistance level so far.
DOT Technical And Fundamental Analysis
The crypto market has been in a tight spot for the last two months, and DOT has also seen its value deplete by the day. The digital asset is trading below the 20-day moving average (MA) support of $15.257, indicating a bearish trend. Its relative strength index (RSI) stands dangerously close to the oversold level at 32.69.
However, if you believe in the numerous uses cases of the Polkadot project, a near negative RSI should not stop you from buying DOT.
Market analysts believe that the token is still going to rally. Wallet Investor has put its 1-year forecast at $56.066 while its 5-year forecast is at $215.853.
Polkadot is readying its blockchain for its parachain auctions. Currently ongoing in its sister network, Kusama, parachain auction will enable blockchain platforms to launch on the Polkadot ecosystem.
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