Key factors to consider when buying DOT
Cryptocurrencies can be a very volatile and risky investment, so it’s always a good idea to evaluate the token and its associated platform before buying. Make sure to perform independent research prior to purchasing any asset, and to never invest more money than you can afford to lose.
- Novelty. Polkadot is a relatively new blockchain, which employs novel technology that has not yet been tried and tested compared to more established chains like Ethereum or EOS. Polkadot is presently in its ‘parachain rollout’ phase, where these chains will be optimized on a testnet. Once these parachains have been fully developed and audited, they will be deployed on the Polkadot network.
- Competition. While the consortium of projects behind the development of Polkadot is highly experienced, the commercial success of the platform remains to be seen. Furthermore, Polkadot operates in a saturated marketplace against operational projects which have had several years to capture market share.The platform’s point of difference is its use of parachains, the success of which may impact the DOT token’s price.
- Tokenomics. According to CoinMarketCap, at the time of writing (September 2021), Polkadot has a circulating supply of 987,579,314 DOT. There is no max supply, and the inflation rate is 10% — a figure that is comparably high. This means that the supply of DOT coins will increase year-on-year. If demand does not match this increase, DOT’s value is at risk of becoming diluted.