The increasing popularity of cryptocurrency has led to an unprecedented shake-up in the global financial industry over the past decade. It was only in 2009 that Bitcoin — the first decentralized digital coin — was created, its supporters lauding the arrival of a currency not regulated by any one government body.
Bitcoin has been a hugely successful venture, and now accounts for USD$6 billion’s worth of online transactions occurring daily. There are more than 40 million crypto users globally; the success of Bitcoin has spurred an array of alternative cryptocurrencies known as altcoins.)
Polkadot and Cardano are just two of the newer digital currencies available. Reputable resources can provide a list of Australian exchanges to buy altcoins on, but how can you tell which one is likely to reign supreme in 2021?
What is cryptocurrency?
Before comparing altcoins, it’s important to understand what cryptocurrency is, and how it can be used. At its core, crypto is digital money which is not regulated by any one government entity, and therefore can be used in more than 100 countries globally.
There are more than 5,000 types of digital coin currently available, Polkadot and Cardano being just two of these.
Digital currency can be gained through mining, and can also be purchased on reputable exchange sites. Some users buy cryptocurrency in order to diversify their investment portfolios, and some utilize staking strategies to make passive income by holding various digital currency. The intended purpose of digital coin is for owners to use it as real currency to buy goods and services; many businesses worldwide now accept Bitcoin and other cryptocurrencies as payment methods.
Cardano’s boost in popularity has been largely influenced by its impressive scalability when compared to popular currencies Bitcoin and Ethereum.
Bitcoin is capable of processing seven transactions per second, with Ethereum performing 15, which may not be sufficient for some large-scale users. Cardano has improved their technology to the point where it can comfortably handle thousands of transactions per second, breezing past the competition in this regard.
Cardano was founded by Charles Hoskinson, who is also the co-founder of Ethereum. If its recent value increase is any indication, Cardano is well on its way to becoming a cryptocurrency powerhouse; the digital coin ended 2020 valued at USD$0.18, and has since rallied by more than 500%.
The first ever crypto blockchain to be founded on peer-reviewed research, the platform requires transaction validators to stake ADA coin (the name of the Cardano currency coin).
Cardano is also now 100% decentralized, an important milestone in making the platform less vulnerable to attacks and other risks. Decentralization is an attractive prospect for investors, and we may see this feature continue to improve the perceived value of the currency this year. The ADA coin is currently available to trade on some large exchange sites, making it available to a wide range of budding investors.
Potential drawbacks to the Cardano cryptocurrency include the fact that it does not support smart contracts at this point in time, and it does not have an NFT token (although this is rumored to be in the works.)
Polkadot is currently among the top five cryptocurrencies by market capitalization, and has provided a return on investment of 89.3% since its launch.
Polkadot uses a virtual coin referred to as DOT, which is able to be used by the owner for bonding or staking. The Polkadot system allows trusted validators to mine on the platform, and features a parallel processing blockchain ability, which allows individual blockchains to operate in tandem with other parachains.
Interestingly, like Cardano, Polkadot was created by a co-founder of Ethereum: Gavin Wood.
Recent announcements by Polkadot to launch the Tether coin on their network have piqued the interest of digital coin investors. Although no launch date has been set, this integration will be welcome news for those running projects requiring stable coins across multiple networks; if this launch provides the intended functionality, it could be a very attractive prospect for investors who value stability and affordability.
One major selling point for Polkadot is its low transaction fee structure; providing a reduced-cost service could help to give Polkadot a boost among everyday crypto users.
Which cryptocurrency should I invest in?
While various market experts may speculate on which of these digital currencies will outperform the other in 2021, there are no guarantees when it comes to crypto investment. Both Polkadot and Cardano have strong pedigrees, thanks to their founders’ prior experience in creating popular digital coins; however, each one is likely to appeal to a different type of investor.
Polkadot is expected to become popular among investors with a vested interest in stability, and projects requiring multiple networks; Cardano’s incredible transactions-per-second capability may put it in strong favor among larger traders, who value raw processing power.
Cryptocurrency trading tips
Whichever digital currency you decide to invest in, you should be aware of some basic trading tips:
Use a reputable exchange site. There are more than 300 cryptocurrency exchanges operating globally; ensuring that you use one that’s well-regarded is critical to protect your investment. You should also check to make sure that the exchange site you’re using is registered to operate in your country; resources such as Crypto Head can help you to do your due diligence in this regard.
Stay updated on the trends. While past performance or current hype may not be a solid indicator of future success, staying on top of industry speculation and activity can help you to make informed investment decisions. Bitcoin tycoon Mike Novogratz believes the digitization of everything and the global pandemic are accelerating the cryptocurrency industry; read up on what leaders in your area think and are saying about digital currency.
Diversify your investments. A good rule of thumb when it comes to investing, is to never put all your eggs in one basket. Consider whether you hold assets in stocks and property already; crypto could be a good addition to your current portfolio. If you have purchased one form of digital currency, consider branching out and adding some different forms of digital coin to your online holdings.
The world is rapidly turning toward digital solutions in many areas of our lives, and money is no exception; for the foreseeable future, cryptocurrency is here to stay. By staying up to date on industry speculation and thoroughly researching your options, budding investors could make smarter decisions for their portfolios.
While Cardano and Polkadot are relatively new to the cryptocurrency game, they both have significant benefits that could see them perform very well long-term. These are certainly two digital currencies to watch in 2021.