Long Term Investment Thesis
(Any views expressed in the below are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions.)
These thesis are solely mine which I myself will be following throughout the year or till the next bull run starts . Consult your financial advisor before following any advice from this thesis .
Let’s begin
So the crypto markets have been retraced looks like a good time to go all-in, huh ?
Wrong, Crypto itself having a bottomless nature we can’t be so sure to go all-in at any moment of time.
So what's the strategy ?
Doing SIP(Systematic Investment Plan) , a plan in which investors make regular, equal payments into a mutual fund, trading account, or retirement account such as a 401(k).SIPs allow investors to save regularly with a smaller amount of money while benefiting from the long-term advantages of dollar-cost averaging (DCA). By using a DCA strategy, an investor buys an investment using periodic equal transfers of funds to build wealth or a portfolio over time slowly.
Although, this strategy is used in traditional markets such as stock market , mutual funds , 401ks etc etc but we can also use the same in Crypto too .
Buying in parts on weekly or monthly basis whatever fits in your best interest. Dcaing and averaging our entries to the absolute bottom .And also doing it in our risk tolerance .
List of Coins :
These are the list of coins which I feel that can be viable investment for long term till the next bull run. List of coins as follows :
- Ethereum (ETH)
- Binance coin (BNB)
- Polkadot (DOT) or Solana (Sol) or Polygon (matic)
Some people like Polkadot and some Solana , the 3rd one could be any of your fav project, As Ethereum and BNB are some of the must have tokens in the portfolio .
You must be asking why not bitcoin in the list ?
You can add Bitcoin to your portfolio as it rallies as first when the bull run starts . Just not my cup of coffee, I am one of those people who believe in the flippening of ETH . It takes a lot of things to make BTC rally such as convincing a billionaire to accumulate BTC or to make it legal tender in a country etc etc . So due to those reasons ,I would stick to Eth.
ETHEREUM ( aka ETH):
Some basics about Eth :
Ethereum is a decentralized computing platform. You can think of it like a laptop or PC, but it doesn’t run on a single device. Instead, it simultaneously runs on thousands of machines around the world, meaning that it has no owner.
Ethereum, like Bitcoin and other cryptocurrencies, allows you to transfer digital money. However, it’s capable of a lot more — you can deploy your own code, and interact with applications created by other users. Because it’s so flexible, all sorts of sophisticated programs can be launched on Ethereum.
Can read more about it on Binance Academy blog about Ethereum.
Why I choose ETH as an Investment :
Eth Being Robust :
Over the years Ethereum has proven it’s capabilities of being a robust blockchain ecosystem provider over the years in crypto.
We have seen Ethereum surviving numerous crypto cycles such as :
- 2017 ICO(Inital Coin Offering) rush
- 2020 Defi(Decentralized Finance) szn
- 2021 NFT(Non-Fungible token) szn
In all of these cycles/seasons Ethereum was robust enough to never go down as an ecosystem provider although scaling we can say that it has been an issue on Ethereum for a while. Whenever the network gets congested with large amounts of transactions, gas cost increases enormously.
The Merge :
It is going to be one of the biggest event in Crypto space. Essentially, the Merge is the process by which Ethereum will change from a proof-of-work (PoW) protocol to a proof-of-stake (PoS) protocol. What it actually means is that the Beacon Chain (a PoS consensus layer that coordinates the network) is merging with the Ethereum Mainnet (which is PoW), and the whole network will transition to PoS.
Also After the merger, ETH inflation rate drops by 90%:
When PoW, inflation in the form of block reward, and the current annual inflation rate is about 4.3%;
When PoS, inflation in the form of pledge reward, but the staking reward is dynamically adjusted according to the total amount of staking, here assume the staking amount is 10 million ETH, then the annual inflation rate is about 0.43%; (Note: the inflation rate rises with the staking amount.
Under this assumption, the inflation rate of ETH will drop by 90%, which is equivalent to completing three halves.
In addition, with the cooperation of EIP1559, it is possible that the ETH destroyed by fees will exceed the newly added ETH, achieving ETH deflation, which is good for the price in the long run.
Can read more about it on Wu Blockchain’s Substack .
Note: There is also a case huge sell-off also because of all the staked ETH deposited in the Beacon Chain contract as they were deposited at very early stage when Eth was very cheap and currently those withdrawals are not opened yet, they might open after the merge event , so there is one of possible scenario where profit taking might happen.
NFT/METAVERSE:
Nft/Metaverse still having some juice left in it, and most of the stuff happening on Ethereum mainnet makes a bullish case for Ethereum. You have big companies(such as Adidas, Louis Vuitton ,Nike, ROBLOX etc)entering Metaverse and most of them building their metaverse on Ethereum based smart contracts or using Ethereum using as a base layer and using Layer 2 scaling solutions.
Metaverse is something which big companies and new startups are heavily investing and very much interested in. In the market we can see some of the lowest investor confidence currently but even after it , we see daily some Metaverse projects raising in millions of $ , this shows VCs are very much interested in making Metaverse the next big thing .
So I believe Metaverse is some thing which would sustain and grow significantly in the next couple of years .
Layer 2s using Eth as base layer:
Most of the Layer-2 scaling solutions using Ethereum as their base layer at some point or the other side-chain scaling solutions having some form of bridge with Ethereum. Layer 2 scaling solutions itself is a whole big topic which needs to covered as a separate blog(will be covering it later on). Currently, In short most of the Layer 2 which are existing or in development is having some form of exposure with Ethereum, which further brings price appreciation/utility in some form for Eth itself .
EIP-1559 Burning Mechanism Implemented:
EIP-1559 changed Ethereum’s fee market mechanism. Fundamentally, EIP-1559 gets rid of the first-price auction as the main gas fee calculation. In first-price auctions, people used to bid a set amount of money to pay for their transaction to be processed, and the highest bidder wins. With EIP-1559, there is a discrete “base fee” for transactions to be included in the next block. For users or applications that want to prioritize their transaction, they can add a “tip,” which is called a “priority fee” to pay a miner for faster inclusion.
The above diagram shows how the fee mechanism works with EIP-1559. Earlier, fees were paid to miners, who also used to receive the block reward of 2 ETH per block, plus uncle rewards. With EIP-1559, the base fee is burned, but a tip and the block reward still goes to the miner.
Can monitor these base gas fees burns which occurs on transactional bases on Ultra sound money site:-
There is a lot to unpack from fundamental side of ETH, these above are some of the major reasons thru which I see Eth as a good investment.
On- Chain Analysis:
For past couple of months if we look at the whale wallets or VC labeled wallets we can clearly see the large sums of outflow of eth from their multisign /OTC wallets to exchange wallets.
3AC labeled wallet sending large sums of Eth to their FTX deposit address from past couple of months.
Same was done by Alameda Trading labeled wallet and Winter mute OTC labeled wallet too.
So if the VC aren’t feeling confident enough holding ETH for the long run there might be some reason to it. It looks like they are waiting for it to retrace 90%+ from it’s ATH(all time highs) as it did happen in the last cycle and made that exact bottom as it’s all time low.
This is one of the reasons because of which I believe Eth is going to 3 digits at least , until the next bull run starts .
Technical Analysis of ETH:
Ethereum’s price has been retraced 58% from $4878 being it’s all time highs to $2050 at the time writing this thesis.
Over the past crypto cycle’s we have seen Crypto getting retraced at least 80–95% (approx) after the Bull cycle ends.
After the last bull of 2017–2018 ETH had retraced 93% from $1400 to $90 .Although the last cycle was very different from the current one, in the last cycle we had all those scams such as Bitconnect and other scammy ICO’s which didn’t survive till this cycle.
So let’s talk about this cycle:
In this cycle we saw ETH going from 86$ ( being it all time lows of this cycle) to $4878 (acc to coingecko) all time highs , that’s approximately about 5500% increase from it’s all time lows .
Wen to accumulate :
Getting a 3 digit entry for Eth before the next bull cycle starts ,is as godly as buying Eth wen it was trading in 2 digits numbers before the bull run .
Let’s looks at the chart of Eth :
Already retraced 60–65% from it’s all time highs currently .
By looking at the chart we can see last cycle highs which was around 1400$ ish ,can also act as strong support (The S/R flip).So if that plays out 1600–1200$ could be good range to accumulate Eth , then if it does sustain those lvls the next target is obviously a 3 digit entry.
I personally am aiming for a 3 digit Eth entry which would allowing me to sustain thru the bear cycle which is currently going on !!
Last cycle , I had bought Eth at $120 and sold it around 4000$ , So living thru the same cycle again brings that type experience.
Eth 690$ to 420$.
some magical numbers I feel confident investing on.
On a serious note 3 digit entry I would be personally comfortable to enter for ETH long term buys.
Binance Coin (aka BNB):
renamed recently to Build n Build chain.
BNB was launched through an Initial Coin Offering (or ICO) that took place from June 26th to July 3rd, 2017–11 days before the Binance Exchange opened for trading. The issue price was 1 ETH for 2,700 BNB or 1 BTC for 20,000 BNB. Although BNB was launched through an ICO, BNB does not provide users with a claim on Binance profits and does not represent an investment in Binance.
BNB was originally issued as an ERC-20 token, running on the Ethereum network, with a total supply of 200 million coins. 100 million BNB was offered in the ICO, but the current total supply is lower due to periodic burning events and a real-time burning mechanism.
Why I choose BNB as an Investment :
Biggest CEX(Centralized) Exchange in the World:
Binance being the most successful, established and trusted exchange across the globe. Since it’s launch on 14th July 2017 and having ICO of it’s token BNB , they became top 3 Global exchanges in just 143 days of the launch.
Till this day, they are the most dominant exchange in the world.
Utility Powerhouse :
BNB as token has been utility king since day 1,Here are some utility use cases of BNB:
- Trading: Binance Coin can be traded for other cryptocurrencies on various exchanges, depending on the restrictions set by the exchange.
- Transaction fees on the Binance Exchange: BNB can be used to pay for transactions on the Binance Exchange, and users also receive a discount for doing so.
- Credit card payments: BNB can be the form of payment for crypto credit card bills on Crypto.com and also for their own Binance Visa Cards.
- Payment processing: Merchants can offer BNB as a means of payment for customers, offering more flexibility in payment methods.
- Booking travel arrangements: BNB can be used to book hotels and flights on select websites(Travala and many more).
- Entertainment: From paying for virtual gifts to buying lottery tickets, BNB serves several purposes in the entertainment space.
- Investment: Several platforms allow investors to invest in stocks, ETFs, and other assets using Binance Coin.
- Loans and transfers: BNB can be used as collateral for loans on certain platforms. Also, there are apps that allow users to split bills and pay friends and family through Binance Coin.
There are endless utility cases for BNB as Binance keeps on expanding daily basis. Various new use cases comes on Binance on daily basis.
BNB Auto-Burning Mechanism and BEP95:
Earlier BNB used to have a scheduled Quarterly burn event , previously BNB burns reflected the tokens’ usage and revenue generated in the Binance centralized exchange.
This was later on changed to BNB Quarterly Auto-Burn.
The BNB Auto-Burn mechanism will automatically adjust the amount of BNB to be burned based on the BNB price and the number of blocks generated on BSC during the quarter. This offers greater transparency and predictability to the BNB community.
The chart below shows the expected quarterly BNB Auto-Burn amount for a range of BNB average prices. After implementation of BNB Auto-Burn, the projected burn amount based on the above formula will be publicly available.
BEP95:
Also BNB gets burned based on BEP95 mechanism which was introduced in Oct 2021.With BEP-95, the network will burn a fixed ratio of each block’s gas fees that validators collect. The exact ratio will be determined via BSC’s governance mechanisms. It won’t affect the auto-burn as it will operate separate from those burns, but eventually adding supply crunch caused by all.
BEP-95 burns are not affected by Binance’s scheduled BNB burns. The number of BNB burned by BEP-95 is solely affected by the BSC network activity. It will continue burning BNB even after BNB auto-burn hits its target of 100m $BNB in circulation.
Can monitor these BNB burning stats on:
Binance Launchpad and Launchpool:
Binance Launchpad is a unique platform that allows users to have first-look access to promising new crypto tokens from various projects. It also helps drive awareness and adoption for these projects.
The Launchpad Subscription Format allows BNB holders to commit an amount of BNB towards a Binance Token sale. The final allocation of the new token is determined by the ratio of their committed BNB against the total committed BNB by all participating users.
Top Projects like Polygon(Matic), Axie Infinity , Sandbox , Stepn (GMT) etc were part of Binance Launchpad at some point in their project lifetime.
Launchpool lets you use your tokens to farm (earn) a new token, for free.
The amount of tokens you earn each daily is proportional to the amount of tokens you have subscribed to the pool vs the total number of tokens subscribed to the pool. (See a more in-depth explanation here)
BNB Chain:
Binance Chain and Binance Smart Chain have formed together as BNB Chain since February 15, 2022. BNB Chain comprises BNB Beacon Chain (previously Binance Chain) and BNB Smart Chain (previously Binance Smart Chain). While BNB (formerly called “Binance Coin”) has also been renamed as “Build and Build.” The name change is not merely for welcoming the crypto world with more than 1 billion users but also to strengthen the delivery of the core infrastructure necessary for future public adoption and, most importantly, to build a better ecosystem for embracing the MetaFi.
What is Build N Build (BNB) Chain?
BNB Chain is comprised of:
- BNB Beacon Chain (previously Binance Chain) — BNB Chain Governance (Staking, Voting)
- BNB Smart Chain (BSC) (previously Binance Smart Chain) — EVM compatible, consensus layers, and with hubs to multi-chains
- BNB Sidechain — Ready-to-use PoS solutions for developing custom blockchains and dApps with existing BSC functionality.
- BNB ZkRolllup (Coming soon) — ZkRollup solution to scale BSC as an super high performance blockchains.
BNB Sidechain and ZkRollup will some of the upcoming developments in the BNB Chain ecosystem, they both are part of the this years roadmap.
Can read more about the roadmap 👇:
BNB stands for “Build and Build”. Along with fueling transactions on BNB Chain (similar to gas on Ethereum), BNB also acts as a governance token. Holding BNB gives you the right to make your voice heard and is necessary for participation in BNB Chain’s decentralized on-chain governance. With this name change also comes more advancements to benefit users, projects and developers connected to the BNB Chain community.
BSC (also know as BNB Smart Chain ):
Binance Smart Chain (BSC) is best described as a blockchain that runs in parallel to the Binance Chain. Unlike Binance Beacon Chain, BSC boasts smart contract functionality and compatibility with the Ethereum Virtual Machine (EVM). The design goal here was to leave the high throughput of Binance Chain intact while introducing smart contracts into its ecosystem.
In essence, both blockchains operate side-by-side. It’s worth noting that BSC isn’t a so-called layer two or off-chain scalability solution. It’s an independent blockchain that could run even if Binance Chain went offline. That said, both chains bear a strong resemblance from a design standpoint.
Because BSC is EVM-compatible, it launched with support for the rich universe of Ethereum tools and DApps. In theory, this makes it easy for developers to port their projects over from Ethereum. For users, it means that applications like MetaMask can be easily configured to work with BSC. Seriously — it’s just a matter of tweaking a couple of settings. Check out Use MetaMask for Binance Smart Chain to get started. And for Trust Wallet it comes by default setup, you can just deposit your funds and ready it’s ready to use.
The BSC (BNB Smart Chain) brings Defi (Decentralized Finance),Cross-Chain Compatibility and Metaverse intractability features to Binance ecosystem.
Some of the notable Dapps used in BSC ecosystem are:
- DEX: Pancakeswap, DODO, 1inch , Apeswap
- DEFI(Lending and Borrowing) : Venus Protopcol , Auto , Beefy Finance
- Gaming : CryptoBlades , AlienWorld , MOBOX
You can track find and analyze various projects based on the daily volume and user count on BSC using DappRadar:
Robust management, community and loyal customer base :
It’s been 5 years since Binance has entered crypto crypto markets with their suit of products. Earlier it was just CEX (Centralized Exchange) Crypto Exchange, but now it has wide range of products/suite of products such as Binance pay , earn ,staking , liquid staking , futures exchange , cards etc etc endless list of products as of now.
These wide range of product attracts a lot of customer base and bring a lot of adoption and main task in crypto Cex business is customer retention and Binance has expertise in it . I would Binance doing various types of events such as trading competitions , giveaways , referral fees sharing etc helps them make customer retention part a bit more easier .
Can read a letter from Cz CEO himself summarizing 5 years of Binance:
Cons:
Too much dependent to Binance as a central authority : if Binance the central exchange itself goes thru some kind of bankruptcy or any type of black swan event that it won’t be able to sustain then all the BSC ecosystem would face backlash because of it.
Although Binance has already faced a hack in it’s early days in which they also tried to recover the stolen Bitcoin by reorging the Bitcoin chain thru 51% attack which the community didn’t like at all.
The customer funds weren’t affected at all , the stolen funds were recovered from SAFU funds.
Technical Analysis of BNB:
BNB’s price has been retraced 60% from $686 being it’s all time highs to $270 at the time writing this thesis.
After the last bull of 2017–2018 BNB had retraced 83% from $25 to $4.
So let’s talk about this cycle:
In this cycle we saw BNB going from 6$ ( being it all time lows of this cycle) to $686 (acc to coingecko) all time highs , that’s approximately about 10000% increase from it’s all time lows .
Wen to accumulate :
Aiming for 2 digit entry for BNB , as it as goods as accumulating Eth in 3 digit.
Last cycle’s BNB ATH levels were in 30$ range and also if we check the retracement levels from current ATH (686$ approx. ) 95% down from these level will also bring the target price to 30–40$ range , So technically this seems the best bottom entry for BNB.
But the above scenario is based on past cycle’s events which maybe play out like the last time or may not. We might see BNB consolidating 200$+ range for a while, until the next big Black Swan event happens similar to Luna one.
That Black Swan event is the one of the likely scenario which could playout and bring the BNB price to the lower levels.
But $BNB going down as much as 95% is difficult only a black swan event strong enough could do it, until then we can see $BNB consolidating around 180$ to 300$ for a while.
Both ETH and BNB have their strengths and weaknesses but they both are one of robust crypto as an investment as they have survived through many crypto cycles and will keep doing so.
Polkadot (aka DOT):
Intro:
Polkadot is an open-source sharded multichain protocol that connects and secures a network of specialized blockchains, facilitating cross-chain transfer of any data or asset types, not just tokens, thereby allowing blockchains to be interoperable with each other. Polkadot was designed to provide a foundation for a decentralized internet of blockchains, also known as Web3.
Polkadot is known as a layer-0 metaprotocol because it underlies and describes a format for a network of layer 1 blockchains known as parachains (parallel chains). As a metaprotocol, Polkadot is also capable of autonomously and forklessly updating its own codebase via on-chain governance according to the will of its token holder community.
Polkadot provides a foundation to support a decentralized web, controlled by its users, and to simplify the creation of new applications, institutions and services.
The Polkadot protocol can connect public and private chains, permissionless networks, oracles and future technologies, allowing these independent blockchains to trustlessly share information and transactions through the Polkadot Relay Chain (explained further down).
Polkadot’s native DOT token serves three clear purposes: staking for operations and security, facilitating network governance, and bonding tokens to connect parachains .
Why I choose Polkadot as an Investment :
Structure of Polkadot Blockchain:
The architecture of Polkadot:
Main chain (Relay chain)
This is the core of this network. The main chain is built to make the connection between Parachains flexible. There, the validator will take on the task of protecting and administering the network.
Scaling Solution Layer 2 (Parachain)
Parachain consists of independent blockchains that are connected to the main chain to take full advantage of the network effect. Parachain works on the results of validation by specified validators. It combines with a relay chain to take advantage of the network, helping to speed up the development of the system many times over. In other words, this is a type of subchain belonging to the main network.
Parachains:
A parachain is an application-specific data structure that is globally coherent and validatable by the validators of the Relay Chain. They take their name from the concept of parallelized chains that run parallel to the Relay Chain. Most commonly, a parachain will take the form of a blockchain, but there is no specific need for them to be actual blockchains.
Due to their parallel nature, they are able to parallelize transaction processing and achieve scalability of the Polkadot system. They share in the security of the entire network and can communicate with other parachains through the XCM format.
Can read in depth about Parachains on Polkadot wiki :
Bridges:
Bridges are a special Parachain form of the network. Bridges have the ability to link the Polkadot ecosystem with other blockchain protocols such as Ethereum or Bitcoin. This is also a cost-effective solution for projects that do not require a constant connection to the main chain.
Parathread:
This type is similar to Parachain, but the difference is that this chain is not continuously connected to the main chain, so if any project does not have a need for a continuous connection, this connection chain can be used to save money.
Outstanding Features:
True interoperability
Polkadot enables cross-blockchain transfers of any type of data or asset, not just tokens. Connecting to Polkadot gives you the ability to interoperate with a wide variety of blockchains in the Polkadot network.
Economic & transactional scalability
Polkadot provides unprecedented economic scalability by enabling a common set of validators to secure multiple blockchains. Polkadot provides transactional scalability by spreading transactions across multiple parallel blockchains.
Easy blockchain innovation
Create a custom blockchain in minutes using the Substrate framework. Connect your chain to Polkadot and get interoperability and security from day one. This ease of development helps Polkadot’s network grow.
Forkless and future-proof
Polkadot can upgrade without hard forks to integrate new features or fix bugs. This capability enables Polkadot to easily adapt to changes and upgrade itself as better technologies become available.
Security for everyone
Polkadot’s novel data availability and validity scheme allows chains to interact with each other in a meaningful way. Chains remain independent in their governance but united in their security.
User-driven network governance
Polkadot has a sophisticated governance system where all stakeholders have a voice. Upgrades to the network are coordinated on-chain and enacted autonomously, ensuring that Polkadot’s development reflects the values of the community and avoids stagnation.
Strong Governance:
Polkadot uses a sophisticated governance mechanism that allows it to evolve gracefully overtime at the ultimate behest of its assembled stakeholders. The stated goal is to ensure that the majority of the stake can always command the network.
To do this, the network brings together various novel mechanisms, including an amorphous state-transition function stored on-chain and defined in a platform-neutral intermediate language (i.e. WebAssembly) and several on-chain voting mechanisms such as referenda with adaptive super-majority thresholds and batch approval voting.
All changes to the protocol must be agreed upon by stake-weighted referenda.
The main components of Polkadot’s Governance are
Referenda
Council
Technical Committee
Mechanism
To make any changes to the network, the idea is to compose active token holders and the council together to administrate a network upgrade decision. No matter whether the proposal is proposed by the public (token holders) or the council, it finally will have to go through a referendum to let all holders, weighted by stake, make the decision.
To read in depth working of Polkadot’s Governance model can go thru wiki:
Latest Changes in Polkadot’s Governance:
There were some amendments and updates brought to the Polkadot’s Governance mechanism.
Explained in article mentioned below author Gavin Wood himself :
What problems does Polkadot solve?
As mentioned in the introduction, Polkadot was born to solve problems that his predecessors could not solve. And of course, the young generation will always be active, enthusiastic and find ways to break out of the shadow of the old generation.
Scalability and transaction speed
Since Polkadot is a multi-chain technology, it allows the system to parallelize transactions on many different parachains, which makes Polkadot very impressive transaction processing speed.
For example, Ethereum currently supports processing up to 15 transactions in 1 second, while a single application on Polkadot can process 1000 transactions in 1 second.
Therefore, the whole Polkadot Ecosystem is capable of processing transactions hundreds of times faster than individual Dapps, meaning hundreds of thousands of transactions per second. With such a huge processing speed, expanding the Polkadot network is only a matter of time.
Interoperability
Individual blockchains cannot interact with each other, multi-chain solutions are new and few. Polkadot has a multi-chain solution, to support individual blockchains to exchange tokens, limiting unnecessary costs.
Adoption
Because blockchain is still new, it is necessary to make it easier for everyone to use it, such as using the internet and applying it to daily life.
Main factors in the Polkadot ecosystem
- Nominators: Secure the Relay Chain by selecting trustworthy validators and staking dots.
- Validators: Secure the relay chain by staking dots, validating proofs from collators and participating in consensus with other validators.
- Collators: Maintain shards by collecting shard transactions from users and producing proofs for validator.
- Fishermen: Monitor the network and report bad behavior to validators. Collators and any parachain full node can perform the fisherman role.
Polkadot Ecosystem
Polkadot Web3 Foundation has created a fully integrated Blockchain to provide developers with infrastructure quickly and efficiently. The web platform provides a native, native layer that helps you create your Blockchain as quickly as possible with the support of one of the most popular languages like Rust and C++. All projects carried out with development on the platform are automatically considered compatible with the Polkadot Blockchain.
The Polkadot ecosystem currently has a lot of new projects in the research phase. Many investors are waiting for projects that simulate and improve upon Ethereum DeFi applications built on Polkadot. Despite having many features similar to Ethereum 2.0, Polkadot did not follow the path of competing with this ecosystem but chose to connect to it via a bridge. Polkadot wants to be a complementary partner for other blockchains, in order to expand the cross-chain DeFi network, and improve the user experience. According to Polkadot’s report, the Polkadot ecosystem is quite complete with over 470 projects in all areas like Wallet, Oracle, NFT, DAO, Bridge, Data, DeFi, Privacy, SmartContracts, Exchange, Scaling, Gaming, Identity, IOT, Crowdloan, Hiring, CeFi, Auction is building.
Roadmap
- PoA: Polkadot acts as a chain of proof of authority (PoA) maintained by the founders of the Web3 foundation. The chain only allows the user to request a Dot token or send an authentication request. Web3 launches Polkadot in Proof of Authority mode.
- Npos: In Proof of Stake, the network will run with a decentralized validator. During this phase, Web 3 uses sudo to increase the authentication process. When web3 is confident it’s working properly -> Sudo Key will introduce an upgrade runtime to enable Polkadot’s administration.
- Governance and quit sudo: Polkadot is enabled, it can elect the first Council and Technical Committee and start accepting proposals publicly.
- Enable balance transfers: Polkadot allows balance transfers.
Before being activated by Polkadot’s network administrator, the parachains will be tested and optimized on both the testnet and Kusama parachains. Once the code has been fully tested, audited, and evaluated and the parachains are running smoothly on Kusama, the Polkadot admin can activate the parachains and start auctioning the parachain location. Parachain slots will be auctioned off one by one, with each auction lasting approximately two weeks.
Token use cases
- Governance: Decision power in the network will be based on the proportion of tokens held by users.
- Staking: Users can stake DOT in pools for a chance to receive regular interest returns.
- Bonding: DOT is used to connect parachains auction, when the auction project is successful, this DOT number will be locked.
- Fee: When parachains need to communicate and transfer data with each other, the system will charge fees in the form of DOT.
Backers:
Team
- CEO — Dr. Gavin Wood: Co-founder and former CTO of the Ethereum blockchain network. Co-founder of Parity Technology. He is the founder of the Blockchain industry, who contributed to the development of the Solidity language. Gavin is also the chairman of the investment fund Web3 Foundation.
- Robert Habermeier: This Polkadot co-founder is a member of the Thiel Fellow, the investment fund of Silicon Valley magnate Peter Thiel, who is the godfather of the social networking platform Facebook.
- Peter Czaban: Peter is currently the CTO of the Web3 Foundation. He holds a master’s degree from Oxford University in computer science with a particular focus on Machine Learning.
Organization that supports Polkadot
Web3 Foundation has commissioned Parity Technologies to build Polkadot.
Founded by Ethereum co-founder Dr. Gavin Wood and former Ethereum Foundation Head of Security Dr. Jutta Steiner, Parity is a global team of top distributed systems engineers, cryptographers, solutions architects and researchers. Parity has fundamentally shaped the blockchain industry, from building the highly-adopted Parity Ethereum client and implementations of Bitcoin and Zcash, to developing the next generation of blockchain technology with Substrate and Polkadot.
Drawbacks Polkadot has until now :
There are various reason Polkadot has it’s drawbacks as follows:
On-chain/Network adoption: People don’t use Dot network as much as they use Eth , BSC, Solana or any other EVM chains. It didn’t get any user adoption as of yet, even thou it has acquired large amount of devs. It could be because of complexity of it’s usability of wallet for an average user which brings us to another problem.
Wallet’s UI/UX not that user friendly: The most used wallet for Polkadot ecosystem is Polkadot.js extension and if you have used it ,you must have felt that it ain’t user friendly enough. The complexity of different chains having different addresses, the setup , balance maintenance, keys etc it may look somewhat easy for an average crypto user who is in space for a while but not for someone who is new to the space trying it. You have to watch tutorials to learn how to use it.
On the other hand we have wallets like Phantom , Trust Wallet , Metamask easy to use and setup , user friendly compared to polkadot.js .
Wallet Balance maintenance of 1 DOT : There has to be an Exist Deposit of 1 dot at least in your wallet or else if there is any balance below 1 dot it will get burned and the account is reaped ( deactivated) . This is called Ed (Existential Deposit).The ED exists so that accounts with very small balances, or completely empty, do not “bloat” the state of the blockchain in order to maintain high performance and to reduce fees.
This is one of feature of which ain’t seems user friendly enough coz even if you are an experienced crypto person this concept would be really new for you too.
Can read more about Existential Deposit down below !!
Even with all of these drawbacks and setbacks Polkadot can provide a good layer 0 blockchain solution with it’s various features such as cross-chain communication , transparency and scalability.
Conclusion and analysis:
Polkadot’s ecosystem is also building itself an Ethereum-like empire spanning many areas in the DeFi industry such as Acala, Phala, Bifrost, Polkastarter, Moonbeam, or even a remarkable Wallet ecosystem like Math Wallet, Cobo Wallet…This shows that Polkadot’s ambition is not small.
Polkadot goes in the direction of connecting with Bridge instead of competing for the ecosystem like in Ethereum 2.0. It wants to support other Blockchain platforms, extend the DeFi cross-chain network, improve the user experience. Promisingly, in the near future, more and more Blockchains will connect and find Polkadot.
It can be said that the potential of Polkadot is huge. However, Polkadot needs to accelerate development time as well as expand the attraction of projects even faster on its platform as Ethereum itself and other ecosystems are also in a race to expand the network blockchain with layer 2.
Technical Analysis of DOT:
Polkadot’s price has been retraced 83% from $55 being it’s all time highs to $9.3 at the time writing this thesis.
Polkadot being comparatively new Project even though it has been in development from around 2016–17.
But the Polkadot’s native token $DOT came out around august of 2020.
So we don’t have any previous cycle’s data unlike we have it for ETH and BNB.
Although we have some data from this cycle itself.
In first cycle we saw DOT started trading from 2$ ( being it all time lows of this cycle) to $49.5 all time highs , that’s approximately about 2300% increase from it’s all time lows .
It also got corrected after making an ATH of 49$ back to 10–12$ range. So that would bring the correction in percentage wise to 79-80% correction approx.
After this correction during mid rally cycle from 10.5$ it made an ATH of 55$ ( acc. to Binance chart)breaking the previous ATH of 49$. That’s almost 430% increase from the lows.
Wen to buy/accumulate :
Currently Dot has retraced from 55$ being it’s ATH to trading around 9–10$ range at the time of writing this thesis.
It has also made lows of around 6–7$ range that being 88% retraced from ATH(55$).
So buying some at CMP ( Current Market price) looks good and doing DCA (Dollar cost Averaging) if it goes down seems a good strategy to me.
So the ranges given/marked in above chart seems good buy/accumulating zones for DOT if holding long term.
This would be Dot’s first bear cycle so we have to take all possible scenario into consideration.
If DOT tries to go below trying make another low so ranges would around 2.5$-4$ which seems good entry for DOT.
All in all keep DCA your entries according to your risk tolerance as it Crypto anything can happen.
Compared to BNB and ETH , DOT is kind of risker bet to invest in. This current would be it’s first bear market . A suggestion would be keeping a low exposure to it as it a kind of new compared to BNB and ETH.
BTC Update:
In the beginning I had mentioned reasons why I have not included BTC in the the Thesis, and one of reasons the came out to be true throughout the writing period of the Thesis , BTC lost quite a lot of dominance in this small rally percentage wise(48%-40%).
Either this rally continues for a while and BTC .d keeps on making new lows or rally ends and profits get rotated into BTC which would pump the BTC .d.
One of the reasons traders rotate capital to BTC from alts coz it’s considered less riskier asset compared to alts.
Still that theory continues to be tru thou: To make BTC rally we have convince a billionaire to buy BTC.
Even thou crypto has got massive adoption throughout the cycle: from El Salvador’s Legal Tender declaration to Ukraine accepting crypto donation for military’s support.
And now Iran govt using crypto for import order .
Remaining Projects to cover :
Two tokens/projects left for the Thesis Solana and Matic. Already the Thesis has reached 6500+ words.
Will make a separate part-2 version of the Long term Investment Thesis as a continuation of this one.
Update on Thesis:
The Ethereum part the Thesis which was written and completed in May itself came to be True, all the events and price targets have already been occurred .
Most of the stuff I had already mentioned in those days in my trading groups.
This Thesis already took 2.5months to complete , it should have been publish in end May or beginning June itself . This was due some personal reason (such as exams ,health, various other distracting stuff). From now on there will one blog published each week on my Medium page.
Conclusion:
All the projects mentioned in the Thesis are great for having some Crypto Exposure in your Portfolio. Keep DCA your entries before the next rally begins. Also do it in Risk Tolerance/Appetite as Crypto have bottom less nature.
If you liked the Thesis and other stuff written and posted my me make sure to give a follow and claps on the Blogs more stuff coming soon.