It seems like Polkadot (CRYPTO:DOT) has been the forgotten cryptocurrency over the past few months as newer blockchains like Avalanche (CRYPTO: AVAX) and Terra (CRYPTO: LUNA) stole the show.
While the ~300% return that Polkadot has posted year to date in 2021 is nothing to sneeze at, networks like Terra and Avalanche captured investors’ imagination with returns of 100x and 25x year-to-date, respectively. Polkadot’s DOT token is also down almost 50% from the all-time high set in November as it sold off with the broader crypto market. So why do I expect Polkadot to get its groove back and have a big year in 2022?
Polkadot in the wild
Cryptocurrencies often see surges in price and interest when investors see examples of tangible real-world adoption or when corporations announce coin purchases.
Polkadot stands to receive a similar boost after news that Deutsche Telekom, Europe’s biggest telecom company, bought a “significant” amount of Polkadot’s DOT token as an investment. Furthermore, the telco giant’s T-Systems subsidiary will be actively participating in the Polkadot network by running several validators on it. In proof of stake blockchains, validators confirm transactions and are rewarded for this participation, in this case with more DOT. This growing involvement from the $90 billion telco shows that they believe in Polkadot’s technology and see it as a growing part of their business going forward.
Polkadot can currently process 1,000 transactions per second, much faster than Ethereum, which currently processes about 30 transactions per second. But this is still slower than networks like Solana and Avalanche which process up to 65,000 and 6,500 transactions per second, respectively. But here’s the kicker: as Polkadot continues to develop, founder Gavin Wood believes the network should be able to support up to 1,000,000 transactions per second. It remains to be seen if Polkadot will be able to reach this throughput, but if it does, this speed would dwarf any current cryptocurrency or traditional financial network.
Follow the developers
The number of developers working on the Polkadot blockchain exploded over the last year, from about 2,600 twelve months ago to nearly 10,000 today. The number of lines of code written for Polkadot in 2021 dwarfs all previous years combined, with founder Gavin Wood estimating that 2 million lines of code have been written, compared to 600,000 at the start of 2021.
Why does this matter? Developers are attracted to thriving ecosystems where they see value, and in turn they build new products and features that enhance the network. Essentially, having a robust developer community becomes a self-fulfilling prophecy. When investing in a crypto project, you want to invest in assets that implement improvements and new use cases, as opposed to coins that live on hype alone and inevitably fizzle out.
Solana, which emerged from relative obscurity to post an almost 100X gain in 2021, becoming arguably the most prominent blockchain outside of Bitcoin and Ethereum, saw the number of developers working on the platform double the year before in 2020, so the quadrupling of Polkadot’s developer count bodes well for the year ahead.
Looking to 2022
Polkadot got lost in the shuffle at the end of 2021 as newer assets like Solana and Terra came into the spotlight. Blazing speed, a robust and rapidly growing developer community working on the project, and increasing real-world adoption by corporations should all help make 2022 a banner year for Polkadot.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.