This is the document outlining my theory that Polkadot and Kusama will be the next breakthrough for the Crypto ecosystem. Also why they will also potentially be an extremely profitable investment.
Crypto is a game of chess and in the long run the Polkadot and Kusama ecosystem has the technology, and is being built out for mass adoption. While other ecosystems lack long term futures, the ecosystem is so far ahead, that the concepts they are creating cannot be seen as bonuses by the public.
Polkadot and Kusama would allow all crypto networks to link together as one, creating a cross chain interoropabol universe. I am no way saying that Polkadot and Kusama will replace all the coins, rather complement them.
Let me explain myself :
Created by Dr. Gavin Wood (Ethereum Co founder & CTO)
What is Polkadot ?
Polkadot is a sharded heterogeneous multi-chain architecture which enables external networks as well as customised layer one “parachains” to communicate, creating an interconnected internet of blockchains. The cryptocurrency uses proof of stake.
What is Kusama ?
Kusama is a public pre-production environment for Polkadot, one that allows any developer to experiment and test new blockchains or applications before releasing them on this network.
While Polkadot is intended to be the chain with established projects on, Kusama stands as the chain building the latest tech. Kusama was originally intended as a halfway point between a test net and an established chain. It has now been adopted by the ecosystem as practically the same chain as Polkadot.
As Dr Gavin Wood said about Kusama, “expect chaos”
While blockchains are slow and inefficient, Polkadot and Kusama would unite chains to allow much faster data transmission. This will upgrade all blockchains and connect the Crypto space.
If we compare Polkadot and Kusama to something like Ethereum that is a pretty established altcoin in the space we can see just how new Polkadot and Kusama are:
Polkadot and Kusama are both very new.
What’s so special about Polkadot and Kusama ?
- The Technology
Utility is going to be the deciding factor at the end of the day if a crypto survives or carries on growing. Therefore let me explain why Polkadot and Kusama are so revolutionary by comparing them both to a standard blockchain.
For example Ethereum works as a middle man between users, there is one blockchain and everything flows through this one blockchain. In the beginning of crypto this was fine as there were not many users using the blockchain. But now on the brink of mass scale adoption, this proposes a problem. Even in ETH 2.0 this would still be a problem. Once you are in the ecosystem you cannot interact outside it. We have the same problem with Bitcoin, Litecoin and pretty much every other crypto.
No one network would be able to handle these amounts of transactions, but together that is another question.
This is how Polkadots and Kusamas blockchain works.
There is one main chain called the “Relay Chain” and this acts as the heart of the ecosystem.
But where they differ from every other network there is something called a “Parachain”, this is where it gets interesting.
What are parachains ?
A parachain is an application-specific data structure that is globally coherent and validatable by the validators of 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.
Parachains allow blockchains to sink up to the relay chain. Then use the relay chain as a bridge to communicate with other chains. This is an extremely important thing, blockchains talking to other blockchains. Polkadot and Kusama will act as the glue in the ecosystem bringing all of the network together.
In order to gain a parachain you must win a “Parachain auction”.
In a parachain auction, DOT or KSM holders can bond their cryptocurrency to support the project that they believe should receive a parachain slot. In return, the project may commit to airdrop tokens (or provide other rewards) to their supporters. This provides a very fair way to build out the ecosystem as the ecosystem users are the ones who decide what happens.
Using this method also means “bridges” can be formed to link other coins like Ethereum and Bitcoin into the ecosystem. Allowing an internet like ecosystem where everything is connected.
Here is the Polkadot Litepaper.
Trying to prove myself right
Polkadot and Kusama are intended to complement other blockchains, really being an umbrella for all blockchains to be able to communicate with each other. It uses something called cross chain technology, meaning if you had a smart contract on ETH and wanted to interact with the Bitcoin blockchain, you could use Polkadot or Kusama.
Polkadot and Kusama would be the network that connects the entire Crypto ecosystem. In an ideal world crypto would form into a metaverse, Polkadot and Kusama would allow this. The digital world would live alongside the regular one.
Currently as I write this the Dot and Ksm ecosystems are being built out for wide scale adoption with the current Parachain auctions.
The type of companies that are winning the auctions have the knowledge and market to be able to provide a very sturdy foundation for the ecosystem.
Rather than having only one company developing everything in the space, Polkadot and Kusama have a very wide reach. This reach is generated by incentivising projects, meaning a wide range of applications can come into play here to build out the ecosystem.
3. DOT and KSM
Dot is Polkadots native token and KSM is Kusamas native token, they power the ecosystem by allowing users to vote on the network as a governance token. It allows users to secure the network by staking. And allows users to participate in parachain auctions.
When the inevitable mass scale adoption comes it will require more computing power the world has ever seen. Therefore the technology has to be spread out, Polkadot and Kusama allow this to happen on its parachains and bridges. Rather than having a huge amount of people on one coin, what will happen is the whole ecosystem will have to be utilised
The web3 foundation are huge developers in the Polkadot and Kusama ecosystem meaning they both get all the upcoming Devs and ideas.
In the next 10 years the trajectory for the internet to change as we know and be replaced by Web3 is strong. Using Polkadots and Kusamas data sharing would aid the network.
Centralisation of the internet is currently being battled by developers and the likeness of a new wave of data sharing is extremely likely. Polkadot and Kusama would be the strongest candidates to fill that.
The metaverse would basically be able to happen due to Polkadot and Kusama, a decentralised underworld with Polkadot and Kusama at its heart.
Although Crypto is intended to be as free flowing and unique as possible, it actually is quite restricting. You cannot interact outside of ecosystems, there will come a day when this needs to be solved. Polkadot and Kusama solve this and would allow limitless opportunities.
Trying to prove myself wrong
Approaching life changing technologies proposes a great risk for the future. The only way to be able to see the project for what it is, is by weighing up positives and negatives. Here are the negatives :
Polkadot and Kusuama would only work if projects and coins wanted to build on top of them. Meaning if the ecosystem rejects Polkadot and Kusama, they will only ever be able to reach a certain level.
Not to mention names, but there is direct competition between other projects in the space. Ecosystems far bigger than Polkadot and Kusama could easily engulf this new technology.
Meaning if a bigger project wanted to, they have the capability and more importantly the money to effectively steal this technology.
Currently the core Polkadot and Kusama team are Dr Gavin Wood, Peter Czaban and Robert Habermeier.
Dr Gavin Wood has a huge amount of experience in the space. But his past on Ethereum could propose tunnel vision in the creation of Polkadot. Causing a huge amount of similarities between Polkadot and Ethereum. This would be a very bad thing as remember we want Polkadot and Kusama to be the internet of blockchains, not the Ethereum killer.
Both Peter Czaban and Robert Habermeier the other two co-founders have experience at the web 3 foundation and working in the space. But not many previous projects under their belt. Would this stunt the growth of the ecosystem?
Their circulating supply increases by around 10% every year, so those 14 % staking rewards don’t seem very attractive anymore. They seem as a must, especially for long term holds.
Kusama was originally formed as a halfway house between a testnet and a standalone chain.
Could a once intended test net really be adopted as the internet of blockchains. Or would Polkadot take all the glory and leave Kusama behind.
With crypto coming out of the dark into the light proposes a challenge from a legal standpoint. There are numerous conspiracy theories over why crypto was invested and what it is and what it will be used for.
If a harsh law came in from governments would mean the whole crypto revolution would be forced to the decentralised underworld. For the ecosystem to work would mean a large number of people adopt it. If crypto went underground then a huge monetary revolution would be necessary to see a wide scale adoption.
I feel it is very easy to get blinded by quick easy money in the crypto ecosystem. This blinding effect could have a detrimental effect on the world. Crypto was invented for things to improve and allow people to live their lives free from control.
We are shaping the new world and if executed incorrectly could put us in a worse situation than we ever have been in before.
If Polkadot, Kusama or any crypto for that matter was adopted as the next power in the world, then one tiny bug could cause thousands of people to lose all their money. With absolutely no sign of getting it back, as once it’s gone in crypto it’s gone.
Apply this example to the internet of blockchains and think if the hub of the whole system had one vulnerability then the whole world could potentially collapse. And this is no over exaggeration, centralised systems have a huge amount of negatives.
But there are some positives, one of these being that they have the power to be able to override the system and change things. In a decentralised system this is not the case. Council approval has to be granted before anything like this happens and by that time it could already be too late.
A good comparison to make would be looking at all of the internet companies market caps and see what percentage Google makes up.
Why Google ?
“Our company mission is to organize the world’s information and make it universally accessible and useful”
Which is essentially what Polkadot and Kusama do in the crypto ecosystem. Obviously Google is a very diverse company with different sub sections in it, but it will still serve as a good comparison.
Google makes up 20.5% of the internet companies market capitalization.
Let’s have a look at Crypto …
Polkadot currently makes up for 1% of the crypto ecosystem market capitalization. (the orange section)
Kusama currently makes up for 0.1% of the crypto ecosystem market capitalization. (the tiny black section poking out)
If we assume the ratio between Kusama and Polkadot market cap stays the same, 1|10.
The overall percentage would be 1.1% (14.6B).
Then if we use the internet market cap on the current crypto market cap, we see a percentage gain of 1763.644% (272.091B)
If we then use the 20.5% on a $10T market cap which crypto is heading towards, we see a value of $2.05T
From the original market cap of $14.6B to a market cap of $2.05T would be a percentage gain of 13,941.1%
KSM price of $183.24 with a 13,941.1% increase would be $25,728.90
DOT price of $13.36 with a 13,941.1% increase would be $1,875.89
Meaning if you invested $250,000 in Polkadot and Kusama today, that would be worth $35,102,750 if this prediction was correct.
If we assume the ratio between Kusama and Polkadot market cap equals out, 1|1
We then see a growth of Kusama market cap of $1.55B being worth Polkadots $13.06B market cap.
We can then calculate $13.06B x 2 to include Polkadot which would be worth $26.12B.
If we then use the 20.5% on a $10T market cap we see a value of $2.05T
Kusama on the ratio 1|1, would have a market cap of $1.025T. From $1.55B to this would be a percentage increase of 66,029%
KSM price of $183.24 with a 66,029% increase would be $121,174.8
Meaning if you invested 250k in only Kusama today, that would be worth $165,322,500 if this prediction was correct.
So we know there is growth potential in the Polkadot and Kusama market caps even if it just skims these figures it is a very profitable return. But like every investment it comes with its risk … but later on down the line who knows what will happen.
These two projects fit in with my core beliefs and I think there will be a huge demand in the entire crypto ecosystem for this technology later on down the line.
And with an ecosystem like this, under a valuation of 15B, there is potential.