Personal Finance

Want to Buy Polkadot (DOT)? Here’s What to Know

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Polkadot launched in 2020, but its DOT token already has become popular among cryptocurrency investors and proponents. Advocates of Polkadot cite its unique blockchain technology and its co-founders’ tenure in the cryptocurrency space as reasons to invest in the coin. However, Polkadot’s technology is still being developed, and the fact that cryptocurrency hasn’t been widely adopted could make it a risky investment.

There are several ways to acquire Polkadot. You can buy it on a cryptocurrency exchange, receive it as payment, or trade a cryptocurrency you currently own for DOT tokens.

Should you buy Polkadot?

Before deciding to buy Polkadot, make sure you’re educated on the risks of cryptocurrency. While promising, blockchain technology is young and hasn’t gained mainstream adoption. Proponents are optimistic it will eventually be widely adopted, but if that doesn’t happen, any token’s gains could be short-lived.

You should also consider the sector’s overall volatility. The value of a coin or token can fluctuate dramatically over the course of a single day or longer. You shouldn’t invest more money in cryptocurrency than you could afford to lose completely.

And consider Polkadot’s pros and cons. Fans like its tenured leadership and the protocol’s technology, which positions Polkadot to compete against other projects building similarly open blockchain networks. On the flip side, Polkadot hasn’t been around as long as some of its competitors, and its technology has yet to be proven.

How to buy Polkadot

If you’ve never bought cryptocurrency before, it may be easiest to make your first purchase on a cryptocurrency exchange. These platforms allow you to buy and sell crypto, facilitating transactions and collecting fees and other charges. And most major exchanges should allow you to purchase Polkadot on the platform.

Alternatively, there are several traditional brokerage platforms that give access to both traditional investments and cryptocurrencies. If you’re already investing on a platform that allows cryptocurrency purchases, you may want to consider that option.

And for more advanced crypto users, there are decentralized crypto exchanges. Some of these exchanges charge lower fees than centralized exchanges. However, these platforms can be more difficult for beginners to navigate and require a fair amount of tech savvy.

You can buy Polkadot with U.S. dollars or, depending on the coin, by using other cryptocurrencies. But since coin values can change rather dramatically in a short period of time, consider the fees and costs of an exchange between Polkadot and whichever coin you plan to swap for it.

Where to store your Polkadot

There are several ways to store your cryptocurrency, and they vary in terms of their convenience, security and ease of use.

Unlike with other investments, accessing crypto coins and assets requires a private key. Typically, the key is a long, random string of letters and numbers. This key proves your ownership of the coins. If you lose the key, you no longer have access to your crypto, period.

If you buy Polkadot on a cryptocurrency exchange, you have the option to simply store your tokens in a digital wallet on that exchange. This can be convenient, since you don’t have to keep track of your private keys. But some hackers target centralized exchanges, putting your assets at potential risk.

You can also choose to store your tokens in a digital wallet. There are two kinds of digital wallets:

  • Hot wallets have access to the Internet. This can make them more vulnerable to theft, but you can send and receive crypto directly from the wallet. These wallets also require private keys.

  • Cold wallets are physical storage devices where you can keep your crypto. They’re offline, and also require a private key, which provides a layer of protection against cyberthreats. However, if you lose your private key or the physical cold wallet device, you lose access to your crypto.

Before choosing a storage method, you’ll want to ensure it’s compatible with Polkadot and with any other crypto you own or may want to buy.

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