A step-by-step beginner's guide to purchasing Polkadot (DOT) coin in United States including which cryptocurrency exchanges to buy it on and where to store your coins. Begin below by learning why I invest in Polkadot or jump ahead to my tutorial.
- What is Polkadot (DOT)?
- What is a blockchain?
- Which coins do I invest in?
- Coins with functional application?
- How much is Polkadot worth?
- How much will Polkadot be worth in the future?
- How to buy Polkadot in the USA
- How to setup an account with Coinbase
- How to setup an account with Kraken
- How to transfer BTC from Coinbase to Kraken
- How to purchase Polkadot (DOT) on Kraken
- How to stake DOT coins on Kraken and earn interest
- What to know moving forward
- Questions, suggestions, and feedback
I'm excited about the future of cryptocurrency and blockchain technology and the role they will play in our lifetimes. I've been following Bitcoin since the early days, have seen over 4000+ coins enter the market (many of which did not withstand the test of time), watched pump and dump ICOs make people rich, and watched blockchain technology go from a misunderstood sci-fi word to an every day part of an investor's vocabulary.
I've been along for the ride, felt the highs and lows of buying and selling at the wrong time, and made more than a few mistakes along the way. (Fine, I'll admit it… I bought Cryptokitties a few years ago!)
I won't claim to be a blockchain or crypto expert because I'm not — but who really is? We're all in this together speculating, wishing, hoping, and figuring things out as we go. So while I'm not here to be your crypto investment advisor and will never tell you to buy a coin, I'm happy to share the coins that I'm personally invested in and give you my reasons why I chose to invest in those particular coins. One of those coins, which we're going to talk about today, is Polkadot (DOT).
I put together this Beginner's Guide to Polkadot because many of my friends and family were asking me how to get involved in the project after hearing me talk about it — and writing a blog post one time is easier than sending the same e-mail 20 times. I decided to publish this tutorial on Travel is Life since we regularly discuss technology on this website.
DISCLAIMER: Before continuing with this tutorial, please know that this is a tutorial not investment advice. You should always perform your own due diligence before investing in a cryptocurrency (or anything for that matter).
What is Polkadot?
Polkadot is a new type of cryptocurrency and blockchain technology that aims to solve the technical and logistical problems of its predecessors Bitcoin and Etherium. Polkadot was announced in Nov 2016 and released for sale in Oct 2017. It was developed by Gavin Wood, the same guy who created Etherium, which is currently the second largest cryptocurrency in the world by market cap.
From the Polkadot Wiki website:
Polkadot enables scalability by allowing specialized blockchains to communicate with each other in a secure, trust-free environment.
Polkadot is built to connect and secure unique blockchains, whether they be public, permission-less networks, private consortium chains, or oracles and other Web3 technologies. It enables an internet where independent blockchains can exchange information under common security guarantees.
In other words, most previous cryptocurrencies were built to support ONE single blockchain, which is both limiting and non-scalable. So Polkadot comes around and says, “How about instead of trying to create the one and only blockchain, we create an open technology that allows other blockchains to communicate and connect with each other?”
What is a blockchain?
A blockchain is a publically accessible digital ledger (like an encrypted spreadsheet) that stores every transaction ever made with a cryptocurrency. For example, if I pay you $20 in Polkadot to mow my lawn, that transaction is written on Polkadot's blockchain for everyone to see. (Although it doesn't show our names. It just shows that one digital wallet paid another digital wallet $20.)
Blockchains are stored on thousands of computers around the world — you can even download and host one yourself — so that no-one can fake a transaction. For example, if I tried to pretend that you gave me $5,000 in Bitcoin, the rest of the blockchains would say, “LIAR! LIAR!”, and not validate the transaction since it wouldn't match up with the other public ledgers.
It's quite an ingenuous technology because it adds transparency to financial transactions that were otherwise historically hidden behind the private fortress walls of banks. Bitcoin started the revolution in 2010 and since then over 4000 cryptocurrencies have been developed (most of which are pretty worthless).
So if there are over 4,000 cryptocurrencies, how do you know which ones to invest in?
At this point, I only invest in coins that have functional application such as VeChain (VET), Basic Attention Token (BAT), and Polkadot (DOT) — to name a few.
In the old days, (a few years ago, LOL), thousands of copycat coins were minted that did nothing but provide an exchange of value, or in other words, serve as a currency — but how many Bitcoin and Ethereum copycats does the world need? Most of these “shitcoins”, as they've come to be known, either died or never got off the ground.
Enter coins with functional application like VET and BAT.
For example, Vechain (VET) is designed to help international companies with supply chain management (ie: monitoring and tracking inventory as it travels around the world). Basic Attention Token (BAT) is designed to track consumers' time and attention on websites and distribute advertising money between advertisers and publishes.
Coins with functional applications aren't just built to be a currency replacement, but instead provide a decentralized digital service to the world.
Coins with functional application still have a financial value because blockchain technology requires an incentive for people to host the blockchain. Otherwise why would I want to dedicate my resources to pay for the storage, Internet bandwidth, and electricity that it takes to host a blockchain? A value associated with the coin promotes adoption, which in turn, adds to the value of the coin. And these are the types of coins that I like to personally invest in.
Why do you invest in Polkadot over other coins with functional application?
Here's why I'm a big believer in Polkadot:
- The dev team has experience. Although the technology is public and open source, it all starts with a core group of dedicated developers to get things off the ground. The developers behind Polkadot are experienced in the world of cryptocurrency and have a history of launching successful coins.
- Polkadot's got big backers. Polkadot is the flagship project by Web3 Foundation, a Swiss Foundation founded to facilitate a fully functional and user-friendly decentralized web. It's got the credibility and financial backing to get itself off the ground.
- Polkadot offers grants. Rather than wait for developers to raise money and start launching projects all on their own, Web3 Foundation offers grants for developers to build on their blockchain. This is why there are already several hundred projects in development around Polkadot (and counting). Remember, adoption = success = value in the world of blockchain technology, and Polkadot isn't leaving adoption up to chance, but instead sponsoring and fostering a community of development projects around its technology from day one. As of today, they've provided grants to 200+ projects in 50+ countries.
- Polkadot is 100% open source. Anyone can contribute to the codebase, run a node, or build services on Polkadot. Unlike some other not-to-be-mentioned crypto coins which feel about as centralized and secretive as your average bank.
How much is Polkadot worth?
At the time of writing this, Polkadot has a $26 billion market cap and each coin sells for around $27/each. However since that changes by the second, below is a widget that displays the latest Polkadot pricing.
How much will Polkadot be worth in the future?
Well isn't that just the MILLION DOLLAR question! I've done calculations on how much I think DOT could be worth in the next few years, however, I don't want to speculate a DOT price prediction with you because this article isn't meant to encourage you to purchase, but rather help facilitate your purchase if you decide on your own to do so. Please do your research and only invest an amount that you can afford to lose, as crypto currencies are notoriously a speculative play. I personally have a healthy amount invested in the coin as a long term play (ie: 5-10 years) and recommend that you invest with that same timeline in mind.
How to buy Polkadot in the USA
If you notice, this tutorial says “in the USA” everywhere — and that's because the process will differ from country to country. Some exchanges (which are websites where you go to buy coins) only work within USA while others only work outside of USA. When I first started buying DOT coins, I was in Ecuador, and when I got back to USA, I had to find new exchanges which I'll highlight below.
Both of the links above are referral links which mean I earn a small incentive for recommending those services — however I would recommend them anyway, and there really aren't any other good options right now in the USA. It just makes business sense to use my referral links since they offer them, so thanks for supporting my work with this website by using them. You'll earn $10 in free BTC when you sign up to Coinbase with my link above, as will I.
Technically you can deposit USD directly to Kraken, however, their only deposit option is wire transfer which typically costs $20-30 depending on your bank. By going through Coinbase first, you can deposit USD for free via ACH Transfer, purchase Bitcoin, and then pay a small transaction fee to transfer it to Kraken. You'll save a lot of money in fees by using the system I outline below (which is how most people do it).
How to setup an account with Coinbase
Step 1: Visit the Coinbase sign-up page and enter your name, e-mail address, state, create a password, and click the sign up button.
Step 2: Next you'll receive a verification e-mail to confirm your address. Clicking confirm will redirect you back to Coinbase to finish creating your account.
Step 3: Enter your phone number, which Coinbase will use to verify your purchases in the future using 2-step authorization. (They'll text you a seven digit code to confirm your transactions.)
Step 4: Submit additional information to create your profile like your legal name, birthday, and physical address.
Step 5: Verify your identity with your drivers license. You'll use your web cam to upload a photo of the front and back of your ID. It may take a few minutes to confirm your identification.
Step 6: Once your ID has been confirmed, you'll be directed to the payments screen and presented with options to deposit funds. Connecting your bank account and doing ACH transfer is my recommended method because it's free — however it takes a few days to verify your account. If you're in a hurry, you can use a different method like debit card or PayPal deposits, but take note of the transaction fee before you go those routes.
Step 7: Once your deposit is cleared, you'll see a USD balance within your Coinbase account. You can now use this to purchase cryptocurrency.
Step 8: Click the BUY/SELL blue button at the top of the screen and use either your deposited USD funds on Coinbase or your now connected checking account to purchase BTC. This may take a few minutes to show up in your account after you purchase.
That's it for the moment. You now own BTC that is being stored in your Coinbase account. Next step is to create your Kraken account so that you can buy Polkadot. If you're waiting for Coinbase to verify your checking account (which takes a few days), you can go ahead and setup your Kraken account below so that it's ready once your Coinbase account is ready.
How to setup an account with Kraken
Step 1: Visit the Kraken sign-up page to enter your e-mail address, create a username, and a password. Then select your country of residence and click “Create Account”.
Step 2: You'll receive an activation code via e-mail which you can enter at the next screen along with your newly created login credentials to activate your account.
Step 3: Now you'll need to verify your account. There are three levels of account verification, but for the moment, you'll only need to do the Starter verification, unless you plan on buying a lot of crypto to which you'll need the Intermediate. Start by clicking “Get Verified” under the Starter verification.
Step 4: Enter your full name, e-mail address, physical address, and phone number in order to begin the process.
And that's it! You're now ready to transfer BTC from your Coinbase to your new Kraken account and use it to buy Polkadot.
How to transfer BTC from Coinbase to Kraken
Step 1: Within your Kraken dashboard, click the “Funding” tab in the top main menu. You should see zero balances for everything.
Step 2: Find where it says “Bitcoin (XBT)” under “Crypto Assets” on this page. XBT is the new acronym for Bitcoin, but it's the same as BTC, so don't be confused. Click “Deposit” on the right next to Bitcoin (XBT).
Step 3: On the next page, you'll be prompted to click the “Yes, I acknowledge” button before you can deposit Bitcoin for the first time. You are acknowledging that it's up to you to copy/paste the correct Bitcoin wallet address and that Kraken is not responsible if you screw up and send your Bitcoin to someone else.
Step 4: Click the “Generate New Address” button which appears after the step above. You'll now see a long string of about 34 random characters appear. This is your new Bitcoin wallet on Kraken. Copy that long string of characters entirely.
Step 5: Switch tabs to your Coinbase dashboard and click the “Send/Receive” button in the upper right corner.
Step 6: Paste your 34 character wallet address in the first field that says “To: Enter e-mail or address”. Then choose “BTC Wallet” under the “Pay With” field and click Continue.
Step 7: Verify that you've entered the correct wallet address and amount on the next screen and then click “Send Now”.
Step 8: You'll receive a 7 digit confirmation code via text, which you'll need to enter on the next screen to confirm the transfer.
Step 9: Switch back to your Kraken dashboard. Within 10 minutes you should see your Bitcoin balance appear in your Available Balances. This sometimes takes up to an hour or longer depending on network availability, but usually just takes a few minutes. (The transaction I made to create this tutorial took 74 minutes.)
And that's it! You've now successfully transferred your BTC from Coinbase to Kraken. Last thing to do is use your BTC to purchase DOT on Kraken.
How to purchase Polkadot (DOT) on Kraken
Step 1: Click “Buy Crypto” within your Kraken Dashboard in the top menu.
Step 2: Select the “Convert” tab and then select “From: Bitcoin” and “To: Polkadot”. You can either choose the amount you'd like to convert or click “Convert Max” to exchange all your BTC for DOT.
Step 3: Select “Preview Convert” and review your transaction. Then click “Convert Now”.
Congratulations! You are now the proud owner of DOT coins.
BONUS: Stake your DOT coins and earn interest
Staking your coins is the process of committing your coins to the Polkadot ecosystem for the purpose of validating transactions. By doing so, you earn a reward for your stake in the form of interest (which they call rewards). This is the Polkadot equivalent of mining Bitcoin.
Step 1: Click the “Staking” tab in the top menu of Kraken.
Step 2: Scroll down until you see Polkadot listed. It's probably the first coin listed.
Step 3: Enter the amount of your coins you'd like to stake. I hit “Max” to stake all of them. No point in having your coins just sitting there on an exchange. Leave “Grow Rewards” option enabled, which is essentially like DRIP with stocks where you reinvest your rewards back into the stake for compounding interest.
And that's it! You've now successfully staked your DOT coins and are on the way to earning 12% interest in the form of DOT coins — which should also go up in value over time which means you'll be earning a lot more than 12%.
What you should know moving forward.
If this is your first time purchasing cryptocurrency, then there are a few things you need to understand.
1. You're storing your coins on an exchange.
If you followed the steps above exactly as written, you are now storing and staking your coins on the Kraken exchange. This comes with the inherent risk that you aren't the official holder of your coins — Kraken is.
Whereas other cryptocurrency holders take their coins off the exchange they bought it from and store them on their own computer, USB hard wallets, or simply as cold paper copies. Each of those options come with their own inherent risks as well.
Personally I have faith in Kraken as an exchange. They are the 4th largest exchange in the world, a US based company, were founded in 2011 (which is a lifetime in cryptocurrency years), and have a history of helping their users recover lost funds.
I don't have ALL my DOT coins on Kraken, but I'm comfortable with having some in order to stake with their exchange. It's also possible to stake DOT coins on your own, directly on the Polkadot blockchain, however, that's a much more complicated tutorial and requires a minimum amount of DOT coin (currently 164 coins or about $4500 USD at the time of writing this).
I can't promise that your coins will be safe on Kraken because no-one can promise that. Same as I couldn't promise that your coins would be safe if you took them off Kraken and stored them on your computer. There are risks with both storage methods. I only aim to make you aware of the risks so that you can take them into consideration with your storage method and investment amount.
Be sure to have a very secure password for Kraken that you don't use anywhere else and secure your account using their additional security methods available such as Two Factor Authorization (2FA).
2. The value of your coins could plummet.
Right now, as I write this tutorial, Bitcoin just broke past $50,000 for the first time and took many of the alt coins up along with it. (Historically other crypto coins rise and fall with Bitcoin.)
When I first started buying Polkadot coins, they were around $17. Then I returned to America and tried to buy more, and the exchange I was using said, “We do not support USA customers. Your account will be deactivated in 14 days. Please remove all your funds.” So I had to switch exchanges.
By the time I got setup with Kraken and validated my accounts, the value of DOT coins had already risen to $24. I waited a few days hoping they'd dip back down, and they instead rose to $29-30. This recent Bitcoin rally has destroyed my dollar cost averaging.
There's a two sided risk with waiting to time the market. By waiting for a dip, you could be waiting forever while the value exponentially rises and never returns to the level at which you started. However by purchasing now, the coins could plummet in value and waiting a week would have allowed you to buy twice as many coins for the same price. If I had the right answer for you on how to time the market, I'd be a billionaire already.
The only thing I'll say about this topic is that I believe in Polkadot's future and think that getting involved at double digit values is a good long term investment. You'll need to decide for yourself though based on your own assessment and risk tolerance.
3. If I lost everything I put into Polkadot, I would still survive.
Cryptocurrency for me falls into the speculative area of my investment portfolio. I like real estate and (some) stocks. Those are my less risk averse investments, however, since I'm 36 years old and have time to recover financially from bad decisions, I allow myself to put some skin in the game with speculative investments like cryptocurrency — for better or worse.
Again, I'm not an investment advisor, and this is a technical tutorial, not investment advice. I just wanted to end this by encouraging you to invest responsibly and assess the risks accordingly.
Questions? Suggestions? Feedback?
Drop a comment below or e-mail [email protected] I will update this article in the future with new information to respond to your questions and keep it up to date.