DOT, the native cryptocurrency of the Polkadot platform, has taken off lately. It’s vaulted into fourth place by market capitalization, but is this warranted compared to Ethereum’s value?
BeInCrypto dives into current platform analytics to compare the DOT versus ETH price and their network usage. Estimation of future production capacity drives price. However, we can begin to understand the valuation of the two ecosystems and why one may be way undervalued or overvalued compared to the other.
Is Polkadot really an Ethereum killer?
Since the bull run of 2017, smart contract platforms pop up regularly. They promise increased transaction speed and decreased transaction costs. They also envision overthrowing Ethereum as the smart contract king. These goals still tempt startups. Platforms like Polkadot and Cardano continue to grow in value and user following.
But how does platform usage translate to price? Do they correlate? These new platforms may promise higher transaction speeds. Both speed and correlation merit further examination in this case.
Understanding the metrics
Ethereum currently ranks second by cryptocurrency market cap. It boasts a total market cap of $137.8 billion compared to Polkadot’s $15.4 billion. Polkadot continues climbing the ranks, though. Crypto market cap aggregator CoinGecko showed that the platform almost quadrupled its market cap since mid-December. However, what justifies the price when comparing the usability of the smart contract platforms? Let’s find out.
Reddit user Oxygenjacket points to data from Polkascan, a website offering on-chain Polkadot data. The platform peaked at about six transactions per minute during high transaction volume in the last few days. Polkadot ran far fewer than six transactions per minute on average before its peak.
Ethereum, on the other hand, averaged more than 850 transactions per minute consistently over the last month. This equals more than 140 times the former’s peak. However, to simplify matters, the comparison below uses the Polkadot high number.
Comparing the market capitalization of the two projects with their current transactional output clarifies the situation, maybe. Ethereum’s market cap of $136.8 billion overwhelms Polkadot’s $15.6 billion. Polkadot weighs in at over 11 percent of Ethereum, by this metric. However, it currently produces only 0.7 percent of the Ethereum’s transaction volume. This wide disparity leads to the conclusion that either Polkadot is overvalued or Ethereum is undervalued. However, the analysis leads to a dead end at this point.
A hint from Pantera
Pantera Capital, one of the most influential blockchain based venture capitalist firms in the world recently gave a clue. It indicated, indirectly, that Ethereum may be the one undervalued. Pantera stated in its latest newsletter that Ethereum is undervalued compared to Bitcoin. By extension, perhaps investors undervalue Ethereum compared to Polkadot with its recent speculative growth.