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Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong. Take 2 mins to learn more
Estimated reading time: 2 min
Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.
What are the key risks?
- You could lose all the money you invest.
- The performance of most cryptoassets can be highly volatile, with their value dropping as quickly as it can rise. You should be prepared to lose all the money you invest in cryptoassets.
- The cryptoasset market is generally unregulated. There is a risk of losing money or any cryptoassets you purchase due to risks such as cyber-attacks, financial crime and firm failure.
- You should not expect to be protected if something goes wrong.
- The Financial Services Compensation Scheme (FSCS) doesn’t protect this type of investment because it’s not a ‘specified investment’ under the UK regulatory regime – in other words, this type of investment isn’t recognised as the sort of investment that the FSCS can protect. Learn more by using the FSCS investment protection checker here.
- Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA regulated firm, FOS may be able to consider it. Learn more about FOS protection here.
- You may not be able to sell your investment when you want to.
- There is no guarantee that investments in cryptoassets can be easily sold at any given time. The ability to sell a cryptoasset depends on various factors, including the supply and demand in the market at that time.
- Operational failings such as technology outages, cyber-attacks and comingling of funds could cause unwanted delay and you may be unable to sell your cryptoassets at the time you want.
- Cryptoasset investments can be complex.
- Investments in cryptoassets can be complex, making it difficult to understand the risks associated with the investment.
- You should do your own research before investing. If something sounds too good to be true, it probably is.
- Don’t put all your eggs in one basket.
- Putting all your money into a single type of investment is risky. Spreading your money across different investments makes you less dependent on any one to do well.
- A good rule of thumb is not to invest more than 10% of your money in high-risk investments.
If you are interested in learning more about how to protect yourself, visit the FCA’s website here
For further information about cryptoassets, visit the FCA’s website here
Table of Contents
Forbes Advisor has provided this content for educational reasons only and not to help you decide whether or not to invest in cryptocurrency. Should you decide to invest in cryptocurrency or in any other investment, you should always obtain appropriate financial advice and only invest what you can afford to lose.
Polkadot is among the top 15 cryptocurrencies based on a market capitalisation of around £7.8 billion ($10 billion). If an investor wants to buy Polkadot, here’s what they should know.
What is Polkadot?
Created in 2016 by Gavin Wood, the co-founder of Ethereum (ETH), Polkadot is a protocol that connects different blockchains.
This platform is designed to provide a bridge between separate blockchains, allowing cross-chain interoperability. For example, it can tie the communications between Litecoin (LTC) and XRP (XRP) together with a smart contract.
Polkadot’s blockchain tackles significant outstanding issues with blockchain technology: interoperability and scalability. The crypto allows other blockchains (public and private) and decentralised applications (dApps) to talk with each other under one umbrella.
Polkadot is also quick and scalable, processing more than 1,000 transactions per second (TPS). That’s impressive compared to Bitcoin which can only process about seven, while Ethereum can only process about 30 per second.
With those advantages, Polkadot could expand the usability of some cryptocurrencies.
Bilal Hammoud, CEO and founder of National Digital Asset Exchange, says: “Polkadot’s mission is to securely allow Bitcoin and Ethereum to interact with each other in a scalable manner. Imagine if you store your wealth in Bitcoin and use that Bitcoin on an Ethereum dApp to take a loan for a house quickly and securely.”
Polkadot has its own native token, DOT, used for governance, staking and bonding. For those looking for yield, staking is a way of making your cryptocurrency earn passive income without needing to sell your tokens.
All DOT users are given rights to vote on governance, such as on upgrades, but votes are weighted by the number of tokens held by the user.
Initially, Polkadot allowed the creation of 10 million DOT, and it didn’t have a cap on supply. The network’s redenomination in August 2020 changed it to an allocation of 1 billion DOT tokens.
Where can Polkadot be bought?
Investors that want to purchase DOT tokens, can do so through a decentralised exchange like PolkaSwap or the 1Inch Network.
If an investor is going to buy Polkadot using Sterling or another form of fiat currency, they can use a cryptocurrency exchange. Binance.US and eToro are among examples of exchanges that allow this.
Some cryptocurrency exchanges offer trading pairs that allow customers to trade DOT with Great British Pound Token (GBPT), a stablecoin.
How to buy Polkadot
To buy Polkadot’s token, investors can follow these three steps:
1. Select a cryptocurrency exchange
If an investor is new to cryptocurrency, they’ll first have to open an account with a cryptocurrency exchange. Crypto exchanges are marketplace platforms that facilitate trades. Some are very basic and easy to use, while others tend to be for more advanced investors and have features like margin accounts and crypto staking.
If an investor is deciding between exchanges, they may want to pay attention to the platform’s security features, account minimums and added fees.
2. Submit a Polkadot order
Once investors have an account, they can fund it by linking their bank account or entering their debit card information. Some exchanges allow credit cards, but credit card transaction fees on crypto exchanges often run high. If an investor decides to use a credit card to buy cryptocurrency, it generally will count as a cash advance and be subject to a higher interest rate than a payment on regular purchases.
When an investor is ready to buy Polkadot, they can enter the ticker symbol – DOT – and the amount they want to purchase, such as £50 or £100.
3. Storing Polkadot
Whenever cryptocurrencies are purchased, storage must be handled by the investor. Properly storing investment is essential in keeping tokens safe. There are several storage options to consider:
- Hard wallet. A hard wallet resembles a flash drive or USB drive. It’s a small, physical device that plugs into a computer or laptop and stores investors’ private and personal crypto keys. They are considered “cold” because they aren’t connected to the internet or a network when not actively in use
- Paper wallet. This form of storage tends to be decreasing in popularity but can be a viable storage option. With a paper wallet, a user writes down keys or apps to download a QR code. If it is lost, cryptocurrencies can be recovered
- Software wallet. Software wallets are apps or programmes that can be downloaded to manage cryptocurrencies electronically. Because they’re connected to the internet and networks (and therefore “hot”), they’re are considered as less secure, but they can make it easy to trade holdings
- Crypto exchanges. Some cryptocurrency exchanges build in storage to their platforms and store your cryptocurrency on an investor’s behalf. Relying on an exchange for storage can be risky, and an investor may want to consider other solutions for long-term storage.
What can be purchased with Polkadot?
Polkadot’s token can be used as a governance token, and individuals holding DOT tokens can provide input on the future of the Polkadot protocol. Polkadot can also be used for staking, which is how Polkadot verifies transactions and issues new DOT tokens.
As with all cryptocurrencies, Polkadot’s pricing can be volatile. One should only invest what they can afford to lose, and be sure to research the risks.
Mr Hammoud says: “If investors are new to the [cryptocurrency] space, they have to invest time reading and investigating the projects they are interested in. Remember that the space is young, and there are many opportunities to learn and hopefully make the right investment decisions.”
Cryptocurrency is unregulated in the UK. The UK regulator, the Financial Conduct Authority, has repeatedly warned investors that they risk losing all their money if they buy cryptocurrency, with no possibility of compensation.
