Polkadot vs Cosmos: Which one is the better investment?
After painstakingly pulling every piece of data
possible on these two projects,
we have a clear idea of who may win.
Is it the underdog Cosmos
with a market cap of $8.1 billion?
Or is it the expected winner Polkadot,
with a market cap of $52 billion?
I think you'll be surprised to find out
who wins which categories.
So let's go ahead and hop in,
starting with the past growth rate.
So here we can see, DOT's market cap
is significantly higher than ATOM's.
Having invested $100 into DOT twelve months ago
would have yielded 24% more
than having invested in ATOM.
Now, this could mean a couple of things.
This could mean that DOT
will continue to grow exponentially more,
but it also could mean that there could be some
catch up here between the two projects,
meaning ATOM could slowly creep up
to DOT's market cap.
So we can see the market cap for Cosmos
is currently 80% lower
than Polkadot.
And again, the growth rate is 24%
less for Cosmos versus Polkadot.
Now, why does any of this matter?
There's a big problem in the world of cryptocurrencies
that will eventually be solved,
and the primary winner of this problem
will be rewarded handsomely.
That problem is Interoperability.
Cryptocurrencies are independently smart,
but collectively dumb, as of right now.
Cryptocurrencies right now are kind of like the-
the shy, smart kid in class
who knows the answer to the teacher's question,
but they're too shy to raise their hand and say it out loud.
Cryptos are getting better and better at
solving individual problems.
Things are getting more and more niche,
down to the point where we now have
thousands of different cryptos,
that we can invest in and trade.
But what we haven't seen yet is what Charles Hoskinson
calls "The 'wifi' moment in crypto".
And this is because it wasn't until 1999,
when the Wi-Fi Alliance was formed
and hundreds of organizations came together
to agree on the Internet standard
that they would use for communications,
and have all of their devices tested
for interoperability.
Basically, they could communicate with
other companies' devices.
If it weren't for this,
we would have ended up with devices that
that sometimes couldn't communicate with others.
- I'm sorry, I don't know what we're talking about.
- See what I mean?
- That would make no sense.
And we don't want that to happen in crypto.
So in crypto, this would be the moment in which
all cryptos can begin communicating
with each other.
And we want this as crypto holders.
What's really exciting here is
when we look at Metcalfe's Law.
Metcalfe's Law says the value of a network
is equal to its total users squared.
So total users multiplied by its total users.
Meaning if all cryptocurrencies can
talk and transact with each other,
the effective network value for cryptocurrencies
gets much, much larger.
So here's an example.
Let's say there are 1 million users
of a single crypto network,
but there are 10 million users across
all different blockchains.
Metcalfe's Law would say that a network value
of 1 million users is 1 trillion.
(1 million times 1 million)
But if all cryptos could interact with each other,
meaning the network is now 10 million people strong.
This brings the value of the network
up to 100 trillion,
meaning by increasing the users by 10X,
unlocking the interoperability,
in this example the network actually
becomes 100 times more valuable.
And this is why interoperability cryptos
are so important.
The winner of this race will benefit
from all the value flowing through the
entire ecosystem.
And the best part is
So let's continue in our data here.
We have Daily trade volume
and Average Daily fees
both on Polkadot and Cosmos.
So the daily trade volume for Polkadot is
21.2 times higher.
Significantly higher.
But its average fees are only 3.2 times higher.
Now this might make you scratch your head a little bit.
- What is going on?
- But what this means is Polkadot
is actually significantly more efficient
on its trades when compared
to the Cosmos network.
Now, neither of these have very high fees.
You know, $12,000 in fees
for the entire Polkadotnetwork
on average in a day
is not a whole lot of money, especially for
something that has a market cap of
$50 billion dollars,
and then $3.7 thousand on Cosmos.
So these fees are very small for both,
but it is much more efficient still for Polkadot.
When we see the average trade volume on
Polkadot is $3.2 billion daily
versus $150 million on Cosmos.
So a 21X difference but only
three times difference in the fees.
Now this is a good time to point out
that some of these data points had to actually be
manually written down.
So if you appreciate the efforts,
just make sure you click that
subscribe button because it took
a whole lot of time
to put together all this data.
Also, if you want even more content
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I think we still have some spots open on that.
Now moving on to the next data point,
you can like this one.
First, looking at new accounts created daily,
we can see Polkadot here in the pink has
averaged 9.3 thousand new accounts
per day to Cosmos' 2.7 thousand.
So significantly higher, 3X higher.
But again, the market cap is more than 5X,
so it's always good to compare things to market cap.
But what you find really curious here
is the active daily accounts.
So Polkadot's daily active accounts
in the past two weeks has averaged
13.7 thousand versus 11.2 thousand for Cosmos.
So fairly small difference here.
So despite Polkadot getting more than three times
new users on a daily basis,
Cosmos only has about 20% fewer
active daily users, and in the long run,
you really want these active users.
So this actually in my opinion,
leans towards Cosmos
as the winner of active accounts,
despite there being more accounts created daily.
Now this could be indicative of other things,
but I found this fascinating as a data point.
That's why I really love digging into this data.
Now let's move on from here and look at the
return on investment for staking
each of these cryptocurrencies.
So staking ATOM versus staking DOT.
Now I think this is important because you want holders
to hold on your cryptocurrency for the long term.
And if someone's looking for a
five-year, ten-year hold, they
are more likely to choose the crypto
that is going to, by default, earn them more over time.
Now both of these coins are inflationary,
meaning the total supply of coins
is increasing over time,
but you can stake both of them.
And you want those staking rewards
to more than make up for the
inflationary effects of the crypto.
So if the crypto increases by 10% every year,
you want the staking rewards to be more than 10%.
That way you're not losing money, you're not
losing effective value of your money, that is.
Polkadot staking is 13.6%.
Their inflation is 8.6%,
which means the Staking ROI considering
inflation and the staking rewards
is 5%, which is actually right about
in line with ADA and some other larger cryptocurrencies.
And this is annualized, by the way.
And then with ATOM,
Cosmos Staking returns you 10%,
but their inflation is currently 7.2%,
which means the annualized rate is only
2.8% for staking your atom token.
Now let's look at this logically for a second.
So staking is nearly risk-free.
If we look at a 5% rate of return
as a risk-free, it's not completely, but
pretty much risk-free,
we look at that as the risk-free return for
holding Polkadot.
By investing in ATOM, you're
effectively saying that not only
is your investment going to continue to grow,
but you're betting that it will beat
the total ROI on Polkadot,
which means in order to break even with
Polkadot, ATOM actually has to do 2.2%
better annualized than Polkadot
to be on the same place,
that is, if you are staking either of these cryptos.
Also, if you do stake Cardano ADA,
I have a stake pool, its ticker symbol MAX1
I'll have the information linked down in the description,
if you want to go ahead and join that.
But I found this data point
especially fascinating.
Now moving on from here,
we have community engagement, which I think is
huge in cryptocurrencies.
So Cosmos' Reddit user base
is smaller, only slightly smaller than Polkadot's,
but they appear to be more engaged
given their comments per day.
So I like looking at comments per day.
Of course there can be bot activity,
but it gives us an idea of how engaged the community is.
And the total subscribers, like I said, it's
35% smaller for Cosmos versus Polkadot.
It's significantly smaller, but it's not
5X smaller like the market cap,
but the comments per day are actually higher
for Cosmos versus Polkadot.
Now, this could be indicative that Cosmos is
actually slightly undervalued when
compared to Polkadot,
but it also could mean
that this is a period of hype
for Cosmos that
it may correct over time.
We can't, unfortunately, tell the future 100%.
But this data brings us about as close as we
possibly can get to telling the future.
- I'm kind of psychic.
I have a fifth sense.
- Next up, we have Developers' activity.
This is a new one that I've been adding.
I'm fine tuning it a little bit.
So this is the number of weekly commits
on GitHub by developers
for each of these ecosystems.
So a commit or a revision is an
individual change to a file or set of files.
It's like when you edit and save a file
except with the Git, every time you save it,
it creates a unique ID.
So this can give us a little bit more information
as to how active the developer community is
for each ecosystem.
As we can see, it's actually pretty comparable
for Polkadot versus Cosmos.
I would honestly say that this is a tie
again despite Cosmos being significantly smaller.
So this could lean towards Cosmos.
However, I do want to say this is not a
perfect data point because a commit in itself
doesn't give us the whole picture.
So I'm working to fine tune this a little bit
to get a slightly more inclusive metric
for developer activity.
But of course, this is much better
than no data at all.
This is a living, growing kind of process
in order to compare cryptocurrencies.
Now moving on from here,
we have the Sharpe ratio, which is
another new addition to this process
of comparing cryptos.
So, both projects' Sharpe ratio
have been closely correlated for the last 12 months.
Currently, the ratio for DOT is
higher than that for ATOM.
Now this suggests that its risk adjusted
upside potential is again higher for DOT.
The Sharpe ratio takes into account
past volatility and an investor's
risk-free return to help make this calculation
and higher is the better in this case.
Now, moving on from here, we have
Metcalfe's Law, which we talked about earlier, but we
didn't break it down looking at
both of these ecosystems.
So if we assume that Polkadot's market cap
is representative of the real value of
what investors feel the value is of
each ecosystem, we can compare that
to what Metcalfe's Law says
is the value in it.
And Metcalfe's Law again is simply the
total number of users multiplied by the
total number of users.
In this case, we had to take the
average active wallets in the last two weeks
of both ecosystems in order to
do our best at getting this figure because this
data is really hard to pull.
And like I said, we spent a lot of time
pulling this data.
So we can see the market cap ratio here.
It's 5.5 times larger for Polkadot,
which means Cosmos would have to increase by
448% in order to match that of DOT's.
But the network value
based on the Metcalfe's law
says it would only have to increase by
49% in order to match the network value
of Polkadot, which means, either Cosmos
could be undervalued when compared to Polkadot
or Polkadot could be overvalued when compared to Cosmos,
which is a good sign for Cosmos either way, if you ask me.
Now let's do a brief recap
of all this data because I know it's been a lot.
So Cosmos puts up quite the fight,
especially given it's significantly
smaller in size when compared to Polkadot.
But of course there's risk either way.
There's risk in any investment, actually
there's maybe one risk-free investment and that's
a sponsor of mine, link down in the description
for BlockFi where you can get up to $250
in free Bitcoin by making an interest earning account.
Go ahead and check that out and you'll help support this channel,
and all this data while you're at it.
Now, when it comes to new and
active addresses, Polkadot has
far more daily new addresss
3.5 times more, and more daily active addresses
of 1.2 times.
However, Polkadot's market capitalization
is 5.5 times higher than Cosmos',
suggesting that Cosmos might be
undervalued versus Polkadot
or that Polkadotmight be overvalued versus Cosmos.
Cosmos also wins out in
community engagement.
Polkadot has a slightly larger
community measured by total Reddit users.
However, Cosmos seems to be more
engaged, given their higher number of
comments per day on their subreddit,
and this might suggest that Cosmos' user base is
more active and more committed to the project.
However, it's important to state that
Cosmos is currently in a pretty hyped period,
and this might explain the difference.
I would also argue that Cosmos
ties with Polkadotin developer activity.
The total number of weekly commits on GitHub
by developers appears to be similar across
both projects, suggesting that
developer activity and commitment
in the project is comparable.
However, again, Cosmos is much smaller,
could be a plus for Cosmos.
And then finally, we have Metcalfe's Law.
Based on average daily active accounts,
Metcalfe's law provides a network value
for Polkadot that's 1.5 times higher than Cosmos.
Now compare this with Polkadot's
much higher market cap, 5.5 times higher,
and it might suggest that Cosmos
could be undervalued versus Polkadot,
or again, that Polkadot might be overvalued versus Cosmos.
Now, where Polkadot wins
is past growth rate, network fees
and total transaction volume,
net staking return on investment
and risk weighted Sharpe ratio.
So in this analysis,
Polkadot is the overall winner, taking
four of the eight categories and tying with
Cosmos on one category.
But Cosmos isn't far behind
beating Polkadot because they did take
three categories despite having a
five times smaller market cap.
And of course, they tied on one.
So it seems to me,
at the very least, Cosmos could make up
some ground here in market cap.
But of course, none of this is financial advice.
So what are your thoughts on this data?
And what would you like to see included in the future?
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I'd like to thank you so much for watching
and I hope you have a profitable day.