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 and my buy alerts, which have been quite successful and to join a successful community of investors, make sure you join my Patreon that's linked down in the description. 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? And if you want even more content, make sure you join my Patreon community, linked in the description. You won't regret it. I'd like to thank you so much for watching and I hope you have a profitable day.
