What’s the Deal With Polygon?
The SEC Chairman once referred to crypto as the wild west. While he’s not wrong, there are a lot of exciting projects with practical innovations that are “shaping” up for groovy applications!
Originally known as the Matic Network, Polygon initially launched back in 2017 as a scaling solution that runs in conjunction with the Ethereum blockchain. But what does that even mean? I thought cryptocurrencies were just supposed to be digital money.
What’s the Point?
Polygon is based on the Ethereum blockchain, which hosts a ton of activity, ranging from DeFi (decentralized finance) applications to NFT (Non-Fungible Tokens) Exchanges. Ethereum’s ability to support smart contracts are what make all these crazy functions possible on the blockchain.
However, it’s not all kittens and rainbows. Because the Ethereum blockchain has grown so much in popularity, it has become congested. Transactions that take too long to process and rising gas fees have become a problem.
Here’s where Polygon comes in: Polygon is a layer-2 network, which means it’s like an add on to the Ethereum network that doesn’t change the original blockchain. As a layer-2 network, Polygon’s goal is to be a scaling solution for Ethereum that provides quicker transactions and lower gas fees for users. What’s so cool about this is that even though Polygon is its own network and because it is an Ethereum sidechain, it allows for the integration of all of the same functions that the Ethereum network offers such as DeFi apps, NFT marketplaces, and so much more. It’s like an extension of the universe!
All of this “layer-2 network” and “sidechain” stuff may seem a little confusing, and the actual technology that Polygon runs on is even more complex, but all you need to remember is this; Simply put, the Polygon network works alongside the Ethereum blockchain and does everything that Ethereum does, but better. It’s faster, cheaper and easier to use.
The MATIC Token
The Polygon network has its own native utility token known as MATIC. Here are the main uses of the MATIC coin:
- Fees: Transaction fees, also known as gas fees, are paid for with MATIC on the Polygon network
- Staking: In the crypto world, staking is a way to earn rewards for holding cryptocurrencies. On the Polygon network, you can earn more MATIC by staking your coins.
- Governance: Those who own MATIC, influence the direction of the Polygon network. This means that holders get to vote on changes to Polygon.
Many crypto enthusiasts also buy and sell MATIC in hopes of turning a profit as is the case with numerous other digital tokens.
While Polygon’s purpose as a scaling solution is great and has worked so far, there are other crypto projects with the same goal. Avalanche, Solana, and Cosmos are other blockchains that offer similar solutions to Polygon. The other potential threat is Ethereum itself. At some point, Ethereum will be coming to its own rescue when the Ethereum 2.0 upgrade finally arrives. This upgrade will aim to fix Ethereum’s network speed and transaction cost problems internally and many are worried it could render networks like Polygon obsolete, or at the very least make it a little less important than it is right now.
The lagging is typical with crypto applications and it has been known to trigger depreciation of the price. Slowness is a bear-market factor in the crypto world.
Wrapping it up
So now that we have a better understanding of this very intriguing network and its token MATIC, let’s lay out some of the pros and cons:
- Polygon has proven itself as a scaling solution for Ethereum with its transaction speeds and low costs.
- Polygon leverages Ethereum’s wide variety of applications.
- Polygon’s MATIC token has a number of uses.
- Competition from other networks.
- The Ethereum 2.0 upgrade could make Polygon less important.
Ethereum, in a way, has become its own programming language in the crypto space with a lot of room for product expansion, which makes Polygon a fascinating alternative.