No, we are not talking about the geometric shape. Despite its name, Polygon Network has nothing to do with mathematics. It is rather a decentralized scaling platform meant to relieve network congestion on blockchain platforms, specifically Ethereum.
Polygon is an example of what is known as Layer-2 scaling solutions in blockchain lingo. It is something built by developers for developers with the motive of eventually creating a full-fledged Ethereum-compatible multi-chain system.
What is Polygon?
Polygon is a blockchain platform that aims to enable blockchain networks to connect and scale up. Specifically, Polygon works on the Ethereum network as a layer-2 network in order to decongest traffic on the main network using sidechains.
It addresses and provides a solution for multiple problems faced by blockchain networks such as slow transaction speeds, low transaction throughput, scalability issues, high transaction fees, and poor usability.
MATIC is the name of Polygon Network’s native cryptocurrency which is used for staking and payment settlement within the network.
To better understand Polygon, it is important to know the meaning of two important terms associated with it.
Blockchain networks often face scalability problems. They face network congestion when the traffic increases. This results in high transaction fees and low transaction speed. The original Ethereum network could, for example, process around 20-30 transactions per second. In contrast, Visa claims that it can process around 24,000 transactions per second.
Layer-2 Scaling Solutions are overlaying networks that sit on top of the main network. They seek to improve the scalability of blockchain networks by increasing their transaction speeds. They do so by shifting the transactional burden to the second layer.
This reduces the workload of the mainnet thus lowering transaction cost and increasing transaction speed. The reports are then sent to the first layer where they are recorded in the blockchain.
Along with Polygon, Plasma, Optimism, Loopring, and Aztec are other layer-2 solutions built on Ethereum.
A sidechain is an independent blockchain network that is connected via a two-way peg to another blockchain called the mainnet. Sidechains run parallel to the mainnet and reduce the burden of processing transactions on the parent blockchain.
The main purpose of sidechains is to solve the problem of scalability faced by most blockchain networks. They have their own security and consensus mechanisms that enable them to process a large number of transactions securely. The independent nature of sidechains ensures that a security breach on the sidechain does not affect the mainnet.
Who is the Founder of Polygon?
Polygon was founded by Indian developers Jaynti Kanani, Sandeep Nailwal, Anurag Arjun, and Serbian engineer Mihailo Bjelic in 2017. The Mumbai-based startup was launched under the name Matic Network which was changed to Polygon Technology in early 2021.
In Matic Network’s white paper, founders Kanani, Nailwal, and Arjun have pointed out the scalability and user experience issues faced by smart contract platforms. They say this has hampered the mass adoption of smart contracts and Decentralized Apps(DApps). Hence, Matic Network was launched to solve the scalability issues while not compromising on decentralization.
Polygon got a major boost in 2022 when it raised $450 million in funding from investors like SoftBank, Tiger Global, Sequoia Capital India, Alexis Ohanian, and Shark Tank’s Kevin O’Leary. Mark Cuban and Balaji Srinivasan are also counted among Polygon’s investors.
How does Polygon Work?
Blockchain networks face a very real problem of scalability. Blockchain is built on the principle of decentralization but as its popularity grows, it faces network congestion and the speed of transactions slows down. Attempts at scaling up often mean compromising on decentralization.
This problem is particularly evident in Ethereum, the platform known for its smart contracts. Ethereum 1.0 could roughly process around 20-30 transactions per second. But any increase in transaction volume on the network pushed up the transaction cost called gas fees.
Polygon was created as a solution to this problem. It established a parallel network that works adjacent to the mainnet. Consider it like a high-speed train that travels on the same tracks as a regular train. The high-speed train makes fewer stops and thus, reaches its destination faster.
Similarly, Polygon shifts the burden of processing transactions from Ethereum to itself and validates them much faster using a modified Proof-of-Stake(PoS) protocol. It is estimated that Polygon can process around 65,000 transactions per second at a cost that is a fraction of that of Ethereum.
Validators and Delegators
Polygon uses a modified form of the Proof-of-Stake(PoS) consensus mechanism to verify transactions. There are, therefore, two main actors here- validators and delegators.
Validators are those that stake their own crypto for the purpose of verifying transactions and adding new blocks to the existing blockchain network. As a reward, they usually get a fee or crypto(in this case, MATIC).
Running a validator node can be a big commitment. Therefore, some token holders delegate their stake to a validator of their choice. In exchange, the validator gives a cut of their reward to the delegator. Delegating is a lucrative path for several people due to the low commitment of not running a validator node all the time.
Understanding Polygon Bridge
Even if Polygon is built on top of Ethereum, it still retains its sovereignty. It is required to transfer your assets from Ethereum to Polygon in order to interact with its dApps. This is accomplished by conceiving a cross-chain transaction channel between Polygon and Ethereum.
Consider it to be like a bridge connecting the two banks of a river. Bridging enables the fast and easy transfer of ERC tokens and NFTs from Ethereum to Polygon and vice versa.
Primarily, the Proof-of-Stake(PoS) bridge and the Plasma bridge are two types of bridges used. The PoS bridge uses the PoS consensus mechanism and is usually the option preferred by users. Plasma Bridge is primarily used by developers due to its increased security for transferring MATIC, ETH, ERC-20, and ERC-721 tokens.
Is Polygon better than Ethereum?
This is an often-asked but redundant question. Because Polygon and Ethereum are not in competition with each other. Rather they are reliant on each other.
Polygon is built on top of Ethereum. Its goal is to help Ethereum scale up by shifting the transaction processing load from Ethereum to itself.
This helps in increasing the speed as well as bringing down the transaction cost on the mainnet.
Polygon’s native crypto, MATIC, is an ERC-20 token. It is a technical standard for tokens created using the Ethereum blockchain. ERC-20 compatibility ensures that MATIC is interchangeable with other Ethereum-based tokens.
Polygon is famously referred to as “Ethereum’s internet of blockchains.” It does not compete with but complements Ethereum. It provides access to the infrastructure and interoperability of Ethereum while giving additional security and maintaining its sovereignty
Polygon vs. Matic
The terms Polygon and Matic are often used in tandem. A lot of people express confusion about their names. What exactly differentiates Polygon and Matic? Are they the same thing?
The answer is- yes and no. The confusion stems from the fact that Polygon was known as Matic Network when it was initially launched in 2017. It rebranded as Polygon in 2021 but decided to retain MATIC as the symbol of its native cryptocurrency. Therefore, at present, Polygon is a blockchain platform similar while MATIC as its crypto token.
It is similar to how Ethereum is the name of a blockchain platform while Ether(ETH) is its cryptocurrency.
What is the worth of Polygon Crypto?
MATIC, Polygon’s native cryptocurrency, was launched in 2019 with an initial price of $0.00263. The project raised more than $5 million by selling 3.23 billion tokens.
After Matic Network was rebranded as Polygon Network and raised $450 million from over 39 investors, its price reached a peak of $2.40 in 2021. Prior to this surge, MATIC was trading at an average of $0.04 since its inception.
As of mid-December 2022, Polygon has a market cap of approximately $8 billion as per Coinbase. Following a rough crypto winter, it is now trading at an average price of $0.90 per MATIC. Coinbase reports that Polygon is now 69.16% below its all-time high of $2.92. Though trends indicate that it might recover its value soon.
The supply of MATIC coins is fixed at 10 billion MATIC. As of December 2022, 8.7 billion MATIC have been issued and are circulating. Since the supply of the coins is fixed, positive sentiment and therefore, increased demand might lead to a rise in MATIC prices in near future.
How to buy Polygon Crypto?
Buying Polygon MATIC is quite a straightforward process like many other cryptocurrencies. All you need to do is register on an exchange, fund your account, and purchase MATIC. Read on to find out the detailed process:
1. Creating an Account
As a first step, you need to sign yourself up on the exchange’s website or download their app.
2. Account Verification
Most centralized exchanges are KYC-compliant and would require you to verify your identity. However, if you are concerned about privacy, you can opt for exchanges that don’t require any ID verification.
3. Funding Your Account
Next, you need to deposit funds in your account to buy MATIC. You can do so by linking your bank account to your cryptocurrency account and depositing money. But you can also use your debit or credit card to make purchases.
Do make sure to confirm which payment options are supported by various exchanges in your location.
4. Buying and Storing MATIC
Now you’re all ready to buy and sell Polygon MATIC! You can store your tokens either in a hot(software or online) wallet or a cold(hardware or offline) wallet. Hot wallets are convenient for trading while cold wallets provide much more security to the wallet holder.
Is Polygon a good Investment?
Polygon has been an ambitious and innovative project since the beginning. Any project that can improve Ethereum, the second-largest crypto by market cap, is bound to generate enthusiasm.
Polygon has great potential to emerge as the main layer-2 solution on Ethereum. The project has been going from strength to strength for quite some time. It has launched multiple projects like Polygon PoS and Polygon Edge while many others like Polygon Miden and Polygon Zero are still under development.
The platform has also acquired funding from an impressive list of investors and has a growing list of partners. Polygon is one of the six companies selected by Disney for its 2022 Accelerator program.
This announcement gave a major boost to Polygon’s currency MATIC whose price jumped nearly 21% in July 2022 after the reveal, as per Coindesk.
As for the question of whether Polygon is a good investment or not, it honestly depends on your goals and risk tolerance. Like any cryptocurrency, MATIC is prone to extreme price volatility. It has also seen a fall in its value after certain developments in the crypto world including the leading exchange FTX’s crash.
However, Polygon has shown some great potential for growth. With Ethereum’s shift to Merge, it is further expected to improve the Ethereum experience.
Do consider carefully your goals and appetite for risk and do proper research before investing in Polygon and MATIC.
The Future of Polygon
Polygon is a project that aspires to be the Amazon Web Services(AWS) of Web3. It enables developers to create user-friendly dApps that are easily scalable. This is a decentralized platform that is open, secure, and sovereign. Polygon makes Ethereum accessible to all while improving the user experience.
With its partnerships with players like Disney and Flipkart, Polygon is going from strength to strength. Polygon’s broad vision has been attracting multiple investors and talent including YouTube’s head of gaming Ryan Watt to give a push to NFT and gaming adoption via Polygon Studios.
MATIC, Polygon’s coin, has also been relatively stable though its value tumbled in the latter half of 2022 due to a difficult crypto winter. However, MATIC still ranks among the Top 10 cryptocurrencies on Coinbase.
Despite setbacks, Polygon is one platform that has managed to differentiate itself from others in the Web3 space. Though it is still an emerging technology, Polygon has been taking great strides in achieving its goal of “Web3 for all.”