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What is Polygon (MATIC)

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Polygon is one of the most popular crypto projects on the market. The thing is that its team invented a solution to the scalability issue that many blockchains face. What is scalability, what tools are boxed into the Polygon ecosystem and why buy the project's cryptocurrency? The answers are in this article.

What is Polygon

Polygon is a L2-solutions network. Sounds vague? πŸ˜Άβ€πŸŒ«οΈ

To understand how Polygon works and what its purposes are, we first need to recall some fundamental concepts. Surely you know that the main feature and innovation of cryptocurrencies is blockchain. This data storage technology involves arranging records into blocks, each of which is connected to the next and the previous one. To connect to the blockchain, information about the set of previous blocks is added to each new block.

When there are too many transactions, and therefore too many records that need to be added to the blockchain, developers face the scalability problem: the system is unable to balance supply and demand, and it needs help. That is why there are several layers of blockchain:

πŸ… Layer 0 (L0) is the basic protocol (set of rules) on which you can build layer 1 solutions – full-fledged blockchain projects.

πŸ₯‡ Layer 1 blockchain protocol (L1) is a blockchain project that can be run by itself. Examples are Bitcoin and Ethereum.

πŸ₯ˆ Layer 2 blockchain protocol (L2) is an add-on (kind of a bridge) for the layer 1 blockchain. L2 is needed to reduce pressure on the overwhelmed network of any cryptocurrency. To reach the goal, layer 2 solutions just take some pressure from the L1. For example, L2 can process L1's transactions.

It is exactly L2 that helps developers solve the scalability problem, that is inability to cope with the increase in load and network efficiency reduction. The tool increases L1 speed and reduces the fees by removing part of the pressure.

πŸ₯‰ Also there is layer 3 blockchain protocol (L3) that is an add-on for L2. It can take on some of the pressure if even L2 suffers.

Now that we've got the meaning of terms figured out, let's move on to the project overview.

Polygon (ex Matic Network) is a L2-solutions network. Polygon also includes a network of autonomous sidechains. This term refers to a part of the blockchain attached to the main one, not an add-on like L2. Let's dive into differences between the terms:

πŸ–‡οΈ Sidechain is an additional blockchain attached to the basic blockchain that can take on part of the pressure, just like L2. But unlike L2, the sidechain is part of the main blockchain. The general disadvantage is sidechains’ low level of security due to their inability to provide an adequate level of decentralization.

πŸ“ŽπŸ“Ž L2 is separated from L1 chain of blocks with its own rules.

According to the team, Polygon can solve the scalability problem of blockchain networks and increase the efficiency of popular blockchains. Polygon also has the MATIC cryptocurrency, which we will discuss at the end of the article.

The Polygon launch took place in October 2017. The project was founded by 10 developers, including Sandeep Nailwal, Jaynti Kanani, David Schwartz, Anurag Arjun, and Mihailo Bjelic. Over the years, Polygon has found many well-known partners, including MasterCard and Flipkart.

Project resources: the official website, YouTube, Twitter, GitHub, Telegram, and Reddit.

To help Ethereum

The main Polygon goal is to reduce pressure over the blockchain of Ethereum (ETH), the second largest cryptocurrency in terms of capitalization. A small recall: in September 2022 the Merge happened, when ETH moved from the energy-intensive Proof-of-Work (PoW) to a more eco-friendly Proof-of-Stake (PoS) algorithm. The decision was a step towards increasing the scalability of Ethereum (this is not the only thing, but is the one important in this context). 

The fact is that with Proof-of-Work Ethereum was unable to continue to process the demanded amount of transactions. The network faced long queues of people waiting for their transaction to happen. Those who wanted to go to the front of the queue could set an increased fee. As a result, ETH overall network fees soared.

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Ethereum network fee chart. The black vertical line is the date of the ETH network's merge from PoW to PoS. Source: bitinfocharts.

After the Merge, Ethereum's scalability increased, but unfortunately the network speed was low anyway. So the developers still need Polygon solutions to help ETH.

Since Polygon is a L2 solution, the project cannot exist without Ethereum, because it is developed to improve L1. Therefore, Polygon cannot be considered an ETH competitor. The thing is that Ethereum can exist without L2, but the second-layer solutions themselves will not be in demand without L1 with its difficulties.

Polygon ecosystem

As of early March 2023, the Polygon ecosystem includes several tools:

⛓️ Ethereum compatible Polygon PoS sidechain. It runs a wallet, a staking system, and a number of other Polygon tools. The sidechain reduces pressure on ETH by taking on and conducting some of the L1 network tasks. It helps to combat L1's high fees and low speed problems. Polygon PoS, for example, can be used as the basis to launch a decentralized application. Technically it will run on Ethereum, but the bridge will conduct operations.

πŸ‘¬ Ethereum virtual machine emulator Polygon zkEVM. The testnet was launched in October 2022. The tool is based on ZK-Rollups technology, which allows network users to remain anonymous since the network does not use personal data to process transactions. Polygon zkEVM has a bridge for transferring assets between the Ethereum and Polygon networks and a network explorer,that is a platform you can use to find out the project's network statistics, as well as information about transactions and crypto wallets data.

Polygon zkEVM is a kind of Ethereum twin. The tool copies the ETH main rules. At the same time, unlike the original, it contains advanced features, for example, ZK-Rollups, and can perform offline data processing. The Polygon zkEVM mainnet beta launch is scheduled for March 27, 2023 ⏳.

πŸ’ͺ Polygon Midden. The tool was made with the goal of increasing Polygon's scalability, security and privacy.

πŸͺ„ Polygon also has a platform that helps create personal blockchains and an identification system for web3.

Many large companies use the project’s tools. For example, Starbucks chose Polygon to start its Web3 loyalty program. And Warner Music Group used the project's tools to launch an NFT music platform. Both companies offer their clients the ability to conduct transactions on Polygon.

Project statistics

You can evaluate the popularity of Polygon using the indicator of the volume of blocked funds. The term "blocking" implies the intentional retention of assets in the project network, which occurs when another project, for example, Ethereum, transfers assets to the Polygon.

The Polygon ecosystem peaked in mid-June 2021. During this period, its network had the largest amount of the blocked assets – $9.89 billion. For comparison, as of the time of writing this review, the metric had dropped to $1.12 billion.

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Here is what the top 10 largest projects on Polygon look like, based on the volume of blocked funds in the project ecosystem:

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Despite the activity decline, the project continues to compete with Ethereum in terms of active addresses: 363,229 for ETH vs 362,992 for Polygon.

In the overall blockchain comparison Polygon takes fourth place. Only Ethereum, Bitcoin, and the largest crypto exchange Binance blockchain (BNB Chain) are ahead.

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Polygon cryptocurrency

The Polygon ecosystem has a MATIC native token. Its main purpose is to conduct transactions inside the system and pay fees. MATIC also performs the functions of a governance token. Here is the basic info about the coin:

πŸ’° Release: MATIC sales started in 2017 as part of private rounds. By 2019, the project team had earned $5.6 million selling cryptocurrency. By December 2022, all coins were distributed according to the tokenomics plan.

πŸͺ™  Supply: limited. A total of 10,000,000,000 coins have been released.

πŸ“ˆ  Rate: absolute maximum value of MATIC was $2.92 on December 21, 2021. At the time of writing this review the coin is trading around $1.

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MATIC has been holding a place in the top 10 most capitalized coins for a long period of time:

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Polygon investment potential

Polygon solutions are highly demanded. The project has partnerships with high-profile companies and a large volume of active users, also its cryptocurrency is consistently in the top 10 most capitalized coins on the market.

Polygon has already proven its effectiveness and earned its place in the crypto community. Therefore, it can be assumed that the project will continue to grow, using the market demand for scaling solutions. Thus, MATIC cryptocurrency can be considered a good investment. 

You can buy MATIC quickly, simply and without pitfalls using itez.com. The purchase can be made with a bank card and for the national currency.

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We have also prepared instructions for you on how to create a wallet for MATIC storage. Be sure to use it if you decide to invest in the project.

πŸ€” What do you think about Polygon? Share your opinion in our socials!

πŸ’Œ  Telegram, Instagram, Twitter, Facebook

This material is not an investment recommendation. The financial and other transactions mentioned in the article are not a guide to action. Itez is not responsible for possible risks. The user should independently conduct an analysis on the basis of which it will be possible to draw conclusions and make decisions about conducting any operations with cryptocurrency and / or tokens.

Maria Kachura
Maria Kachura

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