What is Polygon (Matic)?
The Polygon project is a network of second layer (L2) solutions and standalone Ethereum sidechains . The project was created as a tool to reduce the cost of transactions, speed up the work of decentralized applications and smart contracts – those problems that have plagued the main Ethereum network for so long. Since the beginning of 2021, the project has shown phenomenal growth, and its tokens have risen in price by 68 times .
The project implements the idea of the “Internet of Blockchains ”, due to which different blockchains will communicate with each other thanks to such sidechains as Polygon. At Polygon, developers can run their own Ethereum-compatible scaling solutions or even standalone blockchains on their own. At the same time, all the problems inherent in Ethereum, such as high commissions and slow transactions, will not be affected by such projects.
History of the project
The testnet started in October 2017; then it was called Matic Network.
The project was founded by four people, all from India:
- Jainti Kanani, CEO, Data Scientist;
- Sandeep Nailwal, Executive Director;
- product manager Anurag Arjun;
- Mihailo Beri, developer.
In April 2019, the company held an IEO (Initial Exchange Offering – the same ICO, but conducted directly on exchanges) of the Matic token and raised $5.6 million. In February of this year, the Matic Network rebranded and introduced a new, improved Polygon network. It focuses on solving the blockchain ecosystem’s fragmentation problem using Ethereum as the main platform. In other words, the developers of Polygon set themselves the task of creating a tool for “communication” of many blockchains on Ethereum with each other.
Key features of the project
Now the main disadvantage of the Ethereum network is the problem of its scalability. The DeFi space has grown so much that the main Ethereum network can no longer cope with a large influx of transactions, leading to “congestion” in the network and high transaction costs (high gas fees).
Polygon Network sidechains allow you to make cheap and fast transactions based on the Ethereum network, but outside of it, thereby offloading the main Ethereum blockchain. Sidechains allow you to interact with other blockchains. For a simple user, the value of Polygon is the reduction of transaction costs, because you can transfer Ether on the network in the same way as on the main Ethereum network. And developers, applications and projects use Polygon for the reason that the commissions are lower here, and the transfer speed is higher. Users of these projects automatically use Polygon because the projects are deployed on this network. Projects, the name of the opportunity to save on transactions, can offer more favorable conditions to their users. In this way, Polygon contributes to a wider penetration of DeFi into everyday life.
The Polygon network is a great choice for those who make a lot of transactions. With a large number of transfers, the savings on commissions will be enormous, because the size of the commission in the Polygon Network is hundreds of times less than in Ethererum. This means that Polygon saves many hundreds and thousands of dollars, and this is a big plus for the network.
To use Polygon, you need to transfer your tokens from the Ethereum network to the Polygon Network (if necessary, you can make a reverse transfer). Instructions for using the network and transferring tokens from Ethereum to Polygon are given on the page )
There are several cryptocurrency projects that solve the same problem as Polygon. So why is the price of Polygon rising, but the price of these projects is not? Polygon position themselves as an Ethereum sidechain with low transactions and high transfer processing speed. Therefore, various projects go to them, placing their tokens in their network. The cost grows like this: the more transactions in the network, the more Matic tokens the validators receive. It means that it is profitable to be a validator in the network. In addition, commissions on the network are paid in native Matic tokens. The more projects in the network, the more Matic tokens are needed to conduct transactions. Hence, the higher the demand for Matic. A lot of projects have migrated to the Polygon network and continue to do so.
Technological features of Polygon
The core element of the entire Polygon ecosystem is the Polygon SDK framework, on the basis of which developers can create decentralized applications. That is, it is a ready-made infrastructure that simplifies and speeds up the development process. It becomes easier for developers to deploy their blockchains on Polygon, which will be compatible with Ethereum.
Polygon links different Ethereum-based blockchains that allow offloading the main Ethereum network and thus scaling it. The key role in this process is played by the Polygon SDK, a flexible modular framework for launching new blockchains using various scaling technologies.
Polygon has developed its own sidechain, Matic PoS Chain, which runs parallel to the Ethereum network. Moreover, it is compatible with the Ethereum virtual machine, which allows projects based on Ethereum to move smart contracts to this blockchain freely.
Consensus mechanism in Polygon
Polygon uses Proof-of-Stake consensus. Validators lock their Matic tokens in pools.
The role of the Matic token in the Polygon ecosystem
The total supply of Matic is 10 billion. The token is used as a means of validating and protecting the network (blocked in nodes), as well as a unit of settlement when paying commissions to validators.
Development of the Polygon protocol
More than 1 million addresses have already been created on the basis of Polygon. Over 50 different assets have been issued based on Polygon, including Matic, USDT, USD Coin (USDC), Quickswap, DAI, Chain Games and others.
Many projects have already migrated to Polygon or are in the process of migrating. These are Decentral Games, SportX, Easyfi, Neon District, 1inch Network, Quickswap, Uniswap, SushiSwap, Aavegotchi, Polymarket, Polkamarkets and others.
The London hard fork in the Ethereum network, of course, caused the growth of the popularity of the second cryptocurrency and the interest of hodlers and validators to save Ether. Of course, the 2.0 phase is getting closer, and every day it becomes more profitable to store Eth than to spend it, because with the advent of Ethereum 2.0, validators will begin to massively transfer Eth to the 2.0 contract to participate in staking. However, the problems inherent in Ethereum, such as the high cost of transactions and their low speed, remained, and Polygon has already managed to establish itself as a promising and interesting project, and in this regard, London did not affect the price of the Matic token in any way. It seems that Ethereum will not have a strong influence on Polygon further.
The high popularity of the project is due to fast and cheap transactions on the network. The average cost of a transaction in Polygon is hundreds of times lower than in Ethereum
Prospects for the Matic token
Judging by the huge interest of the DeFi community in the Polygon project, Matic expects further growth. The network effect, large protocol capabilities, low network fees and high bandwidth make Polygon an attractive platform for deploying decentralized applications and joining other blockchains.
If there were some universal indicator of recommendations for buying or selling tokens, for Matic its value would probably be at least 95%, i.e. “definitely buy”. Blockchain speed and low transactions are exactly what DeFi applications and NFTs are lacking right now, and this is worth a lot.