Polygon
The internet of Ethereum
In Brief
Polygon is a project that solves two of Ethereums flaws: Congestion and Interoperability.
To ease congestion, polygon settles transactions on layer 2 through technologies like zk rollups, plasma, optimistic roll ups and more.
The project used to be called Matic, before rebranding to Polygon, but the native token is still called Matic. It is used for governance, staking and fee’s.
Hint: Interoperability is the ability of different blockchain networks to exchange and make use of information
How it started
Created in India in 2017 and was originally called the Matic Network, Polygon was the brainchild of Jaynti Kanani, Anurag Arjun, Sandeep Nailwal and Mihailo Bjelic. They had identified the scalability issue of ethereum and set out to solve it through the creation of Matic.
Started in 2017 as the brainchild of Jaynti Kanani, now the CEO of Polygon. Back then, Kanani was working at Housing.com as a data scientist. He recognised the problem of congestion on the Ethereum network as it became overloaded by the activity caused by the popular NFT project cryptokitties. Through the use of sidechains, Plasma framework and decentralized Proof-of-Stake validators, Matic was able to provide scaling solutions to the network and the project took off. The project rebranded to Polygon in 2021.
What is Polygon
Layer 2 solutions basically refer to blockchain networks working in parallel to the main blockchain network.
Polygon is a layer-2 scaling solution for the Ethereum network. The polygon network has the vision of easing the congestion and fee’s experienced on the Ethereum network. It has been referred to as the internet of the Ethereum blockchain. It does this by settling transactions on a second layer, and then posting these transactions back onto the Ethereum network once completed. This eases congestion on the Ethereum base layer, which has always been one of the major issues with the world's 2nd largest cryptocurrency. The ethereum network can only handle around 14 TPS (transactions per second), and each of those transactions has a gas fee, which is notoriously expensive because of it’s popularity. This is what is meant when people say that Ethereum is not scalable. So, through the use of L2 solutions, users benefit from lower transaction fees and higher transaction speed.
Polygon also has the vision of being a platform that allows for interoperable blockchain projects to be built upon, this means that it is built to help networks interact with each other and allow for a larger number of transactions.
This is hugely important as interoperability is a key challenge that crypto has to overcome before mainstream adoption is viable.
Use cases
Polygon went from being a simple scaling solution to becoming a more broad and complex ecosystem where users and developers alike have a wide set of use cases
Proof of stake
Polygon uses a proof of stake (PoS) consensus, which, unlike proof-of-work (PoW) blockchains, uses token holders to validate and verify transactions.
We cover the advantages and disadvantages of proof of work consensus mechanisms here
This model incentivises token holders to become validators, and rewards them in Matic tokens. This is great for the tokenomics of Matic, as it creates incentive to buy and hold the token. Validators receive a share of the transaction fees for successful verification of transactions, they also receive newly minted Matic tokens as a reward.
Proof of Stake Bridge
The Proof of Stake Bridge is made up of a set of smart contracts, these help in transferring or ‘bridging’ assets from the Ethereum network onto the Polygon side chain. Once assets are bridged over to the polygon network than they can interact with the many defi and decentralised applications on the polygon network.
Polygon Protocol
The Polygon Protocol connects all Polygon-based blockchains with each other and the Ethereum network. It also allows chains to tap into Ethereum to inherit its security model.
Real world use cases
Payment systems - Polygon aims at introducing a fiat-based payment system for dApps with the support of fiat liquidity providers
Defi - Polygon has a TVL (Total Value Locked) of $5 Billion within its Defi ecosystem. The two biggest Defi platforms; Compound and Aave, have both integrated Polygon into their networks.
Gaming - Polygon launched the Polygon Studios division in July 2021 with a vision for transition of gaming to web 3.0 from web 2.0. This studio focuses on supporting developers interested in creating games by using Polygon. Polygon also supports NFT sales, on platforms like Opensea. It provides low transaction costs compared to Ethereum network transactions.
NFT - As well as platforms like Opensea, Polygon see's other commercial partnerships that help give the network exposure... Coffee chain Starbucks will launch an NFT platform using Polygon, an Ethereum scaling network. The Starbucks Odyssey program will give away NFT stamps to customers and employees, but also sell limited edition NFTs.
There are many successful projects that work on Polygon, such as Aave or Curve Finance, decentralized exchanges such as SushiSwap, and the most popular decentralized NFT marketplace, OpenSea.
Conclusion
Polygon is a hugely exciting project, with the potential to bring so many different projects to the blockchain without being hindered by high transactions costs and network congestion. There are already loads of use cases for the token and with its vast set of tools for developers, its innovative mechanism and modules, and full support for the Ethereum Virtual Machine (EVM), we could soon see an enormous inflow of projects thriving on the Polygon ecosystem in the future.
Technical analysis
Long term - We can see that the market found a bottom at $0.30 and completed an inverse head and shoulders reversal pattern before finding some strength and recovering to the $1.00 level. Currently the market is moving upward within a trend channel supported by demand zones at $0.72 and $0.64 levels. The market has found support at the 100 DMA, which would present a good buying opportunity on retest. Currently at the $0.86 level.
The Ethereum merge is just around the corner, and layer 2 solutions will benefit from any increase in price on the layer 1 network. Conversely, anyone looking to invest in any layer 2 projects should be cautious in case there are any issues with Ethereum's move to proof of stake on September 15th.
Short term, we see the market moving largely sideways following a good recovery from the lows. Expect support at $0.76.
Where can I buy Matic
Polygon is available for trade at multiple cryptocurrency exchanges, including Kucoin Exchange and Scallop Exchange.
Disclaimer The content on this website is for informational purposes only. You should not construe any such information as financial or other advice. Please do your research before making an investment decision.
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