A Deep Dive into Polygon (MATIC) – History, Benefits, and Future Outlook

Ethereum is the most popular and widely used blockchain platform for creating smart contracts, decentralized applications (dApps), and non-fungible tokens (NFTs). However, Ethereum also suffers from some limitations, such as low scalability, high transaction fees, and network congestion. These issues have hindered the adoption and growth of Ethereum-based projects and users.

Polygon is a Layer 2 scaling solution that aims to solve these problems by providing faster, cheaper, and more efficient transactions for Ethereum. Polygon uses a network of sidechains that run parallel to the main Ethereum chain, allowing users to interact with dApps and NFTs without paying high gas fees or waiting for long confirmation times. Polygon also offers a variety of tools and frameworks for developers to create customized blockchain environments that suit their specific needs.

In this article, we will compare Polygon and Ethereum in terms of their features, advantages, disadvantages, use cases, and future prospects. We will also explore how Polygon can benefit the DeFi and NFT sectors, which are two of the most prominent and innovative fields in the crypto space.

What Is Polygon (MATIC)?

Polygon (formerly known as Matic Network) is a decentralized platform that operates on the Ethereum blockchain. It is designed to provide fast and cheap transaction fees, making it an attractive option for developers who want to build dApps on the Ethereum network.

Polygon uses a hybrid approach that combines the security and interoperability of Ethereum with the scalability and flexibility of sidechains. A sidechain is a separate blockchain connected to the main blockchain (in this case, Ethereum) through a two-way peg. The peg facilitates the transfer of data and assets between the main chain and the side chains while maintaining the main chain’s security and immutability.

On Polygon, transactions are processed on the side chains rather than the main chain. This allows for faster transaction speeds and lower fees, as the side chains are not as heavily congested as the main chain. In addition, Polygon provides for the creation of multiple side chains, each with its own set of rules and governance structures. This enables developers to create customized blockchain environments for their specific needs.

Some key features of Polygon include:

• Scalability: Polygon uses a network of side chains to offload transactions from the main Ethereum chain, allowing faster transaction speeds.
• Low transaction costs: Polygon boasts significantly lower transaction costs than Ethereum.
• Compatibility: Polygon is fully compatible with the Ethereum Virtual Machine (EVM), meaning that developers can use the same tools and languages to build on Polygon as they would on Ethereum.
• Security: Polygon leverages the security of Ethereum through a set of validators who stake their MATIC tokens (the native currency of Polygon) to secure the network.
• Interoperability: Polygon supports cross-chain communication and asset transfer with other blockchains through bridges and adapters.
• Flexibility: Polygon offers a modular and open-source framework that allows developers to choose from various consensus mechanisms, execution environments, asset standards, and more.

History of MATIC Coin

MATIC is the native token of Polygon that powers the network and enables various functionalities. MATIC was initially launched in 2017 as an ERC-20 token on Ethereum under the name Matic Network. The project was co-founded by three Indian developers who identified a scalability issue with Ethereum and wanted to solve it.

MATIC was distributed through an initial coin offering (ICO) in 2018, raising $5 million from investors. The token was then listed on several exchanges, including Binance, where it gained significant traction and popularity. MATIC was also supported by Coinbase Ventures, which invested in the project in 2019.

In February 2021, Matic Network rebranded to Polygon to reflect its expanded vision and scope. The project aimed to become a platform for launching and connecting multiple scaling solutions for Ethereum, not just one. The rebranding also coincided with a surge in demand for Layer 2 solutions amid the rising gas fees and congestion on Ethereum.

Since then, MATIC has seen tremendous growth in terms of price, adoption, and innovation. MATIC reached an all-time high of $2.68 on May 18th 2021, achieving a market capitalization of over $16 billion. MATIC has also become one of the most widely used tokens in the DeFi and NFT sectors, with over $8 billion locked in various protocols on Polygon.

Understanding Polygon

To understand how Polygon works, it is helpful to first understand how Ethereum works. Ethereum is a decentralized platform that enables anyone to create and execute smart contracts, which are self-executing agreements that run on code without intermediaries or censorship. Smart contracts can power various applications such as decentralized exchanges (DEXs), lending platforms, gaming platforms, NFT marketplaces, and more.

Ethereum uses a consensus mechanism called proof-of-work (PoW) to secure and validate transactions on the network. PoW requires miners to compete to solve complex mathematical puzzles using their computational power. The first miner to solve the puzzle gets to add a new block of transactions to the blockchain and receive a reward in ETH (the native currency of Ethereum).

However, PoW has some drawbacks, such as:

• Low scalability: Ethereum can only process about 15 transactions per second (TPS), which is far from enough to meet the growing demand for dApps and NFTs.
• High transaction fees: Ethereum charges a fee called gas for every transaction on the network. The gas fee depends on the complexity and demand of the transaction. When the network is congested, the gas fee can skyrocket, making it expensive and impractical to use Ethereum for small or frequent transactions.
• High energy consumption: PoW consumes a lot of electricity and contributes to environmental pollution. According to Digiconomist, Ethereum’s annual energy consumption is equivalent to that of Chile.

Polygon aims to address these issues by providing a Layer 2 scaling solution for Ethereum. Layer 2 refers to a secondary layer that operates on top of the main Ethereum layer (Layer 1) and handles transactions off-chain. This means that transactions are processed on Polygon’s side chains instead of Ethereum’s main chain, reducing the load and congestion on the latter.

Polygon uses a consensus mechanism called proof-of-stake (PoS) to secure and validate transactions on its side chains. PoS requires validators to stake their MATIC tokens to participate in the network and earn rewards. Unlike PoW, PoS does not rely on computational power but on economic incentives. Validators who act honestly are rewarded, while those who act maliciously are penalized by losing their stake.

Some benefits of PoS over PoW are:

• Higher scalability: Polygon claims to achieve up to 65,000 TPS on a single side chain, which is orders of magnitude higher than Ethereum’s 15 TPS.
• Lower transaction costs: Polygon charges a fraction of a cent for each transaction, making it affordable and accessible for everyone.
• Lower energy consumption: PoS is more energy-efficient and environmentally friendly than PoW, as it does not require intensive mining operations.

How Does Polygon Work?

Polygon works by creating and connecting multiple side chains that run parallel to the main Ethereum chain. Each side chain has its own set of validators who stake their MATIC tokens to secure the network and process transactions. Each side chain also has its own set of rules and parameters that can be customized by developers according to their needs.

To interact with Polygon, users need to have a Web3 wallet such as Metamask that supports both Ethereum and Polygon networks. Users can then transfer their ETH or ERC-20 tokens from Ethereum to Polygon using a bridge service such as Polygon Bridge or WalletConnect. The bridge service converts the tokens into their equivalent versions on Polygon and sends them to the user’s Polygon address.

Once on Polygon, users can use their tokens to access various dApps and NFTs that are built on Polygon’s side chains. For example, users can swap tokens on QuickSwap (a DEX), lend and borrow on Aave (a lending platform), play games on Decentraland (a virtual world), or buy and sell NFTs on OpenSea (an NFT marketplace).

To transfer their tokens back to Ethereum, users need to use the bridge service again and pay a small fee in MATIC. The bridge service will then convert the tokens back into their original versions on Ethereum and send them to the user’s Ethereum address.

Pros and Cons

Polygon has many advantages over Ethereum, but it also has some drawbacks that users should be aware of. Here are some of the pros and cons of using Polygon:

Pros:

• Faster transaction speeds: Polygon can process thousands of transactions per second, while Ethereum can only handle a few dozen.
• Cheaper transaction fees: Polygon charges negligible fees for transactions, while Ethereum charges high fees that can deter users from using dApps and NFTs.
• Compatibility with Ethereum: Polygon is fully compatible with Ethereum’s tools and standards, making it easy for developers and users to migrate from Ethereum to Polygon without much hassle.
• Variety of scaling solutions: Polygon offers a range of scaling solutions for different use cases, such as Plasma chains, ZK rollup chains, optimistic rollup chains, standalone chains, and more.
• Growing ecosystem: Polygon has attracted many prominent projects and partners in the DeFi and NFT sectors, such as Aave, SushiSwap, Curve Finance, Decentraland, OpenSea, Axie Infinity, and more.

Cons:

• Lower security: Polygon relies on a smaller set of validators than Ethereum, which makes it more vulnerable to attacks or collusion. In addition, Polygon’s side chains are not as immutable as Ethereum’s main chain, meaning that transactions can be reversed or altered under certain circumstances.
• Enhancing its interoperability: Polygon plans to enhance its interoperability with other blockchains and platforms, such as Bitcoin, Polkadot, Cosmos, Avalanche, etc. Polygon aims to create bridges and adapters that allow for seamless cross-chain communication and asset transfer, as well as leverage the strengths and features of each platform.
• Developing its ecosystem: Polygon intends to develop its ecosystem by attracting more projects and partners in the DeFi and NFT sectors, as well as other emerging fields such as DAOs, identity, insurance, etc. Polygon also wants to support the growth and innovation of its existing projects and partners by providing them with funding, resources, and guidance.
• Improving its user experience: Polygon strives to improve its user experience by making it easier and more convenient for users to access and use its platform and services. Polygon hopes to achieve this by integrating with more Web3 wallets, browsers, exchanges, aggregators, etc., as well as enhancing its user interface and design.

Bottom Line

Polygon is a Layer 2 scaling solution that provides faster, cheaper, and more efficient transactions for Ethereum. Polygon uses a network of side chains that run parallel to the main Ethereum chain, allowing users to interact with dApps and NFTs without paying high gas fees or waiting for long confirmation times. Polygon also offers a variety of tools and frameworks for developers to create customized blockchain environments that suit their specific needs.

Polygon has many advantages over Ethereum, such as higher scalability, lower transaction costs, compatibility with Ethereum’s tools and standards, variety of scaling solutions, and growing ecosystem. However, Polygon also has some drawbacks, such as lower security, centralization risks, and dependency on Ethereum.

Polygon is one of the most promising and innovative platforms in the blockchain space, as it aims to solve the scalability issue of Ethereum and enable the mass adoption of dApps and NFTs. Polygon has a bright future ahead of it, as it continues to expand its network of side chains, enhance its interoperability with other blockchains, develop its ecosystem of projects and partners, and improve its user experience.