What is Polygon (MATIC)?

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robertstevens

Robert has reported for a variety of international publications including the Associated Press, The Guardian, Vice, and Decrypt. Current areas of interest include the political economy of technology, cryptocurrencies, and privacy. Robert has a Bachelor of Science from UCL, and a Master's degree from the University of Oxford's Internet Institute.

Polygon is a blockchain infrastructure project that helps developers make the sluggish Ethereum blockchain faster, quicker to use and compatible with other blockchains.

It has its own token, MATIC (Matic Network was Polgyon’s name before the project rebranded and expanded its scope), that as of September 2021 has a market cap of $9 billion.

Polygon’s software sits atop the Ethereum blockchain and serves as a framework for connecting Ethereum-compatible blockchain networks. This ambition has earned it the title of “Ethereum’s Internet of Blockchains.”

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The problem with Ethereum

To understand why a project like Polygon is necessary, it’s important to understand the issues people face with Ethereum.

Ethereum was the first blockchain to enable smart contracts—bits of self-enforcing blockchain code that developers use to tame wild decentralized applications as diverse as crypto art and non-custodial insurance. Ethereum is wildly popular. As of this writing, about $90 billion is locked up in decentralized finance protocols, most of which are based on Ethereum, and the Ethereum coin itself has a market capitalization of $400 billion.

But Ethereum is very expensive and slow to use. As of this writing, the average swap on decentralized exchange Uniswap costs $71, and even sending a token between Ethereum wallets costs $23. And when NFT projects say that you can mint their token for free and that you just have to pay for the transaction fee, that fee can cost several hundred dollars. And Ethereum is slow. The blockchain handles just 14 transactions per second, so it can take a while for transactions to complete.

And Ethereum isn’t great for the environment. According to Digiconomist, a site that tracks the energy consumption of blockchains, Ethereum’s power consumption is comparable to the amount of electricity used by the Czech Republic, and the blockchain produces a carbon footprint comparable to Denmark. Even a single transaction, claims Digiconomist, is equivalent to the power consumption of five days in the average U.S. household.

Some solutions

An upgrade for Ethereum is on the way. It’s called Ethereum 2.0, and it promises to fix all of the above. It transitions Ethereum to a proof-of-stake consensus mechanism, which elects validators based on their wealth, not on the amount of electricity they consume. It will, one day, be capable of hundreds of thousands of transactions per second and fees should decrease, too.

But this upgrade has always been just out of reach—due to delays, the next milestone is always a few months away, and even if all goes well, it’ll be years until Ethereum 2.0 is officially in business.

Until then, there are three main paths forward.

The first is to accept that Ethereum is slow and expensive, but to grit one’s teeth and muddle through. This is somewhat sustainable—as proven by Ethereum’s ability to house its decentralized finance industry, which grew from $1 billion at the start of 2020 to $90 billion less than two years later.

The second is to use completely new blockchains that promise to solve Ethereum’s troubles. Solana, Cardano, and Polkadot are often called “Ethereum killers,” and they’re growing fast. However, they don’t quite have the community that Ethereum does, and people are skeptical of their technologies.

The third is to innovate within Ethereum. Technologies, usually called Layer 2 or scaling solutions, process some Ethereum transactions elsewhere and submit a smaller amount of information to the Ethereum blockchain. For instance, one called Optimistic Rollup, collects batches of transactions outside of the Ethereum blockchain, then rolls them up into a single transaction and submits that to Ethereum.

Enter Polygon

Polygon is an example of the third path: It’s a scaling solution. Launched in February 2021, it provides a proof-of-stake sidechain and a diverse set of tools that let developers launch scaling solutions that are compatible with the Ethereum blockchain and the Ethereum Virtual Machine. That means that developers can write speedy decentralized applications on Polygon in Solidity, the smart contract language native to Ethereum, and hook them up to the main Ethereum blockchain.

Polygon’s blockchain network works through sidechains. These collect batches of transactions, validates them through Polychain’s proof-of-stake blockchain, then sends that information to Ethereum. Developers can choose to institute a security layer that, for a fee, periodically checks the validity of the information processed on a Polygon chain.

All this cuts down on Ethereum’s validation costs while still letting transactions be connected to Ethereum. People still want to send information to Ethereum because the blockchain is very old and big, because its long history and large number of miners make it secure, and because developers can benefit from its network effects by sending information from Polygon to Ethereum.

Polygon intends to expand its scaling solution to include all the latest pieces of scaling technology, including, ZK-rollups, Validum chains, and the aforementioned optimistic rollups.

Separately, Polygon aims to relieve network congestion on a single blockchain due to its multi-blockchain compatibility features. Although it’s built for Ethereum, the scaling framework can apply to any smart contract-enabled blockchain that’s compatible with Ethereum.

There are several Ethereum-compatible blockchains, including Polkadot, Quorum, Cosmos and forks of Ethereum, such as Ethereum classic. Polygon wants to be the network that combines all of them together.

That’s because Polygon chains can communicate with each other. Constellations of Polygon blockchains can collate transactions, achieve consensus, produce blocks and exchange messages. Polygon can, theoretically, combine thousands of chains together to increase transaction times to millions of transactions per second.

Polygon is based in Mumbai. It was built by four software engineers: Jaynti Kanani, Sandeep Nailwal, Anurag Arjun, and Mihailo Bjelic.

How to buy MATIC

The token that powers all of this is MATIC. Also known as Polygon, the token secures Polygon blockchains and is used by its community to vote on governance proposals. The ERC-20 coin (i.e., Ethereum-compatible token) has a supply of 10 billion, of which 66% are in circulation. As of this writing, the price of MATIC is $1.41; MATIC hit its all-time-high of $2.68 in May 2021.

You can buy MATIC on all major cryptocurrency exchanges. Like with most other pairings, the world’s largest crypto exchange, Binance, sucks up most of the trading volume. Approximately 16% of all volume for MATIC takes place through a single pairing: the MATIC/USDT pairing. (USDT, or Tether, is a US dollar-pegged stablecoin.) Coinbase’s MATIC/USD pairing, which lets you buy MATIC directly for real US dollars, accounts for 10% of all trading volume.

The easiest way to buy MATIC is through a cryptocurrency exchange like Binance or Coinbase. To do so, sign up for an account, complete the requisite identity verification procedures (which might request identifying documents like a passport photo and utility bill), and then fund your account with money.

Check the exchange’s markets for MATIC before you buy. Most exchanges support the USDT/MATIC pairing, which means you’ll have to check the USDT pairings first: i.e., you’ll have to buy USDT with something, usually a fiat currency, and then use that USDT to buy MATIC.

When paying for MATIC, you’ll probably have to pay the exchange’s transaction fee. The cheapest of any major exchange is Binance, which charges a maximum of 0.01% in transaction fees.

Once you have your MATIC, you might have to pay a withdrawal fee to remove it from the exchange. Because it’s an ERC-20 token, and thus subject to Ethereum’s transaction fees, fees can be greater than for tokens from other blockchains.

On Binance, it costs $25 to withdraw MATIC tokens, or 18 MATIC, and the minimum withdrawal amount is $50, or 36 MATIC, according to withdrawalfee.com. Gemini charges the cheapest withdrawal fees of just $1.39, or 1 MATIC.

What’s next for Polgyon and MATIC?

MATIC has performed well in 2021, rising from $0.04 at the start of the year to highs of $1.65 in March 2020.

However, some analysts are concerned about Polgyon remaining relevant when Ethereum upgrades to Ethereum.2.0 and addresses all of the problems that its users groan about today, or if another blockchain swoops in and steals all its customers.

However, Polygon aims to remain relevant through its ambitious roadmap, which improves communication with other blockchains and implements more complicated scaling solutions. And, there’s a good chance that some of the problems of high cost, lack of scalability or blockchain interoperability won’t be solved by blockchain upgrades or newer blockchains.

In addition, while Ethereum’s looking worse for wear, developers are building their nests on Polygon, meaning that Polygon-native applications could develop their own network effects and become mighty beasts in their own right.

Last Updated September 20, 2021

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