Nicknamed the “Internet of blockchains”, the Polygon network — along with MATIC, its governance token — is growing its reputation with its versatility and ability to boost scalability on the Ethereum network.
The Ethereum blockchain continues to pick up more use cases as days go by, servicing games, decentralized applications, DeFi, and smart contracts. But with great power comes greater responsibility. The blockchain is riddled with dire scalability issues because of the ever-growing number of people utilizing its services.
A crypto enthusiast might ask: what measures are the Ethereum developers taking to curb the issues? That’s where Polygon’s token, MATIC, comes in. The Polygon network came about thanks to four co-founding blockchain developers — Sandeep Nailwal, Mihailo Bjelic, Jaynti Kanini, and Anurag Arjun. Nailwal, in particular, is an experienced developer specialized in scalability mechanisms.
The Ethereum blockchain’s shortcomings, spelled out by network congestion, may very well have found a solution that lies within the Polygon network.
Polygon in Layman’s Terms
Polygon, in simple terms, is an Ethereum blockchain-backed network and a layer two off-chain scalability booster embedded on a Proof-of-Stake network (PoS). The network is a sidechain system secured by an asset security framework dubbed “Plasma”.
Using Plasma’s technology, Polygon block producers utilize checkpoint mechanisms forwarded on Ethereum’s first layer through the Merkle block. Since the network is PoS, validators approve the produced blocks under the Merkle block, the king of the ecosystem.
The Polygon network boasts of being the fitting solution to the problems that are diminishing Ethereum’s user experience and limited scalability. Aside from providing crucial answers to previously unanswerable questions, at the heart of Polygon stands the development of decentralized finance. The network also supports popular protocols such as SushiSwap, Aave, Curve, and 1inch.
MATIC Token and How Polygon Works
MATIC is an ERC-20 token running Polygon’s network. Initially, Polygon was known as the MATIC network. Despite the rebrand, the utility token retained the name MATIC. To fully understand how the token behind the previous MATIC network works, we need to track how the ecosystem works.
According to its developers, the decentralized network aims to help Ethereum blockchain users create a series of interconnected Ethereum-compatible blockchain networks. In simple terms, Polygon created an ecosystem for blockchain developers to easily and conveniently create on-chain networks on Ethereum’s network. It’s like a programmer who develops an open-source gaming program for game developers to use.
Polygon believes in a world where there is no barrier in between blockchains and people can share information more freely. It acknowledges that blockchains can be unique, but that does not stop them from inter-connecting. Hence its nickname, “Internet of blockchains”.
Importance on the Ethereum Ecosystem
As a PoS off-chain network, Polygon’s workability depends on essential modules that include governance and consensus. It uses various technologies, including state channels, rollups, and sidechains to blockchains, without compromising security and efficiency. These factors also boost transaction throughput across distinct blockchains.
The Polygon network contributes to greater speed within the DeFi space, helping users to transmit messages and connect using decentralized applications (DApps) leveraging the capabilities of several chains. Additionally, among Ether’s scalability solutions, Polygon is the only one harboring an Ethereum virtual machine (EVM).
Sandeep Nailwal, a Polygon co-founder, believes that the future of Ethereum lies in the success of Ethereum 2.0, for which layer two scaling solutions like Polygon are essential. Polygon in Ethereum 2.0 would reduce transaction fees and multiply the number of transactions that the ecosystem currently handles by 64 times.
Market Perspective on MATIC
MATIC generally serves as a governance token and serves the Ethereum blockchain by helping users cover chain transaction costs, or gas fees. It is safe to say that the token gained its popularity from Polygon’s network purpose, boosting scalability in Ethereum’s network. MATIC has been listed on over 50 major cryptocurrency exchanges, including BTSE, Binance, Coinbase Pro, OKEx, and Kucoin, among others.
MATIC’s price was $1.21 as of October 6, 2021, with an $8.1 billion market capitalization ranking in the top 25, according to CoinGecko. Its total circulating supply is nearly 6.7 billion tokens out of a total of 10 billion.
Projected to be the tech behind the next level of smart contracts on the Ethereum network, MATIC serves mainly three use cases within the Polygon network. It can be used to pay gas fees, initiates Polygon Improvement Proposals (PIPs) through governance, and ensures network security via staking.
Token Price Analysis
The MATIC token has seen a price dive like most other cryptocurrencies have since the start of September, although less so. Compared to tokens based on Ethereum’s rival protocols, Binance Smart Chain, Solana, and Polkadot, the ERC-20 token has performed relatively well. In May, other tokens based on different networks suffered huge price dives while MATIC counted another month of gains in a four-month streak.
Also in May this year, the number of users on the Polygon network grew from 7,000 to approximately 28,800. However, China’s crackdown on digital assets had a significant impact on the crypto market, as activity and prices dipped for MATIC and other coins.
MATIC bulls have seen its price run through rounds of consolidation in a triangle that saw its price fall, citing bearish talks. The token’s trend of rejection since the market plunge in June created a somewhat bear market. If the price continues its upward push since late September, bulls may have more reason to smile.
Growing Utility and Popularity
Mark Cuban, well known as a crypto enthusiast and owner of NBA’s Dallas Mavericks, made a mouth-watering investment in MATIC, noting that the more he looked into the Polygon utility token, the more interested he was.
Furthermore, Aave Protocol’s announcement earlier this year that it started collaborating with Polygon saw Aave’s user base surge. Aave sought Polygon’s help to reduce the high transaction fees that its users are facing.
In a certain and transparent effort, the MATIC token has emerged as a breath of fresh air for the Ethereum ecosystem at large. As Ethereum 2.0 continues to unfold, MATIC’s importance to the journey cannot be overlooked. The Polygon network’s reputation and versatility continue to grow, as it enhances scalability, reduces transaction costs, and improves user experience via decentralized applications.
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