Projects like Polygon are a great example of the role of cryptocurrency in the future. Currently solutions are held back by high fees and slow transactions, which limits their applications both for dApps and for use as a currency. By removing these drawbacks, Polygon is a project that will likely gain significant traction. It can verify transactions in only a few seconds, whilst being uploaded to the Ethereum blockchain- two benefits that few alternative projects can offer.
Ethereum is the second biggest cryptocurrency on the planet. It’s also the largest ecosystem for tools, apps, and protocols, being 2.8x bigger than its largest competitor. Despite its size, Ethereum has two key drawbacks: fees and transaction speed. Ethereum fees are considerably higher than many alternatives in the industry. Transactions are also too slow for mass adoption. These issues were set to be addressed with the Ethereum 2.0 upgrade. However, another solution may provide a great alternative. This solution is Ethereum sidechains. Also known as Layer 2 (L2) scaling solutions, these innovative platforms are built on top of Layer 1 (L1) solutions and add the benefits of sidechain functionality to improve transaction speeds and reduce overall costs. Polygon is one such solution.
Polygon ($MATIC) is an L2 scaling solution built on the Ethereum Blockchain. It’s designed to tackle the biggest issues facing dApps adoption: usability, speed and scalability. To achieve this goal it allows users to create off-chain transactions for payments and smart contract integrations. The project also helps to reduce transaction fees with its own “child blockchains”. These blockchains use Ethereum blockchain as a trust layer and allow transactions to be batched before being sent to the Ethereum blockchain.
Polygon is separate from the MATIC blockchain launched on Ethereum. Instead of being built as an Ethereum side chain, it operates as a commit chain. This means that development teams can take advantage of the benefits of scaling as a side chain, whilst getting the security levels of Ethereum by using their nodes.
Developers that use the Polygon ecosystem can choose from two types of chains. These are Stand-Alone Chains and Secured Chains. Stand-Alone chains are less secure than networks using the Ethereum consensus model as they have their own. By doing this they increase their flexibility. Secured chains can be secured by Ethereum or by validators in the Polygon ecosystem. This makes them more secure but less flexible. This is a unique feature as it means that developers can choose from several scaling features instead of one option.
Polygon is unique as it provides developers with a range of layers to choose from. Here’s are the different layers involved.
The Ethereum Layer: This layer uses Ethereum as the base layer for the Polygon chain. It provides high security but lower flexibility. Project developers are not required to build on this layer.
Polygon Networks Layer: This layer is created using a range of independent blockchain networks. Each network can maintain central functions such as block production and transaction collation. It’s a requirement for developers to build on this layer.
Execution Layer: This layer executes transactions issued on the Polygon Ecosystem. It’s a requirement for all developers.
Security Layer: Polygon uses this layer to provide a “validator as a service” option. It allows Polygon validators to operate as the chain’s consensus. It’s more flexible than using the Ethereum layer, but less secure. Much like the Ethereum layer, developers are not required to build on this layer.
This unique structure allows Polygon to overcome many of the issues users experience with Ethereum, offering scalability whilst guaranteeing high levels of security.
The native cryptocurrency of Polygon is $MATIC. MATIC was first introduced in April 2019 with a seed round. During this phase, it was sold for a price of $0.00079. Following this phase, early supporters had the chance to buy MATIC at $0.00263 and in the process raised an additional $450,000 for the project. The next fundraiser sold MATIC at the same price. It included a public sale on Binance launchpad, which raised over $5 million. The remaining early supply was then used for the team, foundation, advisors and daily operations that keep the MATIC mainnet operating.
Today, there are 10 billion MATIC tokens, with 4,877,830,774 in supply. 100% of the supply is estimated to be released by the end of 2022.
The Polygon ecosystem consists of both Ethereum and Polygon-native projects that have grown exponentially since being founded. Each project helps to bring new users to the Polygon ecosystem and shows the potential of what Polygon has to offer. Here are some of the most popular projects.
QuickSwap is an innovative decentralized exchange (DEX) built on Polygon. Its focus is on low transaction fees and speed of transactions. The project was originally a fork in the Uniswap protocol and uses the QUICK token to operate. It’s the most popular Polygon project with over 225,000 users and upwards of $4.5 billion in trading volume. It launched in March of 2021 and has over $1 billion in liquidity on the platform. This makes it one of the biggest DEX’s in the world despite being in the market for less than a year.
PolyMarket is an exciting information market that went live in June 2020. The project provides its users with the ability to trade binary contracts on a range of real-world events. These include elections, court verdicts and sports results. If there’s no market for a particular event, users can suggest their own markets, with other users having the option to make binary sets on an outcome.
Events on the platform can trade between $0.00 and $1.00, which will represent the likelihood of an event occurring. For example, if 84% of voters believe the result of a contract will be a “Yes”, it will be valued at $0.84. The model used builds on traditional betting as users have liquidity on their bets. This can be used to trade them like an asset, adding a whole new level to betting. At the moment there is no native PolyMarket token, with users placing their bets with USDC.
0xUniverse is a DeFi game in which players explore a galaxy and build spaceships during their adventures. It’s powered by the 0XE token, which serves two purposes. It’s used as an in-game utility token and also as a form of energy used in battles. During their exploration, players can buy and visit other planets, with the rarity of a planet being determined by its design and resources. Once a player owns their own planet, they can charge other players 0XE to make a passive income.
As well as being a game designed around exploration, 0xUniverse also has its own storyline. In the storyline players must search for ancient artefacts to build their knowledge and progress. At the start of this story, players will need to get their own planet and spaceship. They can then begin accumulating knowledge on their planet and use it as a base for exploration. The more knowledge a player has, the better their ships and overall game progression.
Polycat Finance is a DEX and yield aggregator powered by the FISH token. The token has a total supply of 3 million and serves as a governance token on the platform. All FISH owners receive a % of all trading fees on the platform, incentivising its users to hold. To provide extra support to early-stage projects, Polycat allows projects to raise funds with an initial farm offering. Platform users can stake their FISH to receive these tokens and any additional yield they earn. The platform has an average of 15,000 users, with the project continuing to attract more attention daily.
Aavegotchi is the perfect project for gamers. It’s a world consisting of NFT gaming avatars on the Ethereum Blockchain. The game is powered by the $GHST token, which can be used by players to upgrade their character as well as earn yield through gameplay. Aavegotchi ported their code from the Ethereum mainnet to Polygon in March of 2021 in order to create a lower barrier to entry. In particular, when it comes to fees and ease of transactions. On the 17th of March 2021, it was reported that this transition saved users around $14 million in gas fees, which shows how much of an impact Polygon can make.
The demand for Polygon grew exponentially in 2021. The project started the year with just 120,000 unique addresses and had over 35,000,000 addresses by the end of the year. This means the project achieved a growth rate of around 28,000%. In addition to this, the number of users on the network also increased. At the start of 2021 the project had around 750 users. By the end of the year, this had increased to 192,000. That means the project hit a user growth rate of around 25,000%.
Alongside this growth, Polygon also hit another milestone in 2021. In May Polygon surpassed Ethereum transactions. Since achieving this goal, they’ve continuously hit almost 4x as many transactions per day. One of the biggest reasons for this mass adoption is the difference in fees. In general, daily fees for all Polygon transactions equate to around $40,000. For Ethereum, this figure is around $21 million, despite it being used to make significantly fewer transactions.
This growing divide in fees can also be seen in the number of tokens being deployed on Polygon vs those on Ethereum. At the start of 2021, no Polygon deployments were being made. However within eight months, 73% of deployments were made on Polygon. This suggests that despite Polygon being relatively new to the crypto world, it’s potential to influence the future of DeFi has already been recognised.
Every day around $360,000,000 Polygon is traded on Binance. According to the data on their site, 82% of traders stated they plan to hold their MATIC for a substantial period of time. This shows that investors are not only bullish towards Polygon, but have also recognised its future potential. To keep up with this rapidly growing popularity, Polygon has been adding more DeFi applications to its network than ever before. As of February 2022, the network has over 7000 operational dApps, which is two times the amount it had at the end of 2021. Research has shown that the number of teams building their projects on Polygon is doubling every month, resulting in the network’s usage to increase by 74% in only a few months.
Despite this growth, Ethereum still remains a more popular option for developers, having achieved more than 13,000 dApps built on its Network by May 2020. However, the huge spike in Polygon users is a testament to its potential for mass adoption.
Polygon is by far one of the most unique scaling solutions available in the world of DeFi. By providing developers with a range of layers to use, Polygon allows for two main benefits: security and flexibility. By using the Ethereum Layer developers can choose higher security, whereas using the Security Layer developers can be more flexible. With either of these being an option, Polygon allows developers to build based on the needs of their project. Combined with the Polygon Networks and Execution layers, building a well-rounded DeFi project has never been easier.
Projects like Polygon are a great example of the role of cryptocurrency in the future. Currently solutions are held back by high fees and slow transactions, which limits their applications both for dApps and for use as a currency. By removing these drawbacks, Polygon is a project that will likely gain significant traction. It can verify transactions in only a few seconds, whilst being uploaded to the Ethereum blockchain- two benefits that few alternative projects can offer.
Over the next few years, it’s likely that the cryptocurrency market will begin moving from traditional projects to L2 solutions such as Polygon to speed up the adoption of cryptocurrency. With the project currently being one of the fastest growing DeFi projects in the world, it’s possible that Polygon will be at the forefront of this adoption.