In May this year Polygon (MATIC) entered the top-20 on CoinMarketCap with a market capitalization of about $13 billion, and in October Bitwise Asset Management launched a fund based on this token.
The cryptocurrency buying service Itez explains Polygon’s prospects and the reasons for the popularity of Layer-2 solutions.
Workarounds: why Layer 2 scaling solutions are needed
Ethereum’s throughput is around 30 transactions per second (Transaction per second, TPS). Yet users actively use DeFi protocols and trade NFTs. As a result, at the time of writing the number of pending Ethereum transactions stands at 190,000.
To increase Ethereum’s throughput, users deploy Layer-2 solutions on top of the blockchain that process transactions off the main network. They can be divided into two types:
- state channels — solutions that allow transactions off the main network (off-chain). The latter acts as a “judge” — finalizes transactions by including them in blocks. Examples of state channels are the Lightning Network in Bitcoin and Litecoin, and the Raiden Network in Ethereum.
- sidechains — separate networks that are bound to the “parent” blockchains. Users can perform operations with tokens and cryptocurrencies on a sidechain and, if needed, return them to the original network. Examples of such solutions are the Liquid Network in Bitcoin and OMG Network in Ethereum.
Another sidechain for the Ethereum ecosystem — Polygon — was launched by developers Sandeep Nailwal, Jaynti Kanani, Anurag Arjun and Mihailo Beli in 2017 under the name Matic Network.
In February 2021, the developers of Matic Network renamed the project to Polygon and unveiled an updated development strategy, according to which the L2 solution would gradually become a multi-chain system.
Polygon today: focus on DeFi and NFT
Polygon’s architecture allows different L2 solutions to interact with each other, preventing the creation of fragmented systems.
“Developers will no longer have to compromise on speed, scalability or tooling. Polygon’s aggregation of L2 solutions will enable them to focus on building applications with real utility and without the current Ethereum constraints,” Polygon said.
As of publication, the project supports Layer 2 solutions Polygon PoS and ZK-Rollups. In the future, developers will add to them Optimistic Rollups and Validum Chains.
Transaction costs on the Polygon network are much lower than on Ethereum. At the time of publication, transferring an NFT on Ethereum costs more than $51, while on Polygon it is $0.00591.
Users pay fees in the native token MATIC. It can be bought on dozens of centralized and decentralized exchanges, as well as various exchanging services.
The cryptocurrency buying service Itez added support for MATIC amid the token’s rising popularity.
“Polygon is one of the largest and most dynamically developing L2 solutions, which recently overtook Ethereum in the number of active addresses. We believe demand for the native token MATIC will only grow. Our goal is to give users the simplest and most advantageous way to acquire it,” — comments Itez product manager Igor Kachura.
The service sends MATIC directly to Polygon — clients do not pay fees on the main network. Itez also supports Bitcoin, Ethereum, TON Crystal, Tron and Tether.
According to the analytics service AwesomePolygon, more than 170 NFT projects operate in the sidechain, including OpenSea and Decentraland. The promotion of such projects and blockchain games is handled by the Polygon Studios division.
The Polygon DeFi ecosystem comprises 95 projects with a Total Value Locked (TVL) of around $4.6 billion. Among them are Aave and Curve — leading DeFi protocols by TVL.