If ETH were a regional train, then Polygon would be like an ICE – because the blockchain is many times faster than that of the competitor. Unlike Deutsche Bahn, Polygon is also much cheaper. While you currently have to pay between 30 and 40 US dollars to validate your transaction on ETH, you can get the same (only faster) on Polygon for 0.1 to 0.5 US dollars.
Some ETH developers realized relatively early on that a slow and at the same time expensive blockchain is unattractive – and then founded Polygon as an ETH sidechain. Since 2017 they have been working on turning the project into the “Internet of Blockchains” – but always in close connection with their mother blockchain. They used the same Solidity programming language, they built compatibility with that ETH Virtual Machine and ensured that transactions processed on Polygon are entered in the ETH protocol at regular intervals. But now ETH 2.0, recently called ETH Consensus Layer, is to come. This should switch ETH to both the Proof of Stake consensus mechanism and introduce “Shard Chains”.
These shard chains are said to be significantly faster than the previous ETH chain – and also cost far less. Does this mean that Polygon loses its use case?
An ETH adapter?
First of all, it must be emphasized that the idea of the MATIC protocol has always been to create a universal basic infrastructure to enable borderless exchanges between different blockchains. The three inventors, by the way the first crypto billionaires in India, had the vision of a borderless world.
This is to be achieved by Polygon being a plasma-based aggregator that, as a second-layer solution for ETH, is intended to help create a framework to:
- increase scalability for ETH,
- to create a playground where developers can create their own sovereign blockchains and decentralized applications.
So, Polygon was built to act as an adapter between the ETH network and other protocols. Developers can use this adapter to connect their own blockchains and decentralized applications to the ETH ecosystem. The advantage: You can use the ETH platform without needing the ETH blockchain.
The result: A multi-chain ecosystem of different ETH-compatible solutions that interact quickly and inexpensively.
Polygon wants to provide developers with an easy-to-use toolbox so that they can develop new products and connect them to ETH. Fixed components of use are the ETH Virtual Machine (EVM) and the Solidity programming language. This means that every valid ETH address is also a valid MATIC address. In addition, however, the developers can decide for themselves whether they want to use the network’s security layer or not. You can decide to build your own consensus mechanism or join Polygon’s proof-of-stake mechanism.
Block producer in the MATIC network
In any case, Polygon acts as this adapter in the background, taking in a certain amount of ETH tokens and returning them with summarized transactions from its own network. For this summarization, the Polygon blockchain expands its Proof of Stake with so-called “Block Producers”. These are stakers determined by the community who stake a large amount of MATIC coins. As BTC-ECHO reported, this property has in the past led to the question of whether Polygon is too centralized because a few wallets claim high shares of the tokens for themselves.
The great advantage of this mechanism is that the polygon transactions can be carried out and validated in smaller chains, then summarized in larger blocks and then fed into the ETH network as such at so-called “check points”.
Lubricant of the network
The lubricant for these processes is the MATIC token. It is used for staking and validating transactions within the Polygon network. It is also crucial for the security of the network. Because owners are allowed to have a say in the governance of the network proportionally to their tokens. Thus, MATIC also has its own value independently of ETH. Also: Like ETH, Polygon also introduced the EIP-1559 update a few weeks ago, which can now also burn MATIC tokens and lead to a deflationary budget.
At the time of writing, the token is trading at $1.57. This makes Polygon the 16th most valuable cryptocurrency by market capitalization at just under $11 billion. If, on the other hand, you don’t look at the course, but at the variable “Total Value Locked”, Polygon already lands 7th place. A total of around $4.67 billion in value can be found on the blockchain.
The reason for this top 10 ranking is the successful dApps already running on Polygon – such as Aave and SushiSwap. In addition, the network has been able to conclude some partnerships in the past, for example with Decentraland or Filecoin. In addition, part of the OpenSea-Operations via Polygon. Especially due to the currently conspicuously high transaction fees and slow times, projects are currently increasingly migrating from ETH to Polygon.
Polygon continues to outperform ETH
These existing partnerships and successful products are one reason why Polygon should not become obsolete with the introduction of the ETH Consensus Layer. Another is that, according to initial projections, ETH will not match Polygon’s top speeds and prices even after the update. In addition, Polygon continues to work on constantly finding and introducing new scaling solutions. The project is currently in the process of investigating and implementing zero-knowledge and optimistic rollups.
A sub-group “Polygon Studios” was also founded, which should specifically strive for NFT and GameFi projects on the blockchain. For example, Polygon invested in the development of PlotX – a game of skill with 80,000 on-chain users.
If you look into the crystal ball, you can definitely see some clouds for Polygon due to the ETH update. Nevertheless, the platform will retain its raison d’être for the moment, which it will probably not give up again so quickly due to the strong network. In addition, one must not forget that the Polygon founders had the goal from the beginning to make Polygon the internet of blockchains that makes ETH accessible to everyone. Therefore, ETH and Polygon should be understood less as competitors and more as a merger. Because even if ETH is expected to become faster and cheaper as a result of the update, it will not become interoperable. Polygon can claim this use case – at least until ETH comes up with the next big update.