what is polygon

Polygon Network, formerly known as Matic Network, is a layer 2 Ethereum scaling solution designed to provide faster and cheaper transactions. It has its native token, MATIC, which is used for paying transaction fees and participating in the network’s governance.

By being compatible with Ethereum, Polygon allows developers to build and deploy decentralized applications (dApps) with Ethereum’s security and Polygon’s scalability. It also provides a wide range of use cases, from DeFi to gaming and NFTs. After reading this article, you’ll be able to know how the Polygon network works, how to use it, its pros and cons, and if it’s worth investing in.

What Is Polygon?

Polygon (MATIC) is a layer 2 solution cryptocurrency and blockchain platform that operates on the Ethereum network. They aim to provide an efficient and scalable framework for decentralized applications (dApps) and decentralized finance (DeFi) projects. Polygon uses a multi-chain system that integrates Ethereum sidechains with a bunch of Plasma chains for faster and cheaper transactions, unlike the main Ethereum blockchain.

Polygon is built on the Ethereum Virtual Machine (EVM), which means that it is fully compatible with Ethereum and can operate all existing Ethereum dApps and smart contracts. However, using sidechains and Plasma chains allows for greater scalability, as transactions can be processed on these secondary chains instead of congesting the main Ethereum blockchain.

Polygon began in 2017 when it launched Matic Network, created initially as a scaling solution for the Ethereum network. In 2020, the network rebranded to Polygon, and since then, they’ve been gaining traction in the DeFi space, with a growing number of projects building on the Polygon network.

One of Polygon’s key features is its low transaction costs, which makes it an ideal option for DeFi projects that process bulk transactions, such as decentralized exchanges (DEXs) and lending platforms. Additionally, using sidechains and Plasma chains increases transaction speed and scalability, improving the user experience for DeFi projects on the platform.

Polygon has been used to develop many DeFi projects like decentralized exchanges (DEXs), lending platforms, and prediction markets. The network has also created non-fungible tokens (NFTs) and tokenized real estate and art assets.

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How Does Polygon Work?

Polygon is a layer 2 scaling solution built on an Ethereum blockchain. It uses a Plasma framework variant called “Proof-of-Stake (PoS) based Plasma.” This framework makes high throughput and low latency transactions possible.

With this modification, transactions done on Polygon are processed faster and cheaper than on the Ethereum main chain. This makes it an attractive option for use cases that require high scalabilities, like decentralized finance (DeFi) and gaming. The Polygon network comprises a series of interconnected sidechains, called “child chains,” anchored to the Ethereum mainchain.

These child chains are secured by a network of validators responsible for verifying and processing transactions on the network. These validators are incentivized to participate in the network by earning transaction fees and the native token, MATIC, which is used to pay and participate in the network’s governance.

On Polygon, the transaction process begins when the user sends the transaction to a smart contract called the “Plasma smart contract” on the Ethereum mainchain. This Plasma smart contract bridges the Polygon network and the Ethereum mainchain. Once the transaction is approved on the mainchain, it is sent to the appropriate child chain on the Polygon network. The validators on this child chain will then verify the transaction and include it in the next block.

A great benefit of using Polygon is that it operates seamlessly with the Ethereum blockchain. This is known as interoperability. It means that developers can build and deploy decentralized applications (dApps) on the Polygon network using the same tools and programming languages as they would on Ethereum. An added benefit is that the Polygon network enjoys the same security level and decentralized governance as Ethereum.

Another advantage of using Polygon is that it allows for a wide range of use cases beyond DeFi, such as gaming and NFTs. Because it’s highly scalable, Polygon can handle the high transaction volumes required by these use cases, which would not be possible on the Ethereum mainchain.

How Do You Use The Polygon Network?

Polygon has many use cases that can be maximized by crypto traders, investors, and innovators. They are:

  • Trading: The Polygon network might be a fairer option for traders seeking efficient and cheaper ways to exchange cryptocurrency, as it offers low-cost and high-speed transactions.
  • Investment: The Polygon network has a growing ecosystem of decentralized finance (DeFi) projects, which can provide investors with various investment opportunities.
  • Innovation: Polygon is designed to be a highly customizable and modular platform for building and launching a wide range of decentralized applications (dApps). This makes it an outstanding option for innovators looking to develop new and exciting products and services on the blockchain.
  • Decentralized exchanges (DEX): Decentralized exchanges (DEXs)can build on Polygon, as it powers fast and low-cost transactions, which is excellent for them.
  • Staking: The Polygon network is based on a proof-of-stake (PoS) consensus mechanism, which means that holders of the network’s native token, MATIC, can earn rewards by staking their tokens and participating in the network’s governance.
  • Yield Farming: Polygon’s DeFi ecosystem also offers a range of yield farming opportunities, allowing investors to earn high returns on their crypto assets by lending or providing liquidity to decentralized protocols.
  • Security: As a layer 2 scaling solution, Polygon can help improve the safety of smart contract-based applications by allowing them to interact with the Ethereum blockchain more efficiently and cost-effectively.

Overall, the Polygon network offers a range of opportunities for traders, investors, and innovators to take advantage of the blockchain space and its many benefits. Whether it’s trading, investing, or building new products and services, the Polygon network provides a flexible and powerful platform to help unlock blockchain technology’s full potential.

Pros And Cons

Polygon (MATIC) offers a layer 2 scaling solution for the Ethereum blockchain. This helps it to carry out transactions fast and at lower costs and serve as a host for building and deploying dApps. Despite having great benefits, it still has its limitations. Some of the pros and cons of the Polygon network are:

Pros 👍
  • Scalability: Polygon uses sidechain architecture, which allows it to handle high transaction volumes at lower costs. This makes it suitable for dApps and DEXs that require efficient and speedy transactions.
  • Security: Polygon was made a highly secure platform focused on protecting users’ assets and data. It uses a proof-of-stake (PoS) consensus mechanism, which reduces the risk of 51% attacks. It also uses a Plasma-based architecture, which helps to ensure the safety and security of smart contract-based applications.
  • Decentralized finance (DeFi) opportunities: The Polygon network has a growing ecosystem of DeFi projects, providing investors with investment and yield farming opportunities.
  • Interoperability: The Polygon network is designed to be interoperable with other blockchain networks like Ethereum, which allows it to work seamlessly with other decentralized platforms and services.
  • Community-driven: The Polygon network is governed by a decentralized community, which makes it more transparent and accountable.
Cons 👎
  • Limited adoption: While Polygon has a great network, MATIC token is limited to just the network and not used for external transactions. This means its value won’t be as high unless the Polygon platform gets higher adoption.
  • Uncertainty: As Polygon is still in its early stages, there is a degree of uncertainty surrounding its long-term prospects and its ability to deliver on its promises.
  • Complexity: Polygon is a complex platform that some users might find difficult to understand and navigate.
  • Regulation: The regulatory environment for blockchain and cryptocurrency is constantly evolving, and there may be some uncertainty around the legal status of the Polygon network in certain jurisdictions.
  • Not autonomous: Polygon is built around Ethereum blockchain as a layer 2 solution. This means that if Ethereum should ever crash, Polygon will likely crash.

Overall, the Polygon network offers a range of benefits, including scalability, security, and DeFi opportunities.

However, it is still a relatively new and untested platform, so there is uncertainty around its long-term prospects and potential risks. For that reason, users must conduct their research and assess the potential risks before investing in the Polygon network or building on it.

Is MATIC A Good Investment?

The Polygon network has been growing rapidly and has attracted much attention in the crypto community. In 2021, the price of its native token, MATIC, saw significant growth, reaching an all-time high in May. Polygon Studios, a Polygon subsidiary focusing on blockchain gaming and non-fungible tokens (NFTs), also launched in 2021. If successful in subsequent years, this could make Polygon a leading blockchain technology provider for gaming and NFTs.

Furthermore, the appointment of their new Chief Executive Officer (CEO), Ryan Watts, who resigned from YouTube as the head of gaming, might ensure this vision becomes a reality. Regardless, investing in the Polygon network also comes with risks. It is important to remember that the cryptocurrency market is highly volatile and can be subject to sudden changes.

Additionally, the Polygon network is a relatively new and untested platform, so there is some uncertainty around its long-term prospects and potential risks. Before making any investment decision, conduct thorough research and consider your risk tolerance. It’s also highly recommended to consult a financial advisor or professional before investing.

Updated on: January 30, 2023