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What is Polygon (MATIC) Crypto? Is it a Good Investment?

What is Polygon (MATIC) Crypto? Is it a Good Investment?

Updated: April 25, 2024

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What is Polygon (MATIC)?

Capitalization leaders Bitcoin and Ethereum blockchains that are based on the Proof-of-Work consensus mechanism are often criticized for the scalability issue. As a consequence, there are issues with the speed of transaction validation and high fees. One of the ways to resolve this issue is to expand scalability using “layer two solutions” that act as an additional blockchain. Decentralized Polygon network is one of the options of bringing this technology to life.

Polygon is a network of Layer two (L2) solutions and autonomous sidechains. Its mission is to improve scalability of the Ethereum blockchain and reduce transaction costs. It is not a separate blockchain, but rather an add-on for Ethereum that helps resolve the scalability issue and gain access to ETH.

For information:

Scalability issue. The issue of limiting the number of processed transactions in a certain period of time with the growth of network users. If the number of users grows, the network is forced to either reduce the data processing speed or raise the fee within the network.
Layer 2 solutions. Projects, applications, infrastructure software technologies deployed on top of the main blockchain
Sidechain. Sidechain, a method of splitting blockchains, a solution to the scalability issue: instead of using the main blockchain, the user sends digital assets to a secondary blockchain, which helps increase the transaction speed.

Side Chain

Ethereum remains the platform for creation of decentralized apps. Polygon becomes an intermediate platform that makes it much easier to work with Ethereum.

History of Polygon

The first version of the network was created in 2017 as Matic Network, a name it used until the beginning of 2020. At that time, solving the Ethereum scalability issue was the primary goal. The developers proposed an idea of how to ensure that Ethereum copes with high congestion in conditions of the growing number of transactions.

In 2019, the platform had an IEO. During the first public offering, around 32% of coins from the total offer were sold. As of now, about 80% of the coins are in free circulation, and the remaining coins are kept in reserve to maintain liquidity.

In the beginning of 2020, the platform’s team rebranded Matic Network as Polygon; the native token kept the name Matic. Following the rebranding, the developers set new goals:

Creation of a full-fledged ecosystem for development of decentralized apps in symbiosis with Ethereum. Integration of the ecosystem into other major projects.

Creation of an interconnected network of Layer 2 blockchains.

Attempt to find the best solution to the “blockchain trilemma” – a simultaneous combination of scalability, decentralization and security.

As of today, over 1,500 apps in DAO, Games, NFT, Tools, B2B and other sectors have been developed on the basis of Polygon.

Apps based on Polygon

Polygon vs Ethereum

Initially created as an auxiliary blockchain for Ethereum, Polygon turned into an independent ecosystem. In some respects, it is much superior to the main ETH blockchain:

Transaction processing speed. For Ethereum it is 13-15 transactions per second (TPS), for Polygon it is about 7,000 per second.

Fee. Ethereum blockchain has one of the highest transaction fees at USD 10-30. The Polygon fee is around 30 Gwei (1 ETH = 1,000,000,000 Gwei), which means that the Polygon’s fee is thousands of times lower.

The number of active registered addresses on Polygon exceeded the indicator of Ethereum. This means that users prefer to register directly on Polygon instead of working with Ethereum.

Ethereum still remains the top blockchain largely thanks to the trust of the users.

Polygon Profile

Ticket	MATIC
Max supply	10 000 000 000
Circulation supply	7 960 000 000
Total supply	10 000 000 000
1 year price low	0,5736 USD
1 year price high	2,8768 USD
Biggest Markets	Binance, Coinbase

How does Polygon work?

The architecture of Polygon has 4 layers responsible for the security of the system, communication between several blockchains included in the network structure – the Ethereum layer, the security layer, the Polygon layer (consists of several blockchains), and the transaction execution layer. Polygon is unique, as it is the only scaling solution that supports the Ethereum Virtual Machine (EVM).

The Polygon ecosystem has the following products:

Products of the Polygon ecosystem

Matic sidechain. It is an add-on, where Ethereum blockchain transactions are processed.

Polygon Hermez. Uses the Ethereum-based ZK-Rollups technology, processing around 2,000 transactions per second. Is not compatible with EVM.

Polygon Zero. It is a layer 2 scaling solution that uses ZK-SNARK technology.

Polygon Miden. Uses the ZK-STARKs technology. It has a low transaction processing speed, but is compatible with the EVM.

Polygon Edge. This is a framework for building layer 2 and sidechain solutions.

Polygon Nightfall. A privacy-focused rollup for corporate clients.

These products are standalone scaling solutions. Any of them can be chosen by the developers as the most suitable one for their project.

How is MATIC created?

Polygon uses the Proof-of-Stake consensus mechanism for its cryptocurrency MATIC. This means that a full emission of coins was performed at the time of the launch of the platform and mining is impossible. Around 80% of the coins are in free circulation, and 20% of coins are controlled by the developers and put in circulation gradually. Therefore, there are two ways to make money from this cryptocurrency:

Speculation on the price.

Staking.

Staking implies that you buy cryptocurrency and ‘freeze’ it in the blockchain, similar to a bank deposit. The frozen coins support the network liquidity and help validators maintain its operation. Staking is supported by some wallets, but the user’s computer must be online around the clock. Staking at exchanges is an alternative option. For example, you register on Binance, pass verification, buy MATIC and activate the staking option.

Staking on Binance

Locking is possible for a period of 30, 60 and 90 days. Early unlocking is categorically not recommended. Estimated APY is around 20% (the annual percentage yield can vary).

Where MATIC trading is going?

Analysts believe that the platform’s rebranding and the change of its functionality became one of the drivers of the explosive growth in 2021. Investor interest coincided with the interest of cryptocurrency exchanges that started to add the coin to their listing. Following the chain reaction, this provided even more worth to the coin in the eyes of investors. For example, adding MATIC to the listing of Upbit, one of the largest South Korean exchanges on October 15 caused the price of the altcoin to spike by 25% in just one day.

MATIC is currently supported by more than 150 local and global cryptocurrency exchanges. Free conversion speaks for complete trust and popularity of the coin, which is available at the exchanges in pairs with stablecoins USDT, USDC, USD, fiat currencies USD, GBP and other currencies and also Bitcoin. A relatively equal distribution of the trading volumes among the major exchanges is another factor in favor of MATIC. This points to the absence of manipulative schemes of market makers, who artificially overstate quotes with high trading volume. Binance accounts for the highest trading volume at around 13-15%, followed by Coinbase with around 6-7%.

Largest Polygon markets

MATIC Performance

From the moment of the launch of Matic Network and until rebranding, the coin incited practically no interest among investors. This was partially due to the fact that literally several months after the launch of the platform, the first global recession of the entire cryptocurrency market began. The fact that the startup survived, when more than 50% of the startups that held ICO ceased to exist, is already a positive thing. However, there could be no discussion about the growth of the price at that time.

The IEO held in April 2019 also did not have much impact on the decision of investors. At the time, Ethereum already had competitors offering scaling solutions. Therefore, Matic Network remained unnoticed.

The situation changed dramatically after rebranding, which partially coincided with the growth of the entire cryptocurrency market. The price grew by over 14000%. The price did not stay at its high for long; by July the coin price dropped by over three times against the background of the general stagnation of the market. Partially, the price was influenced by the increase in the fee by the developers within the network. At the beginning of January 2023, about 6 million transactions were carried out daily in the network, while by the middle of the month this figure had dropped to 3 million.

In January 2023, MATIC hit its new all-time high, having grown 69% after one of the largest and most innovative decentralized exchanges Uniswap was launched on Polygon. Listing on Upbit pushed the price further up.

MATIC/USD Chart

MATIC mining

As it’s already been said above, mining is not possible. The coin is supported by staking. Large holders of altcoins act as validators that make decisions in the network. The coins of private investors are added to the pools of validators, making their small contribution to supporting the operation of the network. Investors receive a reward for participation.

Polygon (MATIC) uses

Polygon is a kind of an add-on for Ethereum, to an extent. Therefore, their purpose is nearly the same – a multifunctional network for building decentralized applications of any type. The team of developers works on development of several areas focused on integration with other types of cryptocurrency systems.

Several examples of the use of Polygon:

Over 7,000 DeFi, GameFi, NFT startups have been built on the platform's blockchain. The most popular Polygon-based decentralized networks include Aave, SushiSwap.

Over 50 digital assets, including stablecoins USDC and USDT were built based on Polygon.

Uniswap. The fact that one of the largest decentralized exchanges decided to deploy on the Polygon platform confirms the benefits of the ecosystem.

Decentraland and Polygon. In January 2023, information was published on the website of Decentraland about mutual integration of both platforms and deployment of Decentraland inside Polygon. There is not much information about the results yet. In particular, there is information about the integration of Chainbreakers, an RPG based on the Ethereum blockchain, in the Decentraland metaverse (Decentraland is one of the largest gaming platforms in the GameFi segment, representing a world of the metaverses). It is assumed that the integration will speed up and reduce the cost of transactions within Decentraland. And Polygon will be able to instantly exchange MATIC and MANA directly.

As of 03.06.2023, the TVL of the ecosystem stood at USD 2.9 billion (TVL is Total Value Locked, i.e. the amount of money locked in smart contracts that provide for the liquidity of the project). In January 2023, Polygon surpassed Ethereum by the number of active addresses – this indicator reached 142 million addresses. The network capacity is over 4 million transactions per day.

Polygon Criticism

Centralization is the weak spot of the platform. Around 35% of the total supply is held in two wallets. And if 20% of the coins are frozen by developers, there are doubts about decentralization. In other words, one counterparty can influence the price.

Top holders of MATIC

Despite the promising nature of the ecosystem, its development and investor support, MATIC quotes are very sensitive to various factors:

Competition. The Polygon solution is not the only one that helps the Ethereum scaling issues. There are many similar platforms for decentralized networks, such as Solana, Avalanche, etc. Each of them has its unique technology for optimizing transaction processing speed while ensuring security. Therefore, investors react to any negative news about the project.

General market trend. The quotes repeat the general market movement, with drivers being BTC and ETH. The volatility of the coin is slightly higher than of BTC, but lower than the majority of high-risk second-level altcoins and tokens. Nonetheless, MATIC cannot be used as a security asset.

There are still relatively few critics of the ecosystem, as the majority do not understand the principles of the platform’s operation, while ordinary users are interested only in two things – transaction speed and fees. That’s where the platform has next to no issues. Unlike its competitor Solana, Polygon is stable; it operates without failures and bugs are rarely found in it. Therefore, the reviews about the network are mostly positive.

Should you buy MATIC?

The answer to this question depends exclusively on your investment strategy and goals. Here are several tips depending on the goal of the purchase:

For practical use. MATIC is a coin in many decentralized networks built on its basis. Therefore, if you are a professional investor who earns money from Flash Loans (DeFi sector), from playing virtual games (GameFi sector), from investing in artifacts and assets of metaverses, you may need MATIC as a transit conversion internal currency. You can use it to reduce the fees in many startups. The example of Decentraland (MANA) has already been used in this review.

For earning income. There are several options here:

Staking. The annual percentage yield is around 20% - it is higher than the average in staking. The APY higher than 50% is offered only for shitcoins. However, there is a risk: in case of a rather deep long-term market stagnation, it is impossible to withdraw the coins early – withdrawal takes several days with a high probability of losing interest.

Speculative trading. This option implies earning a profit from high volatility, which for MATIC is 0.5-1% per day, and 2% and higher on certain days. Here, however, you have to take into consideration the margin and a possibility of using leverage on short positions. Not all exchanges offer such conditions.

Long-term investing, expecting growth in the future. There is such a probability. In this case, it is best to use cold wallets.

If you are ready to buy MATIC, diversify your risks. Build a portfolio of coins of different categories: ВТС and ЕТН, coins of DEX, DeFi, GameFi sectors, coins with original ideas.

Best Crypto Exchanges to Buy Polygon (MATIC)

Binance Review

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Your capital is at risk.

The MATIC coin can be bought on DEX and CES for fiat money and cryptocurrency. The biggest number of options involves buying MATIC for freely converted currency, stablecoins and BTC. The advantage of decentralized exchanges is that there is no need for verification. Decentralized exchanges do not require registration – these are the platforms for quick exchange, and therefore, before making a purchase, an investor needs to register an address in a cold or hot wallet.

Centralized exchanges require registration of a Personal Account and verification. Their drawback is that they have access to user passwords. Their advantage is additional functional possibilities.

The largest exchanges in terms of MATIC trading volume are Binance and Coinbase. Their advantages include:

Regulation. Both exchanges are considered the largest in terms of listing and trading volume. They operate in over 100 countries and therefore are forced to find common grounds with the regulators, including the US Securities and Exchange Commission (SEC).

Functionality. In addition to buy/sell options, there is a P2P platform with location and hundreds of payment methods, staking, deposits, earning at NFT auctions, etc.

Fees. They are the lowest here thanks to a large number of users. For some transactions, the fees are not charged at all.

These are the most secure exchanges with protection against possible hacker attacks.

How to buy Polygon (MATIC): a 3-step algorithm

The first step is determining the goals. For long-term investing, you want to use non-custodial wallets – the wallets in which only the user has the password. For example, the coins in the cold wallet are held on a user’s computer without internet access. For short-term speculations and arbitration, exchanges are more suitable. Their benefits include transaction speed, low fees, wide selection of cryptocurrencies available for exchange, and leverage.

Market analysis

General market analysis. MATIC largely repeats the general market trend. If the market is flat, with a volatility of 1-2% per day, it is better to refrain from investing until the beginning of a strong movement. If the market shows a clear trend, consider the possibility of opening a position. Use support and resistance levels to determine the profit and stop targets.

MATIC/USD Chart

For example, in this situation, formation of the “triangle” pattern can be clearly seen on the weekly chart – there is a decline of volatility, fluctuation amplitude and approach to the support level. The position can be opened after the breakout of the figure.

Fundamental factor analysis. Assess the general news background in the market. If there are conditions for the growth of the entire market, you can also buy MATIC. Also news about Polygon can impact the quotes, for example deployment of a large project in the network, attraction of new institutional investors, or implementation of new functionality.

Funding the account

Registration and verification at a cryptocurrency exchange. Some exchanges have mandatory verification during the registration. For example, Binance grants access to the Personal Account only after verification. It includes sending scanned copies of the passport, a ‘live’ photo, synchronization of the account with the mobile app and visual verification.

Buying MATIC

Binance offers several options for buying MATIC: a bank transfer, debit/credit card, P2P trading or third-party financial systems that are the partners of the exchange. The bought coin is credited to the wallet with a separate address for MATIC and is shown in the Personal Account.

How to buy MATIC on Binance

Summary

Polygon is an ecosystem that is developing several scaling-related areas. Even if one specific method turns out to be outdated or unsuccessful, the network will benefit anyway. The growing number of decentralized apps suggests that the network has prospects. On the other hand, Polygon has many competitors, which are not linked to the Ethereum technology and offer their own unique solutions. Therefore, the future of the platform depends primarily on the policy of the developers.

FAQs

What are the fundamental differences between Polygon and Ethereum?

The key difference is in the consensus mechanisms and supported protocols. In terms of scaling, transaction processing speed and fees, Polygon is very much ahead of Ethereum. Nonetheless, the Polygon ecosystem does not seem to be in a hurry to move fully away from Ethereum and positions itself as a network integrated into different blockchains.

What are the prospects of Polygon?

The prospects depend on the interest of investors towards the platform and the actions of the developers. So far, the forecast is positive – the project is developing and is ahead of its competitors by certain criteria. However, the general market trend has a big impact on the quotes.

What impacts MATIC price?

In addition to general market factors, there are individual factors. The interest of investors towards GameFi (Play-to-Earn), DeFi, and NFT remains high. Therefore, the demand for the networks for deployment of startups in these areas will also be high. With the next wave of growth, there is a possibility of quotes returning to historical highs.

What are the risks of investing in MATIC?

They are the same as in the market in general. As long as cryptocurrencies do not have a fair price, volatility will remain high.

Team that worked on the article

Andrey Mastykin

Author, Financial Expert at Traders Union

Andrey Mastykin is an experienced author, editor, and content strategist who has been with Traders Union since 2020. As an editor, he is meticulous about fact-checking and ensuring the accuracy of all information published on the Traders Union platform. Andrey focuses on educating readers about the potential rewards and risks involved in trading financial markets.

He firmly believes that passive investing is a more suitable strategy for most individuals. Andrey's conservative approach and focus on risk management resonate with many readers, making him a trusted source of financial information.

Olga Shendetskaya

Author and editor at Traders Union

Olga Shendetskaya has been a part of the Traders Union team as an author, editor and proofreader since 2017. Since 2020, Shendetskaya has been the assistant chief editor of the website of Traders Union, an international association of traders. She has over 10 years of experience of working with economic and financial texts. In the period of 2017-2020, Olga has worked as a journalist and editor of laftNews news agency, economic and financial news sections. At the moment, Olga is a part of the team of top industry experts involved in creation of educational articles in finance and investment, overseeing their writing and publication on the Traders Union website.

Olga has extensive experience in writing and editing articles about the specifics of working in the Forex market, cryptocurrency market, stock exchanges and also in the segment of financial investment in general. This level of expertise allows Olga to create unique and comprehensive articles, describing complex investment mechanisms in a simple and accessible way for traders of any level.

Olga’s motto: Do well and you’ll be well!