What is a Polygon? Is this something from geometry? No, it`s one of the most famous Ethereum-based platforms. What is it, how does it work, and where can it be used? And this is only a small portion of questions from Ethereum-related forums.
From now on, you don`t need to research this info on various websites, spending hours of your time. Defiway did the hard part of the job for you and has collected everything you need to know about the Polygon network and its native cryptocurrency MATIC. Save this guide to your bookmarks, so it will always be near you!
What is Polygon (MATIC)?
Polygon is a layer 2 scaling solution for the Ethereum blockchain. As we said before, in our ultimate dApp guide, second-level apps and solutions aim to increase the capacity of already existing biggest networks. So, technically speaking, Polygon is a separate layer of infrastructure that operates in parallel with the existing Ethereum chain.
Polygon is designed to offer and maintain faster transactions for lower fees compared to the Ethereum main net. At the same time, Polygon supports Ethereum-based smart contracts and most Ethereum-based dApps. But how can it achieve more increased scalability than the original Ethereum chain?
The fact is, Polygon uses a hybrid approach of both on-chain and off-chain processing. All transactions are initially processed off-chain (outside the main Ethereum chain) on a Polygonв`s sidechain, which is connected to the Ethereum main net. It means that all transactions are initially processed on Polygon`s chain, and once it`s done, it shares its data with the Ethereum network.
The MATIC token is a native Ethereum-based cryptocurrency of this network. It is used as a medium of exchange for transactions and as a form of payment for network fees. Also, Polygon uses MATIC as a reward for its network participants.
Notable projects that have been built on Polygon include Aave, Curve Finance, and SushiSwap. Additionally, the Polygon network has received significant backing from investors, including Mark Cuban, Coinbase Ventures, and Binance.
How Does Polygon (MATIC) Work?
It`s one of the main questions on various Ethereum-related forums. It`s pretty complex, but we will explain it as simply as possible. As we said previously it`s a layer 2 scaling solution for Ethereum that uses its unique off-chain and on-chain approaches to achieve fast and reliable transactions on the Ethereum main net. Here are the crucial tech aspects of Polygon that you should know:
- Polygon uses multiple layers and 2 scaling solutions. It includes Plasma for faster transaction confirmations and Optimistic Roll Ups for lower transaction fees.
- Polygon uses Plasma side chains. They can maintain high-speed transactions by processing them off-chain. At the same time, they keep high-security levels through periodic checkpoints on the Ethereum chain.
- It`s interoperable. Polygon supports Ethereum-based smart contracts, dApps, and other custom-built sidechains. It even supports interoperability with other blockchains, such as Binance Smart Chain.
- Users can create their EVM-compatible sidechains. Each custom sidechain can run the same smart contract as Ethereum. Users can transfer tokens and assets between Polygon and Ethereum seamlessly.
- Polygon uses the Proof of Stake consensus mechanism. It’s a faster and less energy-consuming solution compared to the Proof of Work used by most Ethereum-based solutions. Polygon`s validators stake their MATIC tokens to participate in block validation.
- It has many ecosystem and developer tools. In less than 6 years, Polygon developers have built a thriving ecosystem with great projects and developer tools, such as Polygon SDK (allows building and deploying custom sidechains) or Polygon.js (JavaScript library), Polygon Studio, etc.
To prove Polygon`s admiration, we provide you with the most famous dApps that use Polygon daily: Aave (DeFi platform), Defiway (Decentralized payment and wallet service), OpenSea (NFT marketplace), and many more. You can use Polygon (MATIC) on most services that support Ethereum blockchain.
What is the MATIC Token?
It`s a native Polygon cryptocurrency with multiple functions in the network`s ecosystem. MATIC is mostly used as currency for transaction fees on the Polygon`s network. Each user should pay a certain amount of MATIC to process transactions, which depends on the size and complexity of the transaction. Speaking generally, the more data-heavy the transaction, the more fees you will pay. But even the highest Polygon fees are mostly smaller than Ethereum in similar situations. In most cases, users will pay a few cents worth of MATIC tokens to make a transaction.
You can stake those tokens to participate in block validation and earn rewards for their contributions. You can even delegate your MATIC to trusted validators and earn a portion of their rewards.
MATIC holders can participate in the governance of the Polygon network. Each holder can propose and vote for various network updates, changing its parameters and network resource allocation.
Benefits and Drawbacks of Polygon (MATIC)
Everything in our world has its strengths and weaknesses. And Polygon blockchain is no exception. To save you time, we`ve gathered them in one place. As we said before, Polygon (MATIC) is an energy-efficient system that allows interoperability. It`s an eco-friendlier choice than most Ethereum-based chains.
Polygon has an increased scalability, which can provide faster and cheaper transactions compared to Ethereum. It`s become possible due to a combination of off-chain and on-chain processing. And its unique structure leads to constantly rising popularity, so you`ll see a large and developed ecosystem with dozens of impressive tools.
What about Polygon`s disadvantages? Some critics have raised concerns about the partial centralization of the Polygon network, including validation control. A small number of validator nodes holds a major portion of the network`s staking power. And it may lead to the abuse of power in the future.
But Polygon`s developers have announced that they want to decentralize its validator nodes further. So it will solve this problem in the next 2-3 years. And even when we say that Polygon is a highly-secure solution, it’s still not perfect. All layer 2 scaling solutions can be vulnerable to hacking attacks such as double-spending. Considering Polygon is a layer 2 solution, it has the same vulnerabilities as other similar solutions.
Moreover, Polygon must compete with other Layer 2 solutions to increase its customer base. The most famous competitors are Optimism, Arbitrum, and zkSync. Everyone who wants to run their dApp on the Polygon should understand that it fully depends on Ethereum. Any Ethereum issues could impact Polygon's performance.
Despite all possible challenges, many users are still attracted to Polygon. And this decision continuously benefits all involved parties. Developers see that people use this solution and apps based on it, so they update existing tools and create new ones. Users see a constantly growing ecosystem, want to become a part of it, and so on.
Wrapping up
Polygon (MATIC) is a popular Ethereum-based layer 2 scaling solution. Its improved scalability and interoperability maintain faster transactions with lower fees compared to the Ethereum main net.
The MATIC is a native Polygon token that is mostly used for transaction fees, governance, and staking. But users should beware of the current partial centralization of the Polygon network, which can create minor validation control issues. Developers promise that they decentralize its validator nodes further which eliminates the possibility of the abuse of power.
One of the greatest things about Polygon is its high compatibility. You can use Polygon solutions in many services and create your Poligon-based dApps. You can also use MATIC in most Ethereum-compatible wallets, including Defiway. Store, stack, and exchange MATIC to any common cryptocurrency or use it as a payment option in our Defiway crypto-wallet with a built-in exchange.
