What Is Polygon? How Does It Work? (2024)

Polygon (MATIC) bills itself as a solution that improves on some of the clunkier aspects of Ethereum (ETH). It’s even dubbed itself as “Ethereum’s internet of blockchains.”

Founded in 2017, Polygon—formerly known as Matic Network—is a relatively popular crypto that regularly ranks among the top 15 cryptocurrencies by market capitalization.

MATIC supports more than 7,000 decentralized applications (dApps), applications that work without intermediaries.

Polygon vs. Ethereum

To understand Polygon, you first need to know a little about Ethereum and a little blockchain developer lingo.

First, blockchain developers face a dilemma—the crypto community calls it the “blockchain trilemma”—when it comes to balancing trade-offs between decentralization, security and scalability.

It’s no secret that Ethereum has its issues. Specifically, the No. 2 crypto has a scaling problem, and this is seen when it comes to the speed of completing transactions.

Ethereum has primarily focused on decentralization and security at the expense of scalability. As a result, transactions can be expensive and slow. That’s where Polygon enters, with its focus on providing faster transaction speeds and lower costs than Ethereum.

Layer 1 blockchains like Ethereum provide developers with a platform to build and run dApps, smart contracts, non-fungible tokens (NFTs), and more. Polygon is a Layer 2 blockchain that aims to help Ethereum with its scalability.

By acting as a Layer 2 protocol, Polygon doesn’t aim to duplicate Ethereum’s functionality. Instead, it helps improve transaction speeds and lower costs for developers. Think of it as an express train that runs parallel to a local train, moving faster with fewer station stops.

Currently, Ethereum can process 14 transactions per second (TPS)—while Polygon achieves speeds of up to 7,000 TPS. This makes everything built on the blockchain much cheaper and quicker, like an HOV lane on the highway.

In the near future, experts anticipate that Ethereum will accelerate its TPS after its long-anticipated network upgrade in September 2022. But even after the Merge, Polygon’s lower fees should still attract developers and help the crypto maintain its narrative.

What Is MATIC?

MATIC is Polygon’s native cryptocurrency. It is an ERC-20 token, a token created on the Ethereum blockchain.

This token is used to govern and secure the Polygon network and pay the network’s transaction fees.

Unlike some other cryptocurrencies with unlimited supply, the supply for MATIC is limited, with about $7.4 billion in circulation. There will never be more than 10 billion coins in circulation.

Proof-of-Stake Model

Polygon’s proof-of-stake consensus mechanism rewards token holders for keeping the network running and verifying transactions.

Proof of stake relies on people staking their tokens, locking them up to be eligible for staking rewards. But there’s also risk involved, and you can lose some of your stake or get fully liquidated, experts say.

You can start staking with just 1 MATIC to earn interest. But most people will delegate their staking to a validator rather than trying to amass enough MATIC and run the validator themselves. Validators may take a small cut, typically between 1% and 10% of your staking rewards as a commission.

How to Buy Polygon (MATIC)

You can buy MATIC on cryptocurrency exchanges, such as Coinbase or Gemini, similar to how you can buy many other popular cryptocurrencies.

If you don’t have an account yet, you’ll need to sign up and verify your identity to get started.

After creating an account, you may then be able to buy MATIC with a bank transfer, wire, debit card or credit card. You can also purchase MATIC with U.S. dollars or other fiat currencies on cryptocurrency exchanges like Coinbase, Kraken and Crypto.com, to name a few.

Some cryptocurrency exchanges also offer staking services, allowing you to earn interest on your MATIC while keeping your tokens at the exchange.

You can also buy MATIC on decentralized exchanges, such as Uniswap.

Depending on the crypto wallet, you may be able to use a payment processor, called a fiat on-ramp, to purchase MATIC directly. Or, you may have to purchase a different token and then pay a fee to swap it with MATIC.

If you want to get MATIC on the Polygon Mainnet, you can use the official Polygon Bridge for depositing and withdrawing MATIC once you connect an eligible wallet. Some wallets, such as the Crypto.com DeFi Wallet app, also allow you to receive MATIC directly from the Polygon network.

How High Will Polygon Crypto Go?

Polygon made headlines when it announced it would be part of the 2022 Disney Accelerator, which focuses on new types of tech, including augmented reality, non-fungible tokens (NFTs) and artificial intelligence as part of its future storytelling efforts.

Disney is joining other big-name companies partnered with the crypto platform, including Meta. Meta plans to test digital collectibles and showcase NFTs on its Instagram platform.

While there’s no exact way to predict the price of the MATIC token, some people are optimistic about the project’s future.

Investing in Polygon

Crypto markets can be volatile, and prices may quickly change even if everything is going well—which could put short-term investors in a tricky position.

If you believe Polygon could be a good long-term holding, you’ll also want to consider the competition and risks. For example, there are other Layer 2 scaling solutions, such as Solana (SOL) and Cosmos (ATOM).

Internal risks could also impact the project, such as issues with the management team or the project. In December 2021, Polygon revealed that hackers stole more than 800,000 MATIC and that it paid $3.46 billion in bug bounties to white hat hackers who found and reported the security vulnerabilities.

“There was a breach, and they handled it,” says Ron Levy, CEO of The Crypto Company. “If people lose faith in the blockchain itself, in Polygon and what it built, then things can go to zero real quick.”