What is Polygon? How Does it Work? – Forbes Advisor INDIA

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 cryptocurrency that ranks 76th on CoinMarketCap’s list of cryptocurrencies by market capitalization. 

MATIC supports 53,000 decentralized applications (dApps), applications that work without intermediaries.

Polygon vs. Ethereum

To understand Polygon, you must first 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 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 15 transactions per second (TPS)—while Polygon achieves speeds of up to 72,000 TPS. This makes everything built on the blockchain much cheaper and quicker, like an HOV lane on the highway. Polygon’s lower fees 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 governs and secures the Polygon network and pays the network’s transaction fees.

Unlike some other cryptocurrencies, which have an unlimited supply, the supply for MATIC is limited. As of Nov. 26, 2024, about $2.33 billion was in circulation, and there will never be more than 10 billion coins.

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 CoinDCX or Mudrex, which is similar to how you can buy many other popular cryptocurrencies.

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

After creating an account, you can buy MATIC with a bank transfer, wire, debit, or credit card. You can also purchase MATIC with INR or other fiat currencies on cryptocurrency exchanges like CoinDCX, Zebpay, and Mudrex, to name a few. Choose an exchange that is FIU-registered in India. 

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 can use a payment processor, called a fiat on-ramp, to purchase MATIC directly. Or, 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 to deposit and withdraw 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. This accelerator focuses on new types of tech, including augmented reality, non-fungible tokens (NFTs), and artificial intelligence, as part of its future storytelling efforts.

Disney joined 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 the price of the MATIC token cannot be predicted exactly, 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. Other Layer 2 scaling solutions, such as Solana (SOL) and Cosmos (ATOM), are also available.

Internal risks, such as issues with the management team or the project could also impact 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, things can go to zero quickly.”