Summary/Overview:

Polygon ($MATIC.X) is a platform designed to support and help Ethereum scale.

Polygon’s core component is their “Polygon SDK” which allows their developers to build Layer-2 infrastructures on their Matic POS (proof-of-stake). Polygon SDK enables developers to build Ethereum-compatible blockchain networks.

Essentially Polygon is transforming Ethereum ($ETH.X) into a multi-chain system. Multi-chain systems are found to be useful for enterprises (especially banks) as it is very scalable and has high transaction speeds.

Currently, the MATIC cryptocurrency trades at a 24-hour volume of $590M and the MATIC coin price is $1 USD

History:

Polygon’s cryptocurrency launched in 2017, at this time they went under the name “MATIC Network”, however, they rebranded to Polygon in February of 2021. Polygon originally launched through an IEO (Initial Exchange Offering), supplying 10B coins that were split between the Founders/Project (42$), Investors (23%), and rewards (35%) In 2017, Polygon was created to address the scalability and usability issues in cryptocurrency. However, Polygon has been able to lower the latency and lower the transaction costs of their cryptocurrency, which is appealing to many.

Since then, Polygon has been dubbed the “Swiss army knife” of scaling solutions, and Polygon aims to continue to scale solutions and play a role in supplying infrastructure for cryptocurrencies.

Token Economics:

As stated previously, Polygon went “public” via an IEO. The original coins were split among founders, investors, and some coins were reserved for future awards/airdrops. The fact that 42% of the coins were distributed to the owners and the project is a little bit worrying. This is because these people have the chance to sell large amounts of these coins whenever MATIC.X starts to run. This is worrying as it can potentially limit the upside of this investment. As a result of this, I have decided to add a “management team” section to this report, because if the management team looks sketchy, then this possibility of limited growth will look more like a probability.

MATIC is native to Polygon’s blockchain and is used to pay for transaction fees in the Polygon network. MATIC is a unit of payment that settles transactions between Polygon users. Furthermore, Polygon uses Proof-of-Stake, which provides users with benefits as they provide function to the Polygon network.

The main benefit of using MATIC is the cheap fees that they offer. This is beneficial to many users as there traditionally has been very high fees in cryptocurrencies, even the mighty Ethereum has problems with their high fees.

Technology:

Plasma/Smart Contracts on Ethereum: Matic has smart contracts on Ethereum that manage their staking functions/rewards for their Proof-of-Stake layer. Furthermore, they have other smart contracts and Plasma contracts on Ethereum to help perform other tasks.
Polygon SDK: Polygon’s Software Development Kit (SDK) serve as a framework for launching a new chain based on Ethereum’s technology. Developers will have the option to include additional features (ie Plasma contracts, Validium etc.). Polygon’s SDK is currently under development.

Polygon Crypto News:

Polygon (MATIC) has recently partnered with DeFi projects such as Aave and Harvest Finance to utilize the high performance and low fees that are offered by MATIC.

This is big news as the previous barriers to entry are now being destroyed. This is due to the high performance and low fess that are offered by Polygon (MATIC).

Previously, many DeFi investors had to have larger accounts in order to be successful due to the high fees. However, with this partnership, DeFi will be accessible to many more “retail” investors who can enjoy all of the perks that DeFi has to offer.

Risks:

A big part of MATIC’s overall appeal to people is their low fees. Currently, they are beating their competition in the space, however, if Ethereum is able to lower their fees, the need for MATIC decreases greatly. This is because there is a big problem with Ethereum’s fees right now but if and when they fix this problem, people who previously used MATIC will likely switch over to Ethereum.

As a result, I am bullish in the short term, and somewhat skeptical in the long term.

Terminology:

Proof of Stake: Allows users who stake a certain amount of a cryptocurrency to become a “validator” for that currency. The more crypto these “validators” stake the more powerful their mining becomes. Proof-of-Stake is more energy efficient, has lower barriers to entry, more decentralized, and is stronger than Proof-of-Work.
Validators: Validators are responsible for ordering transactions and creating new blocks for these transactions. Validators are chosen at random to validate blocks and confirm blocks that other validators create. The better the validator, the better their rewards, some inactive validators can even lose a portion of their stake.
Layer-2: The second layer of the data linking layer. Layer-2 provides functional means for data transfers between network nodes and has the capability to correct errors that may occur in Layer-1.
Plasma: Uses a combination of smart contracts and cryptographic verification to provide a framework for building scalable applications on Ethereum’s blockchain. Plasma can help to enable fast and cheaper transactions by offloading transactions into a “side chain”.