The Fall Of Polygon (Matic)

Blockchain upgrade news from the Polygon (MATIC) team seems to be landing with a thud this morning as the MATIC coin dropped more than 17% to a low of $0.4224 in intraday trading before regaining some ground, according to CoinMarketCap. The downward price pressure for the Ethereum-compatible blockchain coin across cryptocurrency exchanges is surprising given the positive nature of the news.

What is Polygon (Matic)?

Polygon has its own cryptocurrency, called MATIC, which is used to pay fees on the Polygon network, for staking, and for governance (which means that MATIC holders get to vote on changes to Polygon). You can also buy and sell MATIC via Coinbase and other exchanges.

The name MATIC comes from an earlier stage in Polygon’s development. After launching as Matic Network in October 2017, developers rebranded as Polygon early in 2021. 

How does Polygon work?

You can picture Polygon as being like an express train on a subway — it travels along the same route as the regular train, but it makes fewer stops and thus moves much faster. (In this analogy the main Ethereum blockchain is the local train.) Polygon uses a variety of technologies to create this speedy parallel blockchain and link it to the main Ethereum blockchain. 

To create new MATIC and secure the network, Polygon uses a proof-of-stake consensus mechanism — which means that one way you earn money on MATIC you hold is via staking.

The Polygon network allows you to do many of the same things the main Ethereum network allows, but with fees that are often a fraction of a cent. You can try decentralized exchanges like QuikSwap or SushiSwap, yield-generating lending and savings protocols like Aave, NFT markets like OpenSea, or even “no-loss prize games” like Pooltogether. 

To try the Polygon network, you need to send some crypto to a compatible crypto wallet like Coinbase Wallet. You can then “bridge” some of your crypto — stablecoins are a popular choice for this — to the Polygon network. You’ll also need to bridge some MATIC to make transactions, but even a dollar’s worth is plenty because fees are so low.

Polygon’s New Upgrade

Polygon’s announcement seems like it would be a bright spot for the crypto space, which has been rife with negative media reports of scams, hacks, and layoffs in recent weeks. The developers of the Polygon project said they are rolling out a system-wide enhancement named Avail, short for “available,” that will enable larger smart-contract blockchains — such as Ethereum — to be able to quickly scale and operate across other networks.

Polygon’s blockchain uses a modified proof-of-stake (PoS) process to approve transactions, which is widely thought to be more energy-efficient than the proof-of-work (PoW) model currently used by both Ethereum and Bitcoin.

The PoW model requires large amounts of electricity to run the computing power and cooling requirements necessary to settle transactional outputs. The Polygon website claims that its blockchain can process up to 65,000 ETH-based transactions per second with settlement times less than two seconds for less than the price of a penny gumball.

Should You Invest In Polygon?

For background, the MATIC coin reached its peak price of $2.92 on Nov. 27, 2021, and today’s lowest intraday price marks an 85% decline from that top. Each investor should conduct their own research and determine their own investment risk level. This is not financial advice, merely an opinion based on observation. However, this latest positive news and discounted pricing certainly make Polygon worth a look in a currently uncertain and volatile crypto market.