What is Polygon & Why is it Outperforming ($MATIC)
What is Polygon & Why is it Outperforming ($MATIC)
Polygon ($MATIC), formerly called 'Matic Network', is a layer-2 blockchain solution — $MATIC tokens have shown impressive strength in recent months, rising to a new ATH while the broader market crypto market has declined. So what’s layer 2? And why is it valuable?
Layer-2 technology arose to solve a major problem facing Ethereum ($ETH): Scalability.
As the popularity of the Ethereum blockchain rises, so too does the cost to transfer ETH and interact with smart contracts on the network. LF data shows just how large the problem of high transaction fees has become. Consumer mentions of ETH being “expensive” have soared to new highs alongside the underlying price, up +1200% YoY on a 90-day moving average.
Layer 2 solutions address these scalability problems by allowing for the creation of additional side chains — These side chains allow for fast and low-cost transactions that will still benefit from the security of the main Ethereum chain.
Polygon provides a modular software development kit (SDK) to allow for the development of new side chains, effectively transforming Ethereum into a multi-chain system like Polkadot ($DOT) or Cosmos ($ATOM).
Polygon directly benefits from an increased number of users on ETH, and this bears out in underlying data. Mentions of Polygon and its governance token $MATIC have demonstrated continued growth throughout 2021: +3318% YTD on a 30-day moving average.
As with many crypto assets, MATIC has received special attention for its NFT-specific applications in recent months. In fact, Polygon’s NFT-specific Mentions are outperforming the generic Mention trend, up +70% in the past quarter and near an all-time high level (30d MA). Polygon recently entered into a strategic agreement with DraftKings ($DKNG) to power its new NFT marketplace, which has helped drive buzz for the project.
Many have gone as far as to cite its technology as a key component of ‘Web 3.0’ and the internet of blockchains…We’re not totally convinced yet, but it's hard not to be bullish on the leading layer-2 solution for Ethereum.