Last updated on July 21st, 2023 at 08:58 pm
What is MATIC?
Polygon (formerly Matic Network) is an Ethereum layer 2 (L2) protocol that launched in 2017. It aims to create blockchain interoperability and bridge different Ethereum-based protocols together as well as provide much faster and affordable transactions by offloading them onto rollups. Ultimately this will allow Ethereum to unlimitedly scale whilst keeping transactions fees consistently low.
What are the Pros & Cons?
Pros
1. Consistently cheap gas fees
The Polygon platform enables extremely cheap gas transaction fees when sending any Ethereum tokens such as ERC-20 tokens. Across 2.44B+ transactions, the platform has maintained an average fee cost of ~$0.018 per transaction, which is significantly much less than most other platforms. For example, if you use Binance, when withdrawing a cryptocurrency such as Tether (USDT), you will see that MATIC offers the cheapest fee (often around 0.13 USDT), compared to the others which are for the majority ~$1 or more.
The only network fee that comes close is Binance’s BNB Smart Chain (BEP20), which charges around ~$0.29.
Therefore when you transfer your token you have the option of sending it using any of the listed compatible networks. As more and more people realise this and want to save on transaction fees when sending Ethereum-based tokens, the MATIC price will grow.
2. Adoption
At the end of September 2022, it was reported that Polygon already had reached 53,000+ active DApps operating on its platform, up over 400% in the year. 1 For comparison, other networks have reported the following numbers recently:
- TRON – 4000+ DApps (July, 2022) 2
- Ethereum L1 – 2800+ DApps (January 2023) 3
- Cardano – 1000+ DApps (June 2022) 4
- Solana – 350+ DApps (January 2023) 5
3. Partnering with BIG names
Over recent years, Polygon has been the blockchain platform of choice for some top-tier brands.
In November 2022, Meta, the tech-giant parent company of Instagram and Facebook announced that they are testing an NFT marketplace on Instagram that uses Polygon for its minting process. This is huge news if true, as would give the Polygon system exposure to the billions of people that use Facebook and Instagram monthly.
Also in November 2022, JPMorgan Chase & Co., the largest bank in the US executed its first cryptocurrency exchange on a public blockchain where Polygon was used alongside the Aave DeFi protocol.
A list of the top 10 Polygon partnerships can be seen below.
Blockchain Council
4. Uses zero-knowledge rollups
Rollups are just one solution to layer 1 (L1) blockchain scaling. They essentially allow offloading of bundled transaction processes onto a sidechain to be processed before then storing the completed transaction data on the main L1 blockchain – hence reducing the total workload of the main chain.
There are currently two types of rollups – optimistic rollups and zero knowledge (zk)-rollups. Essentially, zk-rollups offer a higher level of security compared to optimistic rollups as transactions are not valid by default. Transactions require cryptographic zero-knowledge proof before they are validated, whereas this is not the case with optimistic rollups. Polygon has taken full advantage in utilising and innovating the latest zk-rollup technology.
5. Full stack of scaling and interoperability solutions compatible with all Ethereum-based platforms
The Polygon zero-knowledge scaling solution is called Polygon zkEVM. It consists of six different products which interface with one another (Hermez, Miden, Zero, Nightfall, and Avail) to meet the client’s needs.
- Polygon Hermez: An open-source zk-rollup optimised for secure, low-cost, and usable token transfers on the wings of Ethereum.
- Polygon Avail: An EVM-enabled sidechain.
- Polygon Edge: A modular and extensible framework for building Ethereum-compatible blockchain networks.
- Polygon Nightfall: An optimistic rollup that is hopeful about reducing the cost of transactions including the ERC-20, ERC-721, and ERC-115 tokens. Blocks of transactions will be compiled by the proposers and submitted to the optimistic contracts in this case.
- Polygon Miden: The L2 Ethereum scaling method combines thousands of transactions into a single Ethereum transaction using zero-knowledge technology. As a result, the throughput is greatly increased and the gas fee is decreased.
- Polygon Zero: The fastest L2 zero-knowledge scaling solution for Ethereum. It makes use of Plonky2, a cutting-edge prover system that produces zk proofs more quickly than any other technique.
Two different bridges allow communication between Ethereum-compatible blockchains:
- PoS Bridge: Allows for great flexibility, efficiency, and fast withdrawals. Supports the transfer of ETH and most ERC-20 tokens.
- Plasma Bridge: Known for its robust security but is quite rigid. Supports the transfer of Polygon’s native token MATIC and certain Ethereum tokens (ETH, ERC-20, and ERC-721)
The Polygon zkEVM mainnet beta launched on March 27, 2023 – you can view the block explorer here.
6. MATIC technicals look very bullish
Scroll down here for my technical analysis of MATIC.
Cons
1. Ethereum interdependence
Polygon’s success relies on whether Ethereum has a use case for its scaling solution or not. It also relies on the success of Ethereum itself, which has many competitors of its own. With further developments to be implemented on Ethereum’s L1 platform, or other potential solutions, rollups may not be needed in the future for scalability. Ethereum 2.0 looks to implement sharding later in 2023, which is a scalability solution on its base L1.
2. High competition
Polygon has a number of zk-rollup competitors that are looking to solve the same problem of Ethereum scalability. This includes the likes of:
Ethereum, although still has the adoption and massive first-move advantage, is also in competition with all other L1 blockchains, some big ones such as:
3. Growing pains
In December 2021, 801,601 MATIC tokens work around $2 million at the time were stolen as a result of a security vulnerability in the system. Up to 9.2 billion tokens were at risk due to vulnerability, though Polygon prompt fix ensured further tokens could not be stolen. 6
Security vulnerabilities are not uncommon, especially in new blockchains such as Ethereum which has had its fair share of hacks itself. What is important is that the developers properly address these issues and ensure there is zero possibility they can occur again.
4. SEC classification of MATIC as an ‘unregistered security‘
On June 5, 2023, as a result of a lawsuit against Binance, the SEC classified MATIC and a number of other cryptocurrencies as unregistered securities. This news negatively affected the price of MATIC at the time as well as resulted in the token being listed from the fintech trading app Robinhood. Whether this further affects the token price or exchange listings is yet to be seen.
In contrast, the SEC has continued to dragged on the Ripple case since 2020. Now having put MATIC in the same category along with 46 other cryptocurrencies, it seems to me to be pure manipulation by the SEC to scoop up tokens at cheap prices. You gotta ask yourself why does the SEC flag these at critical times, like just before a huge bull run? Is it just a coincidence?
What are the charts showing us?
MATIC/USD
Looking at a zoomed-out logarithmic monthly MATIC/USD chart, you can see an ascending broadening wedge structure that has been consolidating sideways since June 2021. This pattern should have three touches on both sides of the trendline, the next top will be our third touch, and confluently the fifth wave of an Elliott Wave count.
Assuming the pattern holds and continues (which looks like it will), the target will take us to around $260 per MATIC, which is a 60,000% move!
Now, this would take MATIC into a couple of trillion dollars marketcap so it sounds unlikely. However, it would take around two years to play out judging by the previous two consolidations in the wedge. By mid-2025 I expect the total crypto marketcap to be well into the trillions, so with all top partnerships platform Polygon has aquired, and the potential number of onboarding users I believe it could play out.
MATIC/BTC
On the monthly MATIC/BTC chart, you can see that price has been ranging in a large channel where we are currently sitting on support. Continuing in this channel, I expect MATIC to outperform Bitcoin by around 150% over the coming months as it heads back up to the 5000 satoshi resistance area.
MATIC/ETH
MATIC charted against its base-layer cryptocurrency Ethereum looks bullish also. The monthly chart shows a broadening wedge formation with the price sitting smack bang on the bottom support. I expect MATIC to outperform ETH by upward of 100% over the coming months.
MATIC/ADA
I expect MATIC to outperform Cardano’s ADA by around 50% given that has formed a sharp falling wedge. The height of the wedge is 50% as can be seen below.
MATIC/XRP
XRP is another token that has performed well recently and is expected to win its legal case against the SEC. If we look at the MATIC/XRP chart, it has been forming another broadening wedge, dating back all the way back to May 2021. Respecting this structure, I expect MATIC to outperform XRP in the coming months by over 200%.
MATIC Tokenomics
| Price at time of writing (24/06/23) | $0.67 |
| Current Price: | $0.69 |
| Price Change (24h): | 2.56% |
| Circulating Supply: | 9,996,901,793 MATIC |
What’s on the horizon?
Polygon has some very exciting key dates on its roadmap for the short foreseeable future. The company has been working diligently over the recent years in developing Polygon 2.0. This massive upgrade will combine their entire stack of scalability and interoperability solutions into a single chain. Practically allowing Ethereum to scale unlimitedly with unified liquidity, which is what Ethereum intended to be from its inception.
In its own words, Polygon 2.0 is as “a set of proposed upgrades that radically reimagine almost every aspect of Polygon, from protocol architecture to tokenomics to governance.”
“Polygon 2.0 will be the Value Layer that looks like the rest of the Internet.”
You can read the Polygon 2.0 one-pager here.
In 2021, Ethereum co-founder Vitalik Buterin appeared on the Lex Fridman podcast where he talked about the importance of Polygon to Ethereum. Basically since this Podcast, Polygon has worked on Vitalik’s concerns, developing the Polygon 2.0 system he is talking about, and are looking to launch the completed product this year. Back then he said “I think it’s a very reasonable strategy and I’m definately really happy they’re part of the ecosystem.”
Where can I trade MATIC?
You can buy and sell MATIC on the following popular exchanges:
Final Thoughts
Polygon’s MATIC has already done a 15x in the 2021 bull run, outperforming many cryptocurencies. I believe it will continue to outperform as the charts suggest and more and more companies start to utilise Polygon for its fast and cheap transactions and interoperability – most people won’t even know they are using it when they purchase an NFT on a marketplace or use a DApp.
The MATIC token is simply too undervalued seeing as the platform allows you to send billions of dollars fee instantly with only a $0.13 fee! In comparison, BNB does the same thing ($0.29 per tx), and has a 6x larger marketcap with a current price of ~$236 per BNB compared to $0.65 per MATIC.
MATIC to me looks like a investment golden opportunity that too good to pass up.
References
- Quarmby, B. (2022). Decentralized apps on Polygon hit 37,000, rocketing 400% this year. Retrieved 27 June, 2023, from: https://cointelegraph.com/news/decentralized-apps-on-polygon-hit-37-000-rocketing-400-this-year
- TRON DAO (2022). Decentralization Research Paper. Retrieved 27 June, 2023, from: https://trondao.org/blog/2022/07/27/decentralization-research-paper/#:~:text=Dapp.com%20reports%20show%204050,%2C%20Game%2C%20Social%2C%20etc.
- Oodles Blockchain. (2023). Solana vs Ethereum Blockchain | Which is Better for dApps. Retrieved 27 June, 2023, from: https://blockchain.oodles.io/blog/solana-ethereum-blockchain-dapps/#:~:text=Over%202%2C800%20DApps%20are%20currently,payment%20systems%2C%20and%20NFT%20platforms
- Sopov, V. (2022). Cardano (ADA) Ecosystem Onboards Over 1,000 dApps; Which Category Is Largest One? Retrieved 27 June, 2023, from: https://u.today/cardano-ada-ecosystem-onboards-over-1000-dapps-which-category-is-largest-one#:~:text=of%20its%20dApps.-,Cardano%20(ADA)%20hosts%201%2C017%20dApps%2C%20NFT%20products%20in%20focus,the%20ecosystem%20continues%20to%20grow
- Oodles Blockchain. (2023). Solana vs Ethereum Blockchain | Which is Better for dApps. Retrieved 27 June, 2023, from: https://blockchain.oodles.io/blog/solana-ethereum-blockchain-dapps/#:~:text=Over%202%2C800%20DApps%20are%20currently,payment%20systems%2C%20and%20NFT%20platforms
- Hamacher, A. (2021). Polygon Quietly Patched Vulnerability That Put $24 Billion in MATIC at Risk. Retrieved 27 June, 2023, from: https://decrypt.co/89514/polygon-quietly-patched-vulnerability-that-put-24-billion-in-matic-at-risk
