In early 2021, an Ethereum infrastructure project called Matic rebranded itself as Polygon. Polygon, which is designed for developers of Ethereum projects, works on the infrastructure of the Ethereum network or blockchain and has products that make things happen faster and with more security.
Before the relaunch as Polygon, the existing Matic project had more than 80 applications that did some 7 million transactions for around 200,000 users. So what is it about this cryptocurrency project and its associated token, Matic, that makes it stand out from other types of cryptocurrency? Read on for everything you need to know about Polygon (MATIC).
History of Polygon (MATIC)
Polygon and Matic before it have many goals, but one of the main ones is to make Ethereum and the Ethereum blockchain easier to use for developers.
Ethereum is known to many investors for its token, Ether — but to developers it’s so much more than a currency. While the token is important for the functioning of the Ethereum blockchain, Ethereum was built to support the creation of applications and host smart contracts — agreements that can be validated and executed without the approval or action of a third party like a judge or lawyer.
The issue, Matic’s developers found, was that there were “scalability and user experience issues,” that had held back “mass adoption” of smart contracts and Dapps. The whole network would slow down. The solution: Matic would use “sidechains” to process apps and contracts on Ethereum without slowing everything down.
Just like Ethereum transactions require “gas” paid in Ether, the Matic token would be the medium through which transaction fees would be paid on the Matic Network.
The project was started in 2017, and by 2019 it attracted attention and funding from industry stalwarts such as Coinbase, bringing a new round of attention and credibility in the wide cryptocurrency world.
How Does the Polygon Network Work?
Polygon describes its network as a “Swiss army knife for Ethereum scaling and infrastructure development.”
Many of the new projects that define Polygon are still in development, but the basic structure is a series of blockchains that are compatible with Ethereum and work with it.
There are four layers in the Polygon Network:
• The Ethereum layer, which is a set of smart contracts that run on Ethereum
• The security layer which runs parallel to Ethereum
• The Polygon Networks layer, a set of sovereign blockchain networks,which is like its own blockchain protocol
• The execution layer, which handles execution for the Polygon Networks blockchains
How Does the MATIC Token Work?
In the original Matic Network, which Polygon has said will continue to operate, the Matic Token plays an important role. It functions as a “the unit of payment and settlement between participants who interact within the ecosystem on the Matic Network.” This means that the Matic Token is like a currency for applications or users on the Polygon Network. Also, like all Ethereum blockchains, the Polygon Network has transaction fees, which in this case can be paid in the Matic Token.
Matic also uses “proof-of-stake” technology as an alternative to “proof of work” (the technology underlying Bitcoin) to validate transactions and secure the network. This requires users to “stake” or put up some of their tokens so that the network overall can function.
New Matic tokens have a regular monthly release schedule that runs through 2022. About 60 percent of all Matic tokens that will be released have been released already. This differs from other cryptocurrencies whose creation is prompted by essentially solving large math problems (this is how Bitcoin mining works).
Is MATIC Crypto a Good Investment?
As with any investment, it’s impossible to say with certainty whether Matic is or will continue to be a good investment. Like many cryptocurrencies, the value of Matic tokens has been incredibly volatile, following the huge jumps in crypto value across the board earlier this year and then the subsequent choppiness, with large spikes and drops.
Recommended: 6 Things to Know Before Investing in Crypto
MATIC Price
The price of Matic has gone up tremendously this year, rising from just under 2 cents to around $2.28 in late May 2021, before dropping down to $1.06 as of late September 2021. As of that time, Matic is the 21st most valuable cryptocurrency listed on CoinMarketCap.
How to Buy MATIC
Step 1. Find an Exchange That Supports MATIC
Create an account at an exchange that lists Matic tokens. SoFi is one exchange that lets you trade Matic.
Step 2. Fund Your Account
Load up your account with the currency you’re buying Matic in. This process varies by exchange. For example, Binance accepts funds using bank transfers, credit, or debit cards; Coinbase uses bank transfers, PayPal, or debit cards. These transfers can sometimes take a few days. How crypto exchanges work is not that different from brokerages you use to buy stocks and bonds.
Step 3. Place a Transaction
Select the amount of Matic you want to buy and then hit the button on the exchange you’re using.
Step 4. Verify Your MATIC Coins
The Matic should then show up in the hardware or software you’re using for crypto storage, otherwise known as a crypto wallet. Many exchanges offer wallets as well.
The Takeaway
Polygon, formerly known as Matic, works on the Ethereum network to process applications faster and with better security. Its token, known as Matic, is the unit of payment within that ecosystem.
One of the basics of investing in crypto is to always know what you’re investing in. While some tokens or coins are supposed to be like money or some kind of savings instrument, others — like Matic — have value as denominated in dollars or other crypto but are primarily used in the context of another blockchain or network. The value of a coin is determined by its use in that network and the speculation that investors have in its value.
The SoFi Invest® online brokerage platform offers a wide range of cryptocurrencies — including Polygon, Bitcoin, Litecoin, Ethereum, Cardano, Dogecoin, and more — with 24-hour trading and secure storage.
Photo credit: iStock/bgblue
SoFi Invest®
The information provided is not meant to provide investment or financial advice. Also, past performance is no guarantee of future results.
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