The Know Your Crypto is a new part of the Litepaper newsletter that will highlight a particular cryptocurrency and answer the questions some may have, like what is it? What is its purpose? Why is it important? Shit coin or not a shit coin?
We want to keep the information on point without going overboard with the deets, but not so long that you get bored. So please give us feedback on what you’d like to see or what we could do better! We’d love to hear your input!
That said, today we’re focusing on Polygon ($MATIC.X). MATIC spiked up more than 30% today and over 84% in just the past six days.
Today is brought to you by the letter L and the word Layer-2
Alright. First things first.
The definitions and terminology used in the cryptocurrency space are daunting. Hell, even people who have been active in the space for a decade don’t know what some of the stuff is. Layer-2? What is that? Side-chain? Zero Knowledge Rollups? It’s a bit much. So we’re going to make it as simple to understand as possible.
And if you’re one of those people who has an immediate response of sending a scathing e-mail or comment like, ‘OMG, THAT IS NOT WHAT IT MEANS LOLERSKATES SO OVER SIMPLIFIED U DUN EVN NAO STOOPIDS” well, your life must be full of suck.
Think of Ethereum as the U.S.’s rail (rail like choo choo trains) system before the interstate. If someone wanted to ship something from Boston to Los Angeles, they could use the rail system, but there’s only so much room, and people would have to bid more and more and more to use that limited space making shipping stupidly expensive.
But then, the interstate system was built, with much of the interstate constructed alongside the pre-existing rail system.
Think of Layer-2 and Polygon as the U.S. interstate and Ethereum as the old-school rail*. More can be done on the interstate; there’s more independence, more things can move, more flexible, and better.
Polygon is essentially an upgrade for Ethereum that runs alongside Ethereum.
*IT’S JUST A GAWD-DAMNED ANALOGY. DON’T GET YOUR COSPLAY CONDUCTOR’S OVERALLS ALL IN A BUNCH.
What is Polygon?
To understand what Polygon is and why it exists, you have to understand the suck that is Ethereum’s ($ETH.X) blockchain.
Ethereum’s network is extremely slow sometimes and often horribly expensive. Why people are still focusing on that network boggles my mind when there are other alternatives with much better and cheaper solutions. Polygon ($MATIC.X) helps with Ethereum’s scalability, cost, and speed problems.
Polygon is a Layer-2 network for Ethereum – a way to reduce the costs and time for transactions to complete. To make Ethereum suck less.
Why do people like Polygon?
Money, mostly.
People want Polygon for money. Polygon has been a trending cryptocurrency ever since it was released. It had a lot of staying power—many people hodl Polygon for growth, but many hodl Polygon for passive income via staking.
Did someone say passive income?
Polygon is a Proof-of-Stake (PoS) blockchain versus Proof-of-Work (PoW). It will take a separate article about the differences between PoW and PoS – but let’s look at it from the question of ‘how do I make it work for me?’
To get more Bitcoin, besides buying it on an exchange or receiving it, you need to mine it. And you’d need a massive warehouse with a bajillion graphics cards/ASIC miners and water cooling on par with what a nuclear reactor needs – ok, maybe not that drastic, but you get my point.
To get more Polygon with your Polygon, you stake it (like depositing or sending to a wallet). Staking involves running a ‘node’ or staking it with a staking pool. Some exchanges let you stake MATIC on their platforms with an APY of 8 to 9%.
On some platforms staking Polygon for the income is as simple as putting in the amount you want to stake, hitting the ‘ok’ button, and then boom. That’s it. MATIC monies start to trickle in every month.
Polygon has a handy-dandy rewards calculator, too.
Polygon competitors
There are several other Layer-2 focused networks that compete with Polygon in its space, chiefly Polkadot ($DOT.X), Cosmos ($ATOM.X), and Avalanche ($AVAX.X). And they all have slightly different focuses in the DeFi space and different APYs and reward schedules.
Threats to Polygon and Layer-2 in general
Ethereum’s ‘Merge’ is slated for launch in September. The ‘Merge’ is intended to fix the problems that Layer 2 blockchains currently solve. But it remains to be seen if the ‘Merge’ update will be more efficient.
Additionally, other 3rd generation blockchains are already cheaper, faster, more efficient, and scalable than Ethereum’s, such as Cardano ($ADA.X). Cardano is often referred to as an ‘Ethereum-killer’ and one of the few blockchains that could successfully overtake Ethereum’s
Is it a shitcoin?
Shitcoins (yes, that’s an industry standard title for certain cryptocurrencies) are cryptocurrencies that are basically scams or just pamp and damps. They attract dumb money and are shilled by people who deserve to have the Theon Greyjoy treatment done to them by Ramsay Bolton.
Polygon is not a shitcoin; it has a ton of big money and funding behind it, chiefly Binance and Coinbase. In addition, Shark Tank persona and Dallas Maverick’s owner Mark Cuban is a Polygon supporter. Heck, he even has them on his markcubancompanies website – and it’s the only crypto-related one.
And last week, Disney ($DIS) announced that Polygon is the only blockchain they selected for its Accelerator program.
Mark Cuban isn’t a slouch when putting his name behind something. And neither is Disney. If you believe you should follow the mantra, ‘follow the money’ – Cuban and Disney represent lots of moola.
The key takeaway for Polygon is it has strong backing from well-known individuals and companies, as well as broad support from the retail investor/trader. However, if Ethereum’s ‘Merge’ solves the problems that Polygon originally was developed for – what kind of impact will that have on other Layer-2 cryptocurrencies?
As always, the Litepaper will keep you updated, and hope you enjoyed this introductory article. 🧠