What Is Polygon Crypto?

What is Polygon Crypto?

Polygon is one of the most popular layer 2 cryptocurrencies in the world and aims to make Ethereum cheaper and easier to use. In this guide I’ll go over:

• The main benefits and drawbacks of Polygon.
• Whether Polygon is a good potential investment. 
• Whether Polygon will be the “internet of blockchains”

So let’s jump right in!

What does Polygon crypto do?

Polygon was created in 2017 by India’s first crypto billionaires: Jaynti Kanani, Sandeep Nailwal, and Anurag Arjun. 

Polygon was created to solve some of the issues of Ethereum, mainly that using Ethereum is both slow and expensive. 

Ethereum is one of the most popular and most secure blockchains in the world. But, because of this high security and popularity, Ethereum has become slower and more expensive to use in recent years.

This is because there are a lot more people trying to make transactions on Ethereum than there are computers (validators) on the network to record those transactions. 

👉 You can think of Ethereum like a highway. The highway works well, but if there are too many cars on it at the same time it gets congested and everything moves slower.

In this example, Polygon is like a set of side streets alongside the highway. People can get off the highway, take some of these side streets to avoid the traffic, and then jump back on the highway later.

This makes Polygon what’s known as a “layer 2” blockchain.

The “special sauce” to Polygon is that it batches transactions together and then writes those transactions to Ethereum in one big bundle.

Let’s take a look at a real-world example:

Imagine you want to send $10 to your friend Lily. If you did that transaction on a Layer 1 blockchain like Ethereum or Bitcoin, you might get charged $80 as a service fee because the network is super busy at the moment.

To avoid that steep fee, you can instead choose to make your transaction on a Layer 2 blockchain like Polygon.

Polygon will take your transaction and batch it with other people’s transactions. It might look something like this:

Sam sends $30 to Jason.

You send $10 to Lily.

Achint sends $32 to Max.

Esteban sends $7 to Victoria.

Sarah sends $87 to Alon.

Kelsey sends $13 to Brittany.

All these transactions will take place on the Polygon blockchain along with hundreds of others. Once Polygon has enough transactions, it will take that entire set of transactions and send it to Ethereum as just one big transaction.

Ethereum will still charge the $80 transaction fee for recording this information, but that fee will now be split amongst hundreds of people. So, instead of being charged $80, you’ll now only be charged $0.10 for example.

Is Polygon built on Ethereum?

Yes, Polygon is built on top of Ethereum. Ethereum is a layer 1 blockchain and Polygon is built on top of Ethereum, making it a layer 2 blockchain.

Solana, on the other hand, tries to solve the same problems as Polygon, but is a layer 1 blockchain.

How does Polygon work?

Polygon can run transactions faster and cheaper because it uses a “proof of stake” mechanism, unlike Ethereum which uses a “proof of work” mechanism.

Proof of work – Ethereum

In a proof of work blockchain, like Ethereum, all the computers that are trusted to write new information to the blockchain compete with each other by solving math problems.

The computer that solves the math problem first is allowed to write the latest batch of transactions to the blockchain and is paid for doing so.

This system is very secure, but it is pretty slow and wasteful because all those other computers who worked on the math problem, don’t get paid anything and just wasted their time and energy.

Proof of stake – Polygon

In a proof of stake blockchain, like Polygon, there is no math problem to solve. Instead, people put some money into a vault in the form of Polygon tokens. As a result they are then trusted to write transactions to the blockchain.

They take turns writing transactions to the blockchain and every time they do they are paid for doing so. 

If anyone tries to write false transactions to the blockchain, the money they put into the vault is confiscated. This ensures that they will be honest and creates security for the blockchain.

What are the main benefits of Polygon?

In addition to making transactions a lot cheaper and faster, Polygon also has a few other benefits that are pretty exciting.

Polygon also allows developers to build apps on top of its platform. This means that developers can extend the functionality of Polygon similar to how people can create new apps for an app store.

Some examples of these added functions are things such as NFTs, which can be created on Polygon as well as be bought, sold, and traded. Polygon also supports entire metaverses (virtual worlds) such as The SandBox, one of the most popular metaverses at the moment.

Should you invest in Polygon?

As with any investment, it really comes down to price and value. You can see the current price of Polygon here. 

Polygon clearly presents some valuable functionality to the crypto world at the current moment.

👉 But, this may change in the future.

Ethereum, for example, is currently looking to solve its problems by upgrading its own blockchain to what’s known as Ethereum 2.0.

Once Ethereum 2.0 comes out, it will make a lot of its limitations less of a problem. Layer 2 blockchains like Polygon will still be needed of course, but maybe not to such an extent as they are now. 

I personally think that Polygon is a great blockchain and it’s founders are very smart and dedicated to its long term growth. But, as with all investments, you should do plenty of your own research before making an investment decision.

If you’re looking for a good crypto exchange to invest in Polygon, you can also see my guide here:

👉 5 Best Crypto Exchanges of 2022