Polygon Might End Up Being Ethereum’s Saving Grace

The movement of bigger fish affects the pond whether it’s the stock market or the cryptocurrency market. That truth relates to recent news regarding crypto whales and Polygon (CCC:MATIC-USD).

A concept image for the Polygon (MATIC) crypto.
Source: Shutterstock

The movement of whales often correlates with positive momentum around a given cryptocurrency project. In the case of Polygon, a rash of large transactions has occurred around its testnet improvement. 

Proposal 1559 

It was on Dec. 14 that the core development team at Polygon announced the roll out of a testnet implementation. That implementation is the Ethereum (CCC:ETH-USD) Improvement Proposal 1559. That implementation introduced the burning of Polygon’s native MATIC tokens. This was subsequently implemented by the Mumbai testnet and theoretically should increase fee transparency.  

Since the Dec. 14 announcement MATIC has risen from $1.90 to $2.16. The so-called whales directed roughly $14 million of capital into MATIC immediately following the burn announcement. One such transaction was completed by an Ethereum holder ranked as having the 453rd-largest ETH wallet. That whale purchased $4.63 million worth of MATIC during that transaction. 

Moreover, large transactions (those defined as being over $100,000) increased by 112% in the 24 hours following the update. 

That is encouraging news for Polygon and its native MATIC token. But the more important aspects of the cryptocurrency relate to its overall function and utility. Because Polygon is a platform for Ethereum scaling and infrastructure development. 

Vital to ETH

Pundits believe that Polygon is the bridge that takes Ethereum’s evolution into a multi-chain system. What that means is that Polygon allows Ethereum blockchain technology to connect with other multi-chain systems. 

Some pundits have likened this to an internet of blockchains, noting Ethereum’s inherent security and large ecosystem as natural strengths. In other words, Polygon takes Ethereum and makes it interoperable with blockchains where it wasn’t prior. 

Ethereum’s Issues

Ethereum has notable issues. It’s expensive and slow for one. This chart shows how Ethereum’s transaction fees have fared over time. They currently sit at $3.50, which is still far too expensive and a serious impedance to greater adoption. And many competitors including Solana (CCC:SOL-USD) and Avalanche (CCC:AVAX-USD) are seeking to fill the void. 

But back to Polygon. Polygon evolved out of Matic, which is where it received its token ticker. Back then it was a layer-2 scaling solution for Ethereum. 

Layer-2 scaling solutions introduce improved functionality like throughput speed without altering decentralization or security. Matic was designed to improve Ethereum’s earlier and persistent speed and cost issues. 

Polygon now has evolved into a platform for mass scale building of collaborative Ethereum-based blockchains which interoperate while remaining independent. 

Why Should You Care About Polygon?

Ethereum has a massive early lead in the cryptocurrency market. It, along with Bitcoin (CCC:BTC-USD), will continue to shape the evolution of crypto. 

Yet, Ethereum is facing significant hurdles. Cost and speed are chief among those persistent concerns. But Polygon should be able to help with those issues because it makes Ethereum blockchain assets interoperable with other blockchains built out of the network.  

Further, the Ethereum development community is the largest such community in the world. Development done on the Polygon network is very similar to that done on the Ethereum network. 

Basically, developers who understand Ethereum also understand Polygon and vice versa. That suggests that developers versed in Ethereum could logically move to the Polygon network, build solutions, and import them to the Ethereum network. Overall, it has to be noted that Polygon is a fairly brilliant idea. If it can truly help Ethereum overcome its persistent issues, that will be huge.

In time, Ethereum may come to attribute its ultimate success to Polygon. It isn’t out of the realm of possibility that Polygon’s development ends up being the saving grace to Ethereum’s early issues.

On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Article printed from InvestorPlace Media, https://investorplace.com/2021/12/polygon-might-end-up-being-ethereums-saving-grace/.

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