How Polygon Can Survive Ethereum’s Big Upgrade, “The Merge”

By all accounts, Ethereum (ETH-USD) operates differently than other, later crypto projects. As a grassroots project where idealistic programmers call the shots – not venture capital – Ethereum isn’t rushing upgrades to provide early investors with exit liquidity. As such, the hotly anticipated ETH “Merge” is taking…however long it takes.

Landscape art with the Ethereum
Source: shutterstock

Once expected in June, the Merge is now targeted by its developers for “the few months after” that. When it hits, Ethereum says its transactions will be “faster and cheaper.” And by moving to its new proof-of-stake blockchain, Ethereum will require less electricity – hopefully saving ETH from a smackdown by environmental regulations.

However, we don’t know the exact degree to which the Merge will move the needle on these factors. In the meantime, transaction speed, scalability, and computing power are already known to be quite impressive on Layer 2s like Polygon (MATIC-USD).

As Polygon keeps racking up more and more adoption – 10,000 apps and counting! – here are projects to watch to gauge MATIC’s viability in a post-Merge world.

Stripe Adds USDC Payments Via Polygon

At this point, crypto payments are much more than theoretical…they’re becoming A Big Thing. As we learned at the Bitcoin 2022 conference earlier this month, companies are falling all over themselves to integrate Lightning Network scalability solutions for BTC transactions.

But bitcoin is unlikely to be your only option. It’d be like just accepting Visa (NYSE:V) cards and saying “No, sorry, don’t want your business!” to Mastercard (NYSE:MA) and American Express (NYSE:AXP) cardholders.

To that end, the online payment platform Stripe will now accept USD Coin (USDC-USD) stablecoin – and route the transactions through the Polygon network.

USDC began on Ethereum, but the companies that created it – Circle and Coinbase (NASDAQ:COIN) – have also brought the stablecoin to other blockchains.

After all, platforms like Stripe need to process 10,000+ transactions per second (TPS). Pre-Merge, Ethereum handles more like 30 TPS! Why would any Stripe customer want to start paying in crypto if it’s going to be so slow? (Not to mention expensive.)

Polygon, on the other hand, boasts “transaction speeds of up to 65,000” TPS…with “approximately ~10,000x lower costs per transaction than Ethereum.”

So, as demand for crypto payments gathers force, Stripe says it’s going with Polygon “for its low fees, speed, integration with Ethereum, and broad wallet compatibility (including MetaMask, Coinbase Wallet, and Rainbow).”

“The pair’s first focus will be on integrating crypto payments with Twitter, enabling users to Super Follow and join Ticketed Spaces using USDC on the Polygon network,” as Luke Lango reported in his latest update Saturday to our Crypto Investor Network.

Polygon Nightfall Provides Privacy

Not all of us want our whole transaction history displayed online – for literally anyone in the world to see. If you’re running a business, for example, you want to protect your clients’ privacy. But on Ethereum, you can’t just switch to “private mode” like you’re on Venmo sending pizza money to a friend. All transactions are visible to the public on Etherscan.

But since August, Polygon has devoted $1 billion to developing zero-knowledge (ZK) solutions.

Polygon Nightfall 3, for example, uses ZK to allow enterprise clients to transact on Ethereum privately – and it “rolls up” a bunch of transactions into one block, to lower your costs.

“All the information required to perform a private transfer exists with clients and does not rely on any off chain third party,” like Tornado Cash…which is infamous for attracting money launderers, like the North Korean hackers who stole $625 million from Ronin (RON-USD)!

And not to worry: With Polygon Nightfall, you can still challenge “invalid blocks” if anyone tries anything shady or fraudulent.

Polygon has other ZK projects in the works, too, like Polygon Hermez for crypto payments. But here’s one I think is particularly cool…

Polygon ID for Navigating Web3

Here in Web 2.0, your data flows through companies like Google (NASDAQ:GOOG), Amazon (NASDAQ:AMZN), and Meta Platforms (NASDAQ:FB)…and gets used for their own purposes.

In Web3, you can ditch Big Tech for the blockchain – where you can own and control your own online presence!

And to navigate Web3 while maintaining your privacy…there will be Polygon ID.

Identity services like Ethereum Name Service (ENS-USD) are handy – but because they’re built on Ethereum, they’re not private. In fact, because ENS assigns you a simple domain name, you may be easier to find. People might not know all the letters and numbers in, say, Jimmy Fallon’s crypto wallet address… But they can certainly remember “fallon.eth.”

This makes ENS great for sending crypto or NFTs to a friend – and not so great for “birth certificates, drivers licenses or resident permits,” which are some of the use cases developers propose for Polygon ID.

The immediate goal is “self-sovereign identity for Web3.” It’s bad enough for Google to know every site people visit in a day. Imagine if everyone’s entire web trail was recorded on Ethereum. You wouldn’t even need to hack anyone – the data would already be there, for the world to see!

But because Polygon ID will use ZK, “users can access apps while remaining anonymous”…and yet sites can still verify your identity (on the Polygon blockchain).

This is great for decentralized autonomous organizations (DAOs), where users and investors can help govern their favorite crypto projects. Without something like Polygon ID, many DAOs use a “one coin, one vote” system. This, of course, means that people with more coins – like early investors and developers – will always hold the most power. But Polygon ID will allow DAOs to identify individual members…so they can actually vote democratically!

Next quarter, Polygon intends to launch its first two ZK identity products: Polygon ID Wallet (for users) and Polygon ID Platform (for organizations). Digital identity is the next big hurdle to jump as we approach the Web3 future – and it’ll be intriguing to see what Polygon contributes next to the New Digital World.

On the date of publication, Ashley Cassell 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. To have more news from The New Digital World sent to your inbox, click here to sign up for the newsletter.


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