When Ethereum (ETH -1.56%) started getting wide public notice in 2020 and 2021, it already had a huge lead over other blockchains that were launching amid the crypto bubble. Developers had spent years constructing tools and infrastructure that projects like non-fungible tokens (NFTs) and new tokens could build on.
As we begin a new year, there's one cryptocurrency that has the momentum of a different type that could make it the Ethereum of 2023. That's Polygon (MATIC -2.50%), the blockchain that's become the go-to for corporate America.
Image source: Getty Images.
What is Polygon?
Polygon is a Layer 2 blockchain built on top of Ethereum. It combines transactions together and then puts one transaction on the main Ethereum blockchain. The idea is to lower the cost of each transaction and make the blockchain more scalable while still being able to use Ethereum's infrastructure.
Corporate partners have flooded to Polygon, in part because of its scalability and development resources and in part because Polygon is paying millions of dollars to attract them. Meta Platforms' (META -0.35%) Instagram has enabled NFTs on its platform, Stripe is using Polygon for payments, and Starbucks (SBUX 0.92%) is using it for a new NFT loyalty program.
Momentum takes hold
Cryptocurrency values have been driven in large part by momentum. There's a natural network effect in cryptocurrencies for both investors and developers. Why develop business models for a blockchain that has no uses?
Despite not having as many users, Polygon gets to ride the development capability of Ethereum while attracting businesses with its lower costs. And once businesses start to flock to Polygon, others will naturally follow.
This was a similar dynamic to the NFT wave of 2021. Ethereum became the go-to blockchain, so why build anywhere else? It looks like that will likely be the case for Polygon, but it's corporate money flowing into Polygon this time.
Not all corporate projects will stick
I think 2023 will be defined by companies trying to determine their best strategies for the blockchain and the decentralized Web3, a contrast to the version of the web we have today with its dominance by a few big companies. I mentioned some of the businesses to watch above, but there are dozens of others that are experimenting with NFT loyalty programs, lower-cost payment rails, and digital goods to sell in the crypto market. Most are building on Polygon.
What's not entirely clear is if corporations are going to develop winning strategies for crypto and Web3 in 2023. There are some examples, like Adidas and Nike launching successful projects with the Bored Ape Yacht Club and RTFKT (which Nike acquired), respectively. But many companies have seen NFTs as a cash grab that they would like to participate in. That won't be a sustainable strategy, and those who aren't in crypto for the long haul will eventually wash out.
The fact that corporations are building on Polygon during a bear market may be enough to make this the best cryptocurrency for 2023. Some blockchains will fail as users and developers flee, but it seems like Polygon is here to stay.
