If there's one thing that's become clear about cryptocurrencies and the blockchain over the past two years, it's that trading alone isn't a good use case for cryptocurrencies. The industry is going to have to provide some kind of utility to businesses, consumers, and other technology companies, or these cryptocurrencies and blockchains won't last.
As blockchains like Solana and Base gather users and developers, improving on their speed and cost structure, some blockchains are going to be left behind. I think Polygon (MATIC +0.00%) falls squarely in that category. It doesn't have the user or developer base to compete with better blockchains.
CRYPTO: MATIC
Key Data Points
The user problem
Cryptocurrencies are fundamentally a currency of a blockchain, so, if no one's using the blockchain, the currency itself has very little value. This is the fundamental problem for Polygon.
According to Stack.Money's tracking of Github repos, which is a measure of how much developer activity is being shared among the developer community, Solana has 4.5 times more developer activity than Polygon. The Layer-1 blockchain Polygon lives on, Ethereum, had a whopping 10.3x more developer activity than Polygon.
Transactions by users of the blockchain show a similar difference in activity. According to Polygonscan and Solana Explorer, Polygon is running at about 23 transactions per second while Solana is performing about 4,000 transactions per second. Users are simply more active on a higher-throughput blockchain like Solana.
Speed and cost on the blockchain
Besides not having a plethora of users, Polygon has fundamental technology challenges compared to other blockchains. It's much slower than a blockchain like Solana, and yet more expensive. Polygon says an average transaction costs about 1.5 cents and Solana's transactions are roughly 0.02 cents.
One of the advantages of Polygon has always been that it's a Layer 2 -- or a blockchain built on top of another blockchain -- to what is considered one of the best and most developer-friendly blockchains, Ethereum. But being a Layer 2 means that transactions are slow and clunky for users, depending on what you're doing. In a recent post, Polygon said that bridging assets to the Ethereum mainnet would take 30 to 60 minutes. To improve performance, Ethereum itself needs to improve speed cost and efficiency.
But if it does that, why not just develop on Ethereum and not on Polygon?
Polygon's challenge
As a Layer 2 Blockchain, Polygon will never control its destiny. Yes, there are potential improvements like rollups and other features that can improve its speed and efficiency, but the underlying blockchain still needs to roll up to Ethereum.
This has put Polygon behind when it comes to developers and users because the blockchain is simply more cumbersome and slow to use. And that isn't going to improve in a bear market. I think as more development happens on the blockchain, more Layer 1 blockchains and possibly some specific Layer 2 blockchains will win out. On top of that, there has been growth in stablecoin usage, which would negate a lot of value being added to cryptocurrencies themselves.
No matter how you look at it, Polygon isn't the best place for money in crypto and that's why it's one I would avoid right now.
