What is Polygon?

Connections

The biggest connection Polygon has is undoubtedly to Ethereum. It's made to complement Ethereum, and many developers deploy their dApps on both networks.

However, Polygon has gradually grown more independent. Data from October 2021 found that of the new dApps being deployed on Polygon, only 38% were also on Ethereum compared to 62% that were exclusively on Polygon.

More recent data has also shown that Polygon is building one of the larger dApp ecosystems on the market today. According to data from Alchemy, Polygon surpassed 19,000 dApps in April 2022. That was more than six times as many as it had in October 2021 and 95 times as many as in June 2021.

Quite a few platforms and projects have integrated with Polygon, encompassing everything from decentralized crypto exchanges to blockchain gaming and non-fungible tokens (NFTs). Here are a few prominent examples:

• Two major decentralized finance (DeFi) protocols, Uniswap (UNI -2.88%) and SushiSwap (SUSHI -1.79%), have deployed on Polygon.
• OpenSea, one of the top NFT marketplaces, supports NFT trading on Polygon.
• The virtual reality marketplace Decentraland relies on Polygon for quick and cheap transaction support.
• Play-to-earn crypto game Sunflower Land is built on Polygon.

Can I make passive income with Polygon?

Since Polygon is a proof-of-stake blockchain, you can make passive income by staking your MATIC tokens.

First, you'll need to store your tokens in a crypto wallet that supports MATIC staking. Then you can become either a validator or a delegator and earn MATIC rewards based on the amount you've staked.

Validator nodes need to run Polygon's software so they can confirm blocks of transactions and add them to the blockchain. It also typically requires a large amount of staked MATIC for a node to be chosen.

Delegators stake their MATIC tokens with a validator of their choosing. Most users who stake cryptocurrency with Polygon do so as delegators since it's the much easier option.

Unique risks

By design, Polygon is closely tied to Ethereum. That's a large part of what makes it useful and has helped it grow, but it could also be a vulnerability.

Ethereum has been going through a series of upgrades, including a switch from its original proof-of-work model to proof of stake. That should significantly improve its transaction processing, one of the main issues Polygon solves. However, Polygon has scaling features that should remain useful even after Ethereum completes its upgrades.

Polygon has also had some technical issues, including a bug that could have been disastrous. In December 2021, a security partner discovered a vulnerability that could have led to the loss of $24 billion in MATIC. The Polygon team quickly fixed it, although one hacker managed to steal about $2 million in MATIC from the network.

Is Polygon a good investment?

Considering the features Polygon has, it's one of the better cryptocurrency investments, especially if you're bullish on Ethereum or smart contract blockchains in general.

There are two key factors Polygon has going for it. One is that it works very well. Although there has been the occasional issue, such as a network outage in March 2022, it definitely does its job of providing scalable solutions. Transactions are fast and cheap, normally costing less than $0.01.

The second is that people are using Polygon. In the ever-important DeFi sector, it's one of the 10 largest blockchains by total value as of April 2022. We've already covered the growth in its number of dApps. It bears repeating that going from 200 to more than 19,000 in less than one year is extremely impressive.

None of this guarantees Polygon will be a success. Cryptocurrencies are always volatile and risky, and there are several smart contract blockchains competing with each other. So if you decide to invest in Polygon, it's still important to be cautious and only put in what you could afford to lose.

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