Polygon (CCC:MATIC-USD) used to be the MATIC Network, but has recently rebranded itself. This change came with a focus by the crypto on multiplatform usage of Ethereum (CCC:ETH-USD) based transactions. But despite the name change, the Polygon crypto kept its token name, MATIC.
The MATIC token now has a chance of rebounding. Its previous high was $2.68 on May 17. As of July 8, it was at $1.13, or down over $1.55 from its peak. This represents a decline of 57.8%, which is fairly close to the average of many popular cryptos.
However, since the end of March, the crypto has risen over three times from 36.42 cents per token to $1.13. This represents a gain of 210% in the space of just a little over three months. But its drop is also typical of other altcoin cryptos, as many are down over 50% from their May highs.
What Polygon Is About
Polygon was started in 2017 as an Ethereum-compatible blockchain platform. Its purpose was to eliminate Ethereum’s major issues. These are its high fees, congestion and clogging risk, according to Altcoin Buzz.
Polygon now bills itself as “Ethereum’s Internet of Blockchains.” It wants to provide the framework for building Ethereum-compatible blockchains. The MATIC token is there for governance, staking and gas fees (transaction fees).
Ethereum’s fundamental problem is its lack of scalability. The greater the number of Ethereum transactions, the greater the congestion. The time it takes to validate each transaction has been rising.
By contrast, Polygon has a way of getting around the scalability problem. It builds “snapshots” of various chains and uses them in the blockchain network.
This is important because decentralized apps (Dapps) are increasingly popular. They depend on the speed of transactions getting processed, especially in the Defi arena (decentralized finance).
Defi includes things like crypto staking, interest earned and financial rewards and prizes. These types of apps are very popular now in the blockchain world. Polygon can help make their transactions go through without the typical problems that Ethereum can present.
What to Do With MATIC Crypto Now
Polygon is known as a “Layer 2” solution to Ethereum’s problems. As a result of its ability to lower transaction fees and increase processing times of transactions, Ethereum transaction fees have also fallen. According to Coindesk, they have fallen to the level they were at during December 2020. This also means it is at six-month lows.
This proves that Polygon and the MATIC network have real value, especially for the many Defi apps in existence. In the end, that is what will help push up the price of the MATIC token.
As a result, Defi apps are bypassing Ethereum and going straight to Polygon to use as their platform. For example, a new Defi app called Cream Finance was recently launched on the MATIC network, according to Decrypt.co. Cream Finance wanted to use the Polygon blockchain because it would lead to faster transaction speeds.
For example, even if MATIC can rise to half of its former height, it would mean reaching a price of $1.7925. That represents a potential gain of over 58.5% from its present price. I suspect that is likely to happen over the next year, especially if Ethereum also rebounds. This is what I expect to happen as well.
On the date of publication, Mark R. Hake held a long position in Ethereum but not any other security mentioned in the article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.