This crypto will be Solana in 2022
New to the long-awaited upgrade to proof of stake, known as The Merge, many crypto investors probably think Ethereum (ETH 128.11%) has the greatest potential for lucrative returns in the coming years.
While that thinking isn’t necessarily wrong, there is a benefactor of The Merge not named Ethereum. Known as a Layer 2 blockchain, Polygon (MATIC 4.81%) is in a position to directly benefit from Ethereum’s move to proof of stake.
As a Layer 2 blockchain, and more specifically a sidechain, Polygon works with Ethereum to make transactions on the blockchain cheaper and faster for users. Since Ethereum’s network became one of the most popular blockchains in recent years, it has been plagued with congestion that causes speeds to nearly grind to a halt and fees to skyrocket at times.
Polygon streamlines Ethereum by processing transactions on its own blockchain and then adding them back to Ethereum at a later time. By doing so, users get the best of both worlds: fast speeds and cheap fees with the security and decentralization of Ethereum.
Understanding the merger is essential
In the days and months leading up to The Merge, there have been a handful of misconceptions regarding what would happen to Ethereum when it transitioned to a proof-of-stake consensus mechanism. The primary one is that the speed will increase and the fees will decrease. However, that is not the case. For that to happen, Ethereum’s network capacity must increase, and the move to proof-of-stake does not increase capacity.
An increase in network capacity is planned sometime in 2023 when the blockchain launches a process called sharding. With sharding, Ethereum’s main blockchain is split into smaller, more efficient chains. This increase in capacity will then reduce these fees and increase speed.
Ethereum needs Polygon
You might be thinking, wouldn’t that spell the end for Polygon since Ethereum will eventually solve its own problems?
Surprisingly, that is not the case. Ethereum developers plan to work “synergistically” with Layer 2 solutions like Polygon to “continue to reduce network congestion and increase transactions per second,” according to the Ethereum website, so that Ethereum can one day serve the needs of a new age of the Internet known as Web3.0.
Compared to the current stage known as Web2.0, Web3.0 aims to return power to individuals instead of corporations. Internet users are familiar with today run by companies that provide services in exchange for your personal information. With Web3.0, the internet will become completely decentralized, permissionless and completely open source.
In order for Ethereum to reach this goal, it needs to significantly increase its capacity and transaction speeds. Even with sharding, it is estimated that Ethereum will only be able to process somewhere around 1280 transactions per second (tps), a nice increase from the current 20 tps now, but not enough to handle all the world’s traffic.
To achieve its lofty goal, Ethereum will need some help, which Polygon was designed to do. It is believed that Polygon can handle around 7000 tps at the moment and when sharding comes this number could increase exponentially. Experts believe that when combining the potential of Layer 2s and sharding, Ethereum can reach speeds as high as 100,000 tps.
Companies are starting to take notice
Despite being in the middle of a brutal crypto winter, this year Polygon has been busy further developing its blockchain and partnering with some of the most famous companies in the world as the technology becomes more sought after.
Polygon has entered into a partnership with Coca Cola, Meta platformsand Walt Disney all in the last three months. The well-known beverage company released a collection of non-fungible tokens (NFTs) on the blockchain back in August. Meta made the decision to add polygon-based NFTs to social media platforms Facebook and Instagram. And probably the most exciting partnership came with Disney when Polygon was selected as an inductee into the entertainment giant’s Accelerator Program, a venture capitalist arm that aims to work with up-and-coming companies to further fulfill Disney’s vision.
Polygon doesn’t seem to be stopping anytime soon. Everything is helping to become the primary scaling solution for Ethereum and Web3.0. Polygon co-founder Mihailo Bjelic envisions that Polygon will eventually become “the holy grail of Web3 infrastructure.” He believes the ideal Web3.0 blockchain should have three primary characteristics: “scalability, security, and Ethereum compatibility,” which Polygon certainly fulfills. As Web3.0 continues to evolve, investors should trust Polygon to remain at the forefront of developments.
