Blockchains are distributed ledgers of trades that serve as the foundation for several of the world’s most popular cryptocurrencies. They are managed by a web of computers that must gain unanimity across the entire network in order to validate trades and generate fresh currency units.
Polygon acts as an interlayer for Ethereum, the platform that powers the ether cryptocurrency, assisting it in scaling its transaction processing ability. The Ethereum network is distinct from the bitcoin blockchain in that it enables apps such as non-fungible tokens (NFTs) and decentralized finance (DeFi) facilities in addition to peer-to-peer (p2p) transactions.
In course of time, as additional users poured in, the Ethereum network became crowded, causing longer transaction times and increased processing costs. This has resulted in the development of what is referred to as “Layer 2” networks such as Polygon, which try to relieve the primary blockchain of its burden.
Polygon is a proof-of-stake (PoS) blockchain that runs on the Ethereum blockchain network. Unlike Ethereum, which relies on energy-intensive cryptocurrency mining to validate trades, members in Polygon’s network only have a requisite to demonstrate ownership of certain tokens — or what is known as a “stake” — to turn into validators.
As a consequence, trade time frames are significantly reduced — to the hundreds of transactions per second, according to Polygon. On the contrary, Ethereum’s network is capable of processing only around 15 transactions per second (TPS). Polygon claims to have processed more than billion trades and has more than 2.7 million MAUs (monthly active users).
Ethereum is in the process of upgrading to Ethereum 2.0, which will make it quicker and more capable. While the improvement is still miles from from realization, some analysts believe it presents a danger to Polygon. Polygon, on its side, anticipates that need for blockchain scaling solutions will remain robust even after the implementation of Ethereum 2.0.
Sandeep Nailwal, co-founder of Polygon, envisions the firm as a decentralized variant of Amazon Web Services (AWS), the e-commerce behemoth’s cloud computing subsidiary. Polygon’s loftier aims are portion of a broader “Web3” trend in the cryptocurrency industry.
Web3 is a fuzzy term in the technology world that refers to initiatives to create a far more decentralized variant of the internet using blockchain technology. It has sparked much discussion in Silicon Valley. Jack Dorsey, co-founder of Twitter, has attacked it as a “centralized entity” run by investment firms, while Tesla CEO Elon Musk has described it as a “marketing jargon” rather than a reality.
“To me, Web3 entails ownership, censorship resistance, and verifiable computation,” Nailwal said to CNBC. Whereas corporations such as Facebook or Twitter maintain control over their own calculations, Nailwal said Web3 provides “transparency” surrounding such procedures.
Polygon aspires to provide a platform on which large businesses may build their own Web3 strategy. It already has Adidas and Prada testing NFTs on its platform. Nailwal notes that although not all organizations are sold on cryptocurrency yet, they have found NFTs to be simpler to stomach. Web3’s buzz has drawn some of venture capital’s greatest names, notably Andreessen Horowitz, Tiger Global, and Sequoia.
Sequoia has been relatively silent about its involvement in cryptocurrency, while Andreessen owns devoted crypto fund. Sequoia is getting more outspoken in recent years.
“Large numbers of developers working on a diverse spectrum of apps have chosen Polygon and their comprehensive set of Ethereum scaling solutions,” stated Shailesh Lakhani, managing director of Sequoia India. “This is an aspirational and proactive team that places a premium on innovation.”
Polygon, similar to Ethereum as well as other blockchains, has a native cryptocurrency, called matic. Instead of issuing fresh shares, the corporation privately offered token units to investors.
Polygon’s investors are betting that the price of matic will improve as the network’s popularity grows. The funds were raised by Sequoia’s India subsidiary, with participation from SoftBank, Galaxy Digital, and Tiger Global.
It follows a similar transaction in which Solana Labs, the firm behind Ethereum competitor Solana, received $314 million in an exclusive token sale financed by Andreessen Horowitz. Polygon intends to use $100 million of the funds to establish a “ecology fund” that will assist the creation of new products on its network. The remainder will be used as “buffer money” to assist Polygon’s 240-person staff in continuing to expand up the platform over the next years. Additionally, the firm is expanding into gaming, having just appointed Ryan Wyatt, a former YouTube executive, as director of its game studio.
“You’re witnessing a lot of incredibly talented engineers leave traditional firms to pursue blockchain game development,” Wyatt told CNBC. “By partnering with developers of blockchain-based games, we’re going to enable a whole new form of gaming experience.”
“In the forthcoming two or three years, we’ll showcase instances of top-notch, triple-A games created on Polygon,” he said. According to Polygon, the company is now estimated at $2 billion. The organization does not see itself as a business in the conventional sense.
A lack of transparency over who owns the systems that underpin some crypto currencies has been a point of contention for authorities monitoring the rapidly growing worlds of crypto and DeFi.