Disclaimer: this opinion piece only reflects the opinion of the article writer below, and not the entire team of Despace University
There are big differences between trading and investment. Unlike trading where your aim is to make a quick profit with a technical analysis approach, investment is more of a long-term thing. When it comes to investment, you might not want to touch the funds within 1-2 years because your goal is to see that investment turns into something real. You want to see all the promises in the roadmap become actual developments.
This is why it’s very important to see all the fundamentals, tokenomics, and even the profiles of the team members before you decide to invest in something new. More importantly, you should put bigger investments in the middle of a bear market and gradually take profits in a bull market.
This is why the current crypto climate is actually the ideal state to invest in strong projects because the prices are already at the bottom.
In this article, I explain why I decided to pick MATIC (Polygon) as one of my long-term cryptocurrency investments in the current bear market.
Table of Contents:
Polygon is the most popular sidechain to the Ethereum blockchain. As a layer two solution, it works as an extra layer to the Ethereum chain. Polygon’s main focus is to provide various different tools for gas fee reductions and overcomplicated blockchain processes.
Polygon is already fixing many issues that have been long plaguing the Ethereum world. As we all know, Ethereum has huge problems in regard to gas fees and transaction speed. Polygon helps traders and users to mitigate these issues. With Polygon, the average transaction fee is lower than $0.01, and the average transaction speed is also much faster than Ethereum.
The main Polygon chain uses a Proof of Stake (PoS) consensus mechanism and the users can stake Polygon native cryptocurrency called MATIC to validate transactions and cast their votes on proposals.
Polygon offers SDK (software development kit), which can be utilized to construct dapps as sidechains that will be connected to Polygon main chain. Other tools that Polygon offers as part of its ecosystem include Plasma Chains, zk-Rollups, Optimistic Rollups, scalable data availability layer (Avail), and privacy-focused rollups for enterprises (Nightfall).
By integrating all these promising scaling solutions into its arsenal, Polygon wants the world to know it is trying to build a big blockchain solution ecosystem beyond just being a standard PoS sidechain.
Polygon used to be known as Matic Network. The founders of Matic Network were known as highly skilled Ethereum developers. They are Sandeep Nailwal, Anurag Arjun, Mihailo Bjelic, and Jaynti Kanani.
Matic successfully raised $5.6 million worth of ETH in April 2019. The network itself went live two years ago (2020), and they decided to rebrand in early 2021 to Polygon. They, however, keep the crypto token name MATIC.
During the peak of its chain activity, Polygon was able to grab $10.53 billion TVL (total value locked) in June 2021. Now? The TVL has dropped massively due to the ongoing bear market.
At its peak, Polygon dapps were able to receive huge attention from crypto traders and gamers. Yes, crypto games with NFTs were a big thing last year, and Polygon was seen as one of the main blockchain solutions for high-volume transactions like games.
As for the token price action, MATIC was trading at $2.87 back in December 2021. Of course, price has dropped significantly this year, just like every other cryptocurrency out there. It might even drop further from here. Nevertheless, I am still quite optimistic in the long run it will go higher than the current price, which is $0.4939 (June 23, 2022).
The future of Polygon is bright, in my opinion. There are not many altcoins with strong fundamentals, but Polygon is definitely one of the strong ones. Unlike many other alternative chains that aim to be “Ethereum killer”, Polygon was not designed to be one. It was created to solve scaling solutions, and they are one of few teams that have been able to keep delivering on its technical promises.
MATIC use case in the Polygon ecosystem is quite straightforward. Like most native cryptocurrencies in their own chains, MATIC serves as gas fee currency.
Basically, whenever there’s a transaction happening on Polygon, the transaction would use MATIC to pay for the fee. The fees are needed to incentivize validators to provide their service to the Polygon blockchain.
Not only as gas fee currency, MATIC is also used as governance. MATIC hodl-ers can use their tokens to vote on PIPs (Polygon Improvement Proposals) to decide the future of Polygon ecosystem improvements.
One more thing, PoS in Polygon utilizes MATIC tokens to reach a consensus. We can stake our MATIC and get rewards when we help secure the Polygon PoS network. Meanwhile, dishonest participants would lose their staked MATIC tokens. With this mechanism, Polygon hopes to minimize rogue actors in its blockchain.
At the time of writing this article, Polygon’s circulating supply is 7.96billion tokens out of 10billion max supply.
MATIC use case on Polygon ecosystem looks good enough to me. Almost 80% of the tokens are already circulating, yet it still allows room to provide enough token rewards to the stakers. Also, being a gas fee currency will help MATIC price in the future when network activity pumps.
Since we are talking about long-term investment, we also need to talk about the risks and all the possible negative scenarios in the long run. To me, the biggest risk to Polygon has always been the future of Ethereum itself. While Ethereum is still very slow and its average gas fee is still very high, there’s a chance that in the future, the chain will be able to solve its gas fee problems.
While I don’t think Ethereum 2.0 alone would be enough to alleviate all of the current Ethereum issues, we still do not know how Ethereum’s main chain would perform 5 years or 10 years down the line. We also don’t know if any other layer 2 Ethereum solution would be able to outperform Polygon in the next bull market.
I mean, you can always say that Polygon is aiming to become a bigger ecosystem rather than just being a sidechain to Ethereum, which is correct, but at the same time, the brand has always been associated with “Ethereum scaling solution.” It would not be easy to grow beyond that, although still quite realistic, of course.
Another potential risk is if nobody uses Polygon’s main chain anymore when one of the competitors becomes better than Polygon. There are so many alt-chains out there trying to become the next Ethereum, and to be fair, most of them have very low gas fees and fast transaction speed as well. It’s possible one day the competitions will become faster and cheaper than Polygon while still able to maintain a decent level of decentralization.
It’s important to note that I also invest in some other cryptocurrencies, although Polygon is definitely one of my top five long-term investments. I have mentioned all the plus-es above, which include its amazing technology, being a scaling solution to Ethereum, and its solid tokenomics.
Many other altcoins do not have good tokenomics and a good amount of network activity. That’s why Polygon, being the most popular layer two solution to Ethereum, has the prime position to maintain its relevance in the next bull market.