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MATIC, an Ethereum token that powers the Polygon Network, was championed as a bastion of stability in the rocky crypto sea not too long ago. However, the rout in the wider crypto sphere seems to have reached this pillar of strength as well.
Before discussing the reasons behind this extraordinary innate strength and today’s fall, let’s first detail what exactly Polygon is. Bear in mind that the MATIC Network was recently rebranded as the Polygon Network. So, what does the Polygon Network do? It is fundamentally a multichain scaling solution for Ethereum that facilitates fast and cheaper transactions by using Layer 2 sidechains – ancillary blockchains to the Ethereum main chain. This basically means that users can deposit the Ethereum coin to a Polygon smart bridge contract in order to obtain the MATIC coin, work with various applications using the Ethereum-compatible Polygon chains, and then re-deposit the Ethereum tokens to the Ethereum main chain. During this process, the MATIC token is used to pay the transaction fee and power Polygon’s proof-of-stake consensus mechanism, where miners are chosen randomly from a pool of validators to perform periodic authentication of the blocks produced and any disagreements on the Polygon chains are resolved through cryptographic proof. MATIC token holders delegate staked coins to the chosen validators in exchange for a portion of the validators’ revenue. This approach tackles some of the most fundamental challenges related to Ethereum – low throughput, lack of sovereignty, and poor UX. The Polygon Network offers scalability and flexibility of the sidechains together with Ethereum interoperability, liquidity, and security. It also offers a throughput of 7,000 transactions per second.
It is hardly surprising that the MATIC coin exhibited such extraordinary strength even in the face of the growing carnage across the crypto sphere. Just consider the wide gamut of applications that already utilize the Polygon Network. We currently have the Polymarket, a prediction market utilizing the power of the blockchain, the crypto collectible game Aavegotchi, a number of games built in the Decentraland metaverse, sports betting service SportX, Decentralized Finance (DeFi) products under the Easyfi brand, and a Cyberpunk RPG adventure game called the Neon District. Recently, the DeFi giant Aave integrated with the Polygon network to bypass Ethereum’s high gas fees.
Year to date, the MATIC coin has registered a gain of over 12,000 percent. However, it is down over 30 percent today, largely in line with Ethereum’s price plunge. As we’ve detailed in a number of posts, the latest crypto weakness was precipitated by the suggestion that Elon Musk might dump Tesla’s (NASDAQ:TSLA) Bitcoin (BTC) holdings. Akin to a dam giving way, the development has unleashed a wave of selling. This is hardly surprising given the extraordinary rally in the wider crypto sphere this year. However, the institutional adoption of Bitcoin and Ethereum has now entrenched itself too firmly to retreat in the face of speculative price action. Consequently, this capitulation will end, paving the way for a gradual revival of the bullish case in MATIC and other promising cryptocurrencies.