Polygon Crypto Sidechain Explained: A Guide for Beginners

The Ethereum blockchain has become an incredibly important platform over the recent years. All kinds of digital financial assets and activities use it as their basis: almost everything innovative — from NFT markets to various DeFi projects — seems to utilize it these days. And that’s not a coincidence: Ethereum is perfect for those projects because this blockchain works with smart contracts — these are basically blockchain programs that can be set to run once some conditions are met.

This steady growth of the Ethereum ecosystem has (predictably) made its transaction fees (referred to simply as ‘gas’) extremely high, prohibiting users from making small transactions. And this is where Polygon comes on stage. You can think of it as an add-on for Ethereum, or ‘sidechain’. It operates alongside the main blockchain to provide cheaper and faster transactions. Basically, you give Polygon your money, and it gives you access to all kinds of Ethereum services.

MATIC

Sounds great, you may think, but HOW do you give Polygon those money? Well, this sidechain has its own cryptocurrency called MATIC. It operates on the Proof-of-Stake consensus mechanism: all coins were minted at the launch of the project, so mining is out of question. About 4/5 of the coins are exchanged on the market, and about 1/5 are controlled by the team which gradually releases them. MATIC is used as the main Polygon crypto coin: you pay fees with it, holders use it for voting, and so on.

Of course, you can also earn using MATIC, and that’s a really interesting topic to discuss. Basically, you can just buy and sell it to make money out of market fluctuations — and with MATIC, that may be extremely profitable. This cryptocurrency has managed to grow from $0.0035 to almost $3 in just one year, and while that initial surge was probably a one-time event, you can still earn something on MATIC. Now it’s worth about $0.6, but some crypto experts predict that it may hit $5 by the beginning of 2024.

Another way to earn with MATIC is staking. That means you freeze some amount of crypto in the Polygon blockchain — similar to a common bank deposit. Your coins help the system operate, and you get some reward. While definitely less profitable (APY is about 20% at best) than speculating, this way of using your coins is much safer, so if you’re more of an investor, consider this option.