What is Polygon? Why is it the New Buzz in the Crypto World?

Padmini Das
6 min readSep 23, 2022
Polygon crypto

Just when you thought the unprecedented flow of easy money through the markets had stopped, here comes yet another startup parading its decacorn valuation.

We speak of Polygon, an Indian blockchain startup, which raised $450m in the latest funding round led by heavyweights like Sequoia, SoftBank and Tiger Global. This is in addition to a growing list of marquee investors in the platform which also includes Mark Cuban and Balaji Srinivasan.

Many have likened this to a “Flipkart moment” for India’s blockchain ecosystem. This means that Polygon is expected to do to the Indian blockchain industry what Flipkart did to the Indian e-commerce industry — take it by storm!

Today, we explain to you the business of Polygon and why it has suddenly become the talk of the crypto town.

The Ether Killer/Saviour

In geometry, a polygon is a two-dimensional figure with a finite number of sides. In the world of cryptocurrency, however, Polygon is a “Layer 2” network built on the Ethereum blockchain.

Let’s break this down. Ethereum, as we all know, needs no introduction as it is the world’s second-largest cryptocurrency. In fact, if purists are to be believed, it is likely to take over Bitcoin soon.

But like many new and emerging drifts, Etherum also faces quite a few growing pains. For years now, slow speeds and high transaction fees (aka gas fees) have plagued the network which is not only home to Ether — a token with $350bn in market cap — but also a host for several other blockchain applications (NFT, Metaverse, DeFi, Web3, DAO, DApp, supply chain projects etc.).

This is where Polygon enters. It was founded in 2019 as a “scaling solution”, which is another way of saying that it was created to improve Ethereum’s efficiency and output. It essentially works on the Ethereum blockchain to unclog the platform in a smart and cost-effective way.

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Come, Again?

Think of it as the bitly equivalent for URLs. Polygon’s Layer 2 technology (also called “rollup”) plucks out transactions from Ethereum, compresses them and posts them back on to the original chain for a fraction of time and cost. To put it in numbers, a transaction that may cost traders $50 and take 14 secs to confirm directly on Ethereum costs less than a cent and happens instantaneously on Polygon. As it so happens, Polygon is the only active Layer 2 network currently.

Sounds like a prize, when you think of it. And you’re right, it is. In fact, the rollup function isn’t the only thing Polygon does. Here are some of its other tricks/use cases…

Sidechains on Top of Sidechains

Polygon allows developers to build their own blockchains. It is sort of a secondary network that helps build tertiary networks which run as sidechains parallel to both the primary chain (Ethereum) and the secondary chain (Polygon).

The Blockchain Bridge

If you are working on a Polygon chain then you can make payments and transactions between projects which are built on Polygon as well as on Etheruem proper.

The Matic Unplugged

Matic is Polygon’s native token and it’s the underlying resource behind the Polygon ecosystem. It is used for transacting and operating on its native network and has a maximum supply of 10 billion (67% already in circulation).

Fun Fact: The “Layer 2” functionality that Polygon is associated with is something of a misnomer because the function works on four layers — an Ethereum layer, a security layer, a Polygon network layer and an execution layer.

One thing that must be clear by now is that Polygon’s success depends on Ethereum on a fundamental level. Polygon is to Ethereum what Lightning Network is to Bitcoin. Both of them are protocols that sit on top of the primary blockchain and help in scaling their processes without replacing them.

So, the idea that Polygon is an “Ethereum Killer” is far from accurate. It is more likely an “Ethereum Saviour” because it helps cement its deficiencies.

Having said that, Ethereum has been on a path of reformation for a long time now. The fabled Ethereum 2.0, which is expected to fill up some of the existing shortcomings of the chain (especially the Proof-of-Stake or PoS consensus mechanism), has been in the offing for a while now. It is expected to be a slow but effective transition.

So, the question is, once Ethereum 2.0 takes effect as intended, will sidechains like Polygon be redundant?

And if so, what happens to all the investing swirl and the money that has been rushing into Polygon lately? Not another pump-and-dump gimmick, surely?!

The Internet of Blockchains

That’s what Polygon now calls itself. At the time of its creation, the idea was to create a multi-chain ecosystem of Ethereum-compatible blockchains. In a world that’s growing increasingly unsettled with the congestion and rising costs in the Ethereum network, Polygon’s astonishingly low fees and quick transaction times are gaining massive traction.

And its social media dominance is off the charts too (636% gain in just three months in 2021). Naturally, investors have been taking a more extensive interest in the company than ever before. The company has also been in news due to its engagement with various high-profile projects, be it the M-Setu collaboration with Infosys or integration with BigQuery, a Google Cloud dataset.

And then there is the resounding growth story of the founders — four non-IITians whose rise to become the first crypto billionaires of the country has charmed the non-elite flanks left and right.

This has contributed handsomely to rising VC interest in Polygon and the Indian crypto industry at large. The latest funding, therefore, is expected to be an inflection point for homegrown blockchain startups. Perhaps Polygon’s outperformance in the market is just the fillip the Indian crypto industry needs to rake in the big bucks. Re

Sounds charming, doesn’t it? A little too charming, maybe even?!

The Fault in our Sidechain

Despite Polygon’s strengths and the building enthusiasm about its utility, its price and valuation are hardly justified. This isn’t our assessment, it’s Nasdaq’s. Much like other altcoins, Matic (Polygon’s token) has defied the logic of investing which means one must be aware of its speculative surges.

Plus, the fact that Polygon has reached a $10bn valuation with no revenue to show is perplexing, to say the least. Sure, its features complement its valuation by adding paradigms like scalability, higher throughput, low gas fees, user-friendly operation, security, interoperability etc. to its resume. Its one-stop-all DeFi feature separates it from hundreds of other altcoins and blockchains out there by showing that application is a part of its core product strategy.

Note: To be fair, some of these features are contentious too, as seen in the case of Sunflower Farming where gas fees on Polygon were pushed as high as 70%.

So, how much of a contender is Polygon to be the next big crypto phenomenon with so many contentions looming? Will it succeed? Or, will it follow along the lines of its alt peers which ultimately flatline after initial meteoric surges?

Only time will tell, as will Sequoia, SoftBank and Tiger Global, as they come to collect what they have invested.

(Originally published February 21st 2022 in transfin.in)



Padmini Das

Lawyer and policy professional. Passionate about international law and governance.