Home Altcoins News The Ethereum 2.0 Finalization Might Dent MATIC’s Performance

The Ethereum 2.0 Finalization Might Dent MATIC’s Performance

Ethereum Poylgon MATIC

Polygon has been around since 2017 as a layer 2 scaling solution for the Ethereum blockchain. However, Ethereum 2.0 is almost here and it promises to solve most of the problems that have plagued its network, such as scalability limitations and transaction speeds. This means that platforms such as Polygon that provide scaling solutions for Ethereum may end up in an awkward situation.

Ethereum network’s overreliance on external scaling solutions will come to an end once the Ethereum 2.0 final rollout takes place and this could have serious consequences for Polygon’s Matic network. However, the impact might not be as pronounced depending on various factors.

Most of the projects that have been launched on Polygon leverage the speed and scalability advantages that the network delivers while still taking advantage of the security and infrastructure offered by the Ethereum mainnet. Ethereum 2.0’s better scalability and transaction speeds will reduce the incentives to launch on the Polygon Matic network in favor of the Ethereum network.

If that is the case, Polygon might experience diminished demand which will directly affect demand for the MATIC token which has grown rapidly this year especially after its Coinbase listing in March. The token is used for staking on the network and also to facilitate transaction fees.

MATIC is currently trading at $1.53 and has risen by 12.69% in the last 7 days but its price slipped by 6.59% in the last 24 hours. To put its 2021 gains into perspective, it traded at $0.08 on January 1 and peaked at $2.7 on May 18.

Polygon MATIC USDT
 Source- Binance

The MATIC token is currently experiencing substantial trading volume although not as much as in May when it reached its all-time high. Despite the market correction, it is still trading at healthy levels compared to its performance at the start of 2021. The Stochastic indicator currently shows that it is currently in the oversold region and this explains the current bearishness.

Although it might be difficult to determine the fate of the MATIC token and Polygon platform right now, the effects of Ethereum 2.0 are predictable to some degree.  Right now there are multiple blockchain platforms offering the same services as Polygon which means they are competing for a limited client base. Once Ethereum solves its scalability limitations, it will take up a substantial proportion of the projects looking for an ideal blockchain host. In other words, Polygon’s adoption rate will slow down, thus slowing down the pace at which MATIC is growing.

How will Polygon survive the upcoming disruption?

The impact will likely not be as pronounced because Polygon already has a lot of projects currently running on its network. Polygon had more than 100 dapps running on its MATIC network and had more than 200,000 users by February 2021 and could potentially continue to attract more if its fees are lower than those of the Ethereum network. Some of the projects on Polygon such as Aavegotchi transitioned from the Ethereum network due to high gas fees.

Polygon’s MATIC network could potentially continue to enjoy healthy demand for its services if Ethereum gas fees remain high. Polygon’s roadmap and planned developments might be enough to sustain demand for the network, in which case Ethereum 2.0 would not have much of an impact. If things turn out well and Polygon continues to gain more adoption, then the MATIC token might have some more upside in the future especially if it maintains its current development trajectory. Nonetheless, there will be a lot of uncertainty in the coming months which indicates a potentially bumpy road ahead in the near term.

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Sydney Ifergan

Sydney has 20+ years commercial experience and has spent the last 10 years working in the online marketing arena and was the CMO for a large FX brokerage.

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