Matic jumps 5% despite major crypto rout: How does it work; why is it in demand?

Over the last one year, the digital currency has spiked nearly 11,000%.Premium
Over the last one year, the digital currency has spiked nearly 11,000%.
 1 min read . Updated: 19 May 2021, 05:50 PM IST Abhinav Kaul

MUMBAI : Made-in-India crypto token Matic, which is the native token of Polygon, traded higher on Wednesday on a day when only four-five digital assets out of the top 100 cryptocurrencies showed positive movement. Sentiment in crypto market soured after China warned investors against speculative crypto trading.

In a widespread sell-off, bitcoin plunged as much as 13% to trade below the $40,000 level, while ether cracked over 16% to give up the $3,000 mark. However, despite the bearish mood, Matic traded 5% higher at $2.27 around 4 pm IST, according to CoinGecko. Over the last one year, the digital currency has spiked nearly 11,000%. Thanks to the recent rally in its price, Matic has become the 14th biggest cryptocurrency with a market capitalization of over $14 billion.

MORE FROM THIS SECTIONSee All

Matic is the native currency of Polygon (formerly Matic Network), which was co-founded in 2017 by three Indian software engineers—Jaynti Kanani, Sandeep Nailwal and Anurag Arjun. Polygon tries to solve pain points associated with blockchains such as high gas fees and slow speeds, without sacrificing on security. The project seeks to stimulate mass adoption of cryptocurrencies by resolving the problems of scalability on many blockchains.

“With Polygon, we want to enable ethereum to become a robust, highly-scalable multi-chain environment that acts as the backbone of the Web3 revolution," Jaynti Kanani, co-founder of Matic Network said in February while announcing changing to Polygon and expanding the mission and tech scope. Polygon can achieve up to 65,536 transactions per block. Meanwhile, according to coinmarketcap.com, Matic tokens are used for payment services on Polygon and as a settlement currency between users who operate within the Polygon ecosystem.

New Matic tokens are released on a monthly basis and around over six billion tokens are in circulation, with a maximum supply capped at 10 billion. Polygon seeks to ease the problems associated with ethereum, which is the base layer that Polygon is using. Ethereum has come under criticism for having high fee structure for enabling transactions. According to experts, layer 2 scaling projects, such as Polygon, can help decentralized finance (DeFi) protocols bypass ethereum’s high transaction costs, which can open up this platform to more users.

The demand for layer 2 scaling solution is attracting capital inflows, which is in turn fuelling the rise in Matic tokens.

While Polygon currently supports only Ethereum basechain, the network intends to extend support for additional basechains.

Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.

Never miss a story! Stay connected and informed with Mint. Download our App Now!!

Close