Polygon vs. Ethereum
Ethereum provides a decentralized and secure platform for building smart contracts, dApps and digital assets, while Polygon enables scaling through sidechains which are less congested, offering a faster and cheaper alternative.
Key Takeaways
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Ethereum is a decentralized, open-source blockchain platform that supports smart contracts, while Polygon is a Layer 2 scaling solution for Ethereum.
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Despite Polygon's significantly lower transaction costs and higher throughput, Ethereum still boasts a higher total value locked (TVL) market cap.
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For NFT buyers and sellers, it's significantly cheaper to mint, sell and buy NFTs on Polygon OpenSea than on Ethereum OpenSea.
If you are thinking of launching a crypto project like a non-fungible token (NFT), one of the critical decisions you will make is choosing which chain your project will operate on. This is where comparing how Polygon stands up against Ethereum comes in. Remember, your blockchain choice could play a significant role in your project's ultimate success.
Polygon (formerly known as Matic Network) is a decentralized platform that operates on the Ethereum blockchain. It is designed to provide fast and cheap transaction fees, making it an attractive option for developers who want to build decentralized applications (dApps) on the Ethereum network. On the other hand, Ethereum is a decentralized, open-source blockchain platform that enables the creation of smart contracts and dApps.
This guide provides a side-by-side comparison of Polygon vs. Ethereum. We look into the two blockchains and touch on their total value locked, market caps, consensus mechanisms, transaction per second, tokenomics, decentralization, and more.
What is Polygon?
Simply put, Polygon is a Layer 2 scaling solution for Ethereum. It aims to provide faster and cheaper transactions for Ethereum through sidechains. A sidechain is a separate blockchain connected to the main blockchain (in this case, Ethereum) through a two-way peg. The peg facilitates the transfer of data and assets – between the main chain and the side chains – while maintaining the main chain's security and immutability.
On Polygon, transactions are processed on the side chains rather than the main chain. This allows for faster transaction speeds and lower fees, as the side chains are not as heavily congested as the main chain. In addition, Polygon provides for the creation of multiple side chains, each with its own set of rules and governance structures. This enables developers to create customized blockchain environments for their specific needs.
Some key features of Polygon include:
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Scalability: Polygon uses a network of side chains to offload transactions from the main Ethereum chain, allowing faster transaction speeds.
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Low transaction costs: Polygon boasts significantly lower transaction costs than Ethereum.
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Compatibility: Polygon is fully compatible with the Ethereum Virtual Machine (EVM), meaning that developers can use the same tools and languages to build on Polygon as they would on Ethereum.
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Modularity: Polygon is modular, which means it can be customized to fit different needs and use cases.
Some limitations of Polygon include:
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Centralization: Polygon is partially decentralized as it relies on a set of validators to confirm and record transactions. While these validators are chosen through a democratic process, it is still possible for them to collude or act in their own self-interest, which could compromise the network's security and integrity.
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Adoption: While Polygon has gained some traction in the blockchain industry, it still has a relatively small user base compared to Ethereum.
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Limited functionality: While Polygon has a wide range of capabilities, it may not be suitable for all use cases and may not offer the same functionality as Layer 1 blockchains, like Ethereum.
What is Ethereum?
Ethereum is a decentralized, open-source blockchain platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud, or third-party interference. Ethereum was created in 2015 by Vitalik Buterin, a Russian-Canadian programmer and co-founder of Bitcoin Magazine. It's often referred to as a "world computer" because it was the first blockchain to allow developers to build and deploy dApps that run on a global network of computers rather than just on a single server or computer.
Ethereum operates on a decentralized computer network that uses a proof-of-stake (PoS) consensus algorithm to validate transactions and add them to the blockchain. It is secured by a network of computers (also known as nodes) that work together to validate transactions and add them to the blockchain.
Besides, Ethereum has its programming language called Solidity, which is used to write smart contracts. These smart contracts can be used to facilitate the exchange of anything of value, including money, property, and shares, and they are automatically executed once the specificied conditions are met.
Some key features of Ethereum include:
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Smart contracts: Ethereum allows developers to create self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code.
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DApps: Ethereum enables the development of dApps that are not controlled by any single entity.
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Programming language support: Ethereum supports multiple programming languages, making it more accessible to a broader range of developers.
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Ecosystem: Ethereum has a large and more active developer community than any other blockchain, as well as a growing ecosystem of tools and resources for building dApps.
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Security: Ethereum has been in operation since 2015. It has never experienced severe security issues throughout this period, like a 51% attack or total shutdown like most Layer 2 chains.
Some limitations of Ethereum include the following:
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Scalability: Ethereum has struggled with scalability issues since the 2017 ICO boom. It has limited throughput and can become congested with high numbers of transactions. The Merge, which marks the move of Ethereum from Proof-of-Work to Proof-of-Stake, is one of the Ethereum upgrades with the goal of improving scalability.
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Complexity: Ethereum can be complex for developers new to blockchain technology, as it requires a good understanding of programming and cryptography.
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Cost: Ethereum transactions can be costly, especially during high network usage.
Polygon vs. Ethereum
While Polygon is touted as an Ethereum killer, Ethereum is still holding strong against the competition. As of time of writing, Ethereum boasts a higher total value locked (TVL), market capitalization, and a larger dApp ecosystem. Meanwhile Polygon offers cheaper transactions and higher transactions per second.
TVL
As of January 2023, according to DefiLlama Ethereum has a TVL of $27.25b, while Polygon has a TVL of $1.15b. TVL refers to the total value of funds locked in the smart contracts on a given blockchain. It indicates the assets available in various ecosystem dApps for trading, borrowing, lending, staking, farming, etc. Generally, a higher TVL shows more growth in the DeFi landscape of that ecosystem – reflecting usability, liquidity, and popularity.
Market Cap
As of January 2023, the Ethereum ecosystem boasted a market cap of $474.6b, while the Polygon ecosystem had a market cap of $220.9b. The market cap of an ecosystem is the sum of the market caps of the assets that live on that chain. You can calculate the market cap of an asset by multiplying its current price by the circulating supply.
Market cap = Price x Circulating Supply
The higher the market cap of an ecosystem, the more dominant it is in the crypto market.
Consensus Mechanism
Both Polygon and Ethereum use the PoS mechanism to achieve consensus. Ethereum migrated to the PoS mechanism during The Merge because of the energy burden of PoW. It's important to note that Polygon uses the PoS mechanism and other techniques to achieve high scalability and low gas fees. These techniques include Plasma chains, ZK-rollups, and optimistic rollups.
Transaction per Second (TPS)
TPS is a tool for measuring the scalability of a blockchain. The higher the TPS value, the more scalable the network is. After the successful implementation of The Merge and completion of the upcoming Sharding upgrade, Ethereum will boast a TPS of up to 100,000. On the other hand, Polygon promises the potential of over 7,000 TPS. Realistically, as of time of writing, the current TPS of Ethereum is at around 11 TPS, while Polygon clocks in at 34 TPS.
Tokenomics
Ethereum has a circulating supply of almost 120.5m and an uncapped maximum supply.
The initial distribution of Ethereum (ETH) is as follows:
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83.33% is allocated to Ethereum Crowdsale.
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16.68% is allocated to Ethereum Foundation, Early Contributors & Others.
Polygon has a circulating supply of 8.9b and a maximum supply of 10b.
The initial distribution of Polygon (MATIC) tokens is as follows:
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12.00% is allocated to Staking Rewards
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23.33% is allocated to the Ecosystem
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21.86% is allocated to the Foundation
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4.00% is allocated to Advisors
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16.00% is allocated to the Team
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3.80% is allocated to Private Investors
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19.00% is allocated to Binance Launchpad
Decentralization
Polygon has capped the number of its validators at 100, implying only a few participants secure the Polygon blockchain. Apart from the small number of validator sets, the whole Polygon security and the dApps running on it are controlled by merely 5-out-of-8 multisig (four of which are owned by the Polygon team. These two points make Polygon partially decentralized. On the other hand, Ethereum has over 400,000 validators and is decentralized to a level where it can't be censored.
Gas Fees on Polygon and Ethereum
One of the significant Ethereum pain-points Polygon developers wanted to solve was the exorbitant gas fees that plague the network during periods of high congestion. The table below illustrates how Polygon compares to Ethereum regarding gas fees, and while Ethereum gas fees are significantly lower now compared to their previous high of $196.69, Polygon still offers cheaper gas fees than Ethereum.
In a bid to keep gas fees low even when there is a lot of activity on the network, Polygon implemented a hard fork on January 17 2023 to smooth out "gas spikes", which are esevere fluctuations in gas prices due to Polygon's PoS chain's faster block times.
Opensea: Selling and Buying NFTs on Polygon vs. Ethereum
Polygon and Ethereum blockchains support the minting and trading of NFTs. OpenSea is a marketplace for minting and trading NFTs, and recently, OpenSea started supporting Polygon NFTs in addition to Ethereum NFTs. Partly due to Polygon's low transaction fees, OpenSea pays for all gas costs on Polygon, making transactions free for users, although users still need to pay gas fees if they are transferring ETH to the Polygon network.
Polygon appeals to small-time purchasers, as based on Dune Analytics, the average cost of an NFT on Ethereum OpenSea is approximately $345, while the average cost of an NFT on Polygon OpenSea is significantly less at $10.
While minting and trading NFTs on Polygon OpenSea is cheaper than Ethereum OpenSea, most Polygon NFTs are not blue-chip NFTs and boast lesser cultural significance. Most blue-chip NFTs, including CryptoPunks (PUNK), Bored Ape Yacht Club (BAYC), Azuki (AZUKI), and PudgyPenguins (PPG), live on the Ethereum network. However, this might change, given the popularity of Reddit's Collectible Avatars NFTs, which are minted on Polygon.
Ultimately, whether to buy and sell NFTs on Polygon or Ethereum OpenSea depends on your specific needs and priorities. If you are looking for low gas fees and want to tap into a growing market, Polygon might be a good option. If you are looking for more liquidity and want to list your collection alongside blue-chip NFTs, Ethereum might be a better choice.
Conclusion
Polygon aims to make it easier for people to access and use Ethereum by providing a scaled up version of the Ethereum network with lower fees and faster transaction times. While there may be uncertainty about Polygon's role in the future once Ethereum completes its upgrades, Polygon currently serves a valuable purpose in the cryptocurrency ecosystem by helping bring more people in by providing scalable solutions for web3.
Josiah is a tech evangelist passionate about helping the world understand Blockchain, Crypto, NFT, DeFi, Tokenization, Fintech, and Web3 concepts. His hobbies are listening to music and playing football. Follow the author on Twitter @TechWriting001
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