Polygon Vs. Ethereum: Decoding the differences

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Polygon Vs. Eth...

Polygon Vs. Ethereum: Decoding the differences

8 mins read / updated on Thu Nov 16 2023

Ethereum furnishes a decentralized and fortified platform for crafting smart contracts, dApps, and digital assets. In contrast, Polygon augments scaling via less crowded sidechains, presenting a quicker and more economical alternative.

Polygon, which used to be Matic Network, is a decentralized platform on the Ethereum blockchain. Polygon is designed to offer rapid and economical transaction fees and appeals to developers eager to construct decentralized applications (dApps) on the Ethereum network. In contrast, Ethereum is a decentralized, open-source blockchain platform that facilitates the formation of smart contracts and dApps.

This guide provides a comprehensive juxtaposition of Polygon vs. Ethereum, examining these two blockchains in-depth and shedding light on their total value locked, market capitalization, consensus algorithms, transactions per second, tokenomics, decentralization, and beyond.

Ethereum vs. Polygon Quick Overview

Polygon and Ethereum are the two most renowned proof-of-stake blockchain networks. For context, Solana holds the third position in popularity. While Ethereum is a secure, decentralized blockchain network apt for crafting decentralized applications, dApps, forming smart contracts, and NFT creation, Polygon blockchain’s appeal lies in its lower transaction costs and swifter transactions relative to Ethereum. It is particularly attractive for gaming and high-frequency transactions. Nevertheless, Ethereum remains the preferred choice in DeFi and among NFT creators.

Both networks use Solidity programming language to create smart contracts and support the NFT marketplace, stablecoins, DeFi, GameFi, and digital payments. Although Polygon’s transaction fees are substantially lower, Ethereum still holds a more substantial TVL (total value locked).

For NFT enthusiasts, Polygon’s OpenSea platform significantly undercuts Ethereum’s OpenSea in selling, minting, and purchasing NFTs.

While Ethereum is home to various projects and decentralized exchanges such as Uniswap, MakerDAO, and Compound, Polygon’s ecosystem includes platforms like Aave, Curve Finance, and Sushiswap.

Now, let’s further explore these two blockchain networks, analyzing their main attributes, strengths, and weaknesses.

Also Read: Type Of Blockchains

What is Polygon?

In essence, Polygon is a Layer 2 scaling solution for Ethereum, striving to render quicker and more affordable transactions for Ethereum via sidechains. In this context, a sidechain is a separate blockchain tethered to the primary blockchain (Ethereum, in this case) via a two-way peg. This peg ensures the seamless transfer of data and digital assets between the main chain and the side chains while preserving the main chain's security and permanence.

On Polygon, transactions are handled on the side chains instead of the main chain, facilitating accelerated transaction speeds and reduced fees since the side chains are typically less burdened than the main chain. Moreover, Polygon empowers developers to create a spectrum of uniquely governed side chains, allowing for tailored blockchain environments for varied needs.

Also Read: Altcoins

Some Key Characteristics of Polygon:

- Scalability: Offloads transactions from Ethereum’s main chain through a network of side chains, promoting faster transactions.

- Low Transaction Costs: Significantly more economical than Ethereum.

- Compatibility: Fully aligns with the Ethereum Virtual Machine (EVM), which means developers can utilize the identical tools and languages as they would on Ethereum.

- Modularity: Polygon’s architecture can be tailored to suit diverse needs and use cases.

Also Read: ERC 1155

Some Polygon Limitations:

- Centralization Aspects: Relies on a set of validators to verify and record transactions. Despite being selected democratically, these validators may collude or act selfishly, potentially undermining the network’s security and integrity.

- Adoption: Compared to Ethereum, Polygon still extends its user base within the blockchain industry.

- Limited Functionality: Despite its broad capabilities, Polygon might only be ideal for some use cases and may not equal Layer 1 blockchains like Ethereum in functionality.

Also Read: Blockchain Network Congestion

What is Ethereum?

Ethereum is a decentralized, open-source blockchain platform that executes smart contracts—applications that function precisely as programmed without the likelihood of interruptions, censorship, fraud, or third-party interferences. Established in 2015 by Vitalik Buterin, Ethereum is often likened to a “world computer” due to its pioneering nature—it was the initial blockchain to permit developers to create and deploy dApps on a global computer network, as opposed to a singular server or computer.

Ethereum is upheld by a decentralized computer network that utilizes a proof-of-stake (PoS) consensus algorithm to validate and record transactions on the blockchain.

Furthermore, Ethereum has its distinct programming language, Solidity, employed to compose smart contracts. These contracts facilitate the automated exchange of anything valuable without intermediaries.

Also Read: Blockchain Bridges

Some key features of Ethereum include:

- Smart Contracts: Enables developers to craft self-executing contracts with the conditions of an agreement written into code.

- DApps: Supports the development of dApps independent of central control.

- Programming Language Support: Accommodates multiple programming languages, inviting a diverse range of developers.

- Ecosystem: Has a vibrant and active developer community and a growing assortment of tools and resources for crafting dApps.

- Security: Since its inception in 2015, Ethereum has retained a solid security record.

Also Read: EIP-1559

Some limitations of Ethereum include:

- Scalability: Ethereum has grappled with scalability, a challenge highlighted since the 2017 ICO surge. Its transaction capacity can be strained under high volumes. Upcoming upgrades like The Merge and Sharding aim to enhance scalability significantly.

- Complexity: Ethereum’s landscape can be intricate for newcomers to blockchain technology, necessitating a solid grasp of programming and cryptography.

- Cost: Transactions on Ethereum can be costly, notably during periods of high network traffic.

Polygon Vs. Ethereum - Total Volume Locked [TVL]

As of January 2023, data from DefiLlama reveals Ethereum with a TVL of $27.25b and Polygon with a TVL of $1.15b. TVL denotes the aggregate value of digital assets secured in smart contracts on a particular blockchain. It verifies the digital assets available in an ecosystem’s dApps for activities such as trading, borrowing, lending, staking, and farming. Generally speaking, a higher TVL signals a burgeoning DeFi scene within that ecosystem—indicative of its usability, liquidity, and appeal.

Polygon Vs. Ethereum - Market Capitalization

As of January 2023, the market capitalization of Ethereum’s native token, ETH, stands at approximately $229.4b, while Polygon’s native token, MATIC, is valued at roughly $10.3b, according to CoinGecko. Market capitalization denotes the aggregate market value of a particular digital currency. It is calculated by multiplying the circulating supply of a token by its present market price. Typically, a higher market capitalization is correlated with more considerable stability and reduced volatility, although this is not universally true.

Polygon Vs. Ethereum - Consensus Algorithms

Ethereum’s Consensus Algorithm: Since December 2021, Ethereum transitioned from a Proof-of-Work (PoW) consensus algorithm to a Proof-of-Stake (PoS) consensus through the Beacon Chain. The PoS consensus protocol is integral to Ethereum 2.0, the blockchain’s ongoing upgrade, designed to enhance scalability, security, and sustainability. In a PoS model, validators supplant miners to validate and record transactions on the blockchain. Validators are chosen based on the quantity of cryptocurrency they are willing to “stake” or lock up as collateral.

Polygon’s Consensus Algorithm: Polygon’s consensus is structured on a variation of the PoS algorithm known as Heimdall and Bor. This PoS model involves a set of validators elected to confirm transactions and place them into blocks. Validators are incentivized to act honestly, as dishonest or malicious actions can result in their staked MATIC tokens being confiscated.

Polygon Vs. Ethereum - Transactions Per Second (TPS)

As of the start of 2023, Ethereum can process approximately 30 transactions per second. However, with the impending integration of sharding with Ethereum 2.0, this figure is anticipated to surge to 100,000 transactions per second.

In contrast, Polygon boasts a significantly higher transaction throughput, which can handle 7,200 transactions per second. This stark difference in transaction capacity is one of Polygon's most compelling advantages over Ethereum, particularly for dApps requiring high transaction volumes.

Polygon Vs. Ethereum - Tokenomics

Ethereum (ETH) is not only the native cryptocurrency of the Ethereum network but also functions as “gas” for powering smart contracts and transactions on the network. The total supply of ETH is not capped, but with the introduction of EIP-1559, part of the transaction fees (the “base fee”) is burned, introducing a deflationary mechanism to ETH’s economy.

Polygon (MATIC), the native token of the Polygon network, plays several roles. It is used for staking by validators, as a unit of payment for transaction fees, and for participating in the network’s governance. MATIC has a fixed supply of 10 billion tokens.

Polygon Vs. Ethereum - Decentralization

Ethereum is often recognized as one of the most decentralized blockchain platforms today. It maintains a globally dispersed network of nodes and has no centralized point of failure.

Polygon, while designed as a decentralized network, Polygon has certain elements that can be perceived as more centralized than Ethereum. For instance, the network relies on a set of validators, which, while elected, could theoretically collude under specific circumstances.

Also Read: Ethereum Staking Rewards

The Final Verdict

In conclusion, while Polygon and Ethereum are intertwined, they serve distinct roles within the blockchain ecosystem. Ethereum remains a foundational layer for decentralized applications and smart contracts, known for its security and decentralization. As a Layer 2 scaling solution, Polygon enhances Ethereum by offering a faster and more cost-effective environment, making it an attractive solution for developers seeking high throughput and lower fees.

For end-users and developers, the decision between Ethereum and Polygon will often hinge on the specific needs of their use case—whether they prioritize decentralization and security (Ethereum) or speed and cost-effectiveness (Polygon).

Also Read: Matic Staking Rewards

Frequently Asked Questions

Q: How does Polygon achieve faster and cheaper transactions compared to Ethereum?

A: Polygon achieves faster and cheaper transactions through its Layer 2 scaling solution, which uses sidechains. These sidechains offload transactions from the main Ethereum chain, reducing congestion and allowing for faster transaction speeds and lower transaction costs.

Q: Which platform is better for decentralized applications (dApps)?

A: Both platforms are suitable for dApps. Ethereum is more established and secure and has a larger developer community, but its transaction fees can be high. Polygon provides lower transaction fees and faster transaction speeds, making it attractive for high-transaction-volume dApps, particularly for smaller budgets.

Q: Is Polygon a true competitor to Ethereum?

A: No, Polygon is not a true competitor to Ethereum. It is designed as a Layer 2 scaling solution to work with the Ethereum blockchain to solve its scalability issues. It aims to enhance Ethereum’s capabilities rather than compete against it.

Q: What are the advantages of using Ethereum over Polygon?

A: Ethereum has a larger and more established developer community, more security due to its longer operational history, and is widely adopted as a decentralized platform for digital assets, smart contracts, and dApps. It also has a broader ecosystem of tools, resources, and projects.

Q: What are the advantages of using Polygon over Ethereum?

A: Polygon offers faster transaction speeds and significantly lower transaction costs compared to Ethereum. It is particularly advantageous for users with smaller budgets or requiring frequent, low-cost transactions, such as in GameFi applications.

Q: How does the community and ecosystem of Polygon compare to Ethereum's?

A: Ethereum has a larger, more active developer community and a broader ecosystem of tools, resources, and decentralized applications. Polygon is growing but has a comparatively smaller user base and ecosystem than Ethereum.

Q: Can Ethereum and Polygon be used together?

A: Yes, Ethereum and Polygon can be used together. Polygon is designed as a Layer 2 scaling solution for the Ethereum blockchain. It aims to provide faster and cheaper transactions for Ethereum, with assets and data able to move seamlessly between the two.

Q: What are the limitations of using Polygon as a scaling solution for Ethereum?

A: Some limitations of using Polygon include potential centralization risks due to its set of validators, a smaller user base compared to Ethereum, and potentially limited functionality for certain use cases compared to Layer 1 blockchains like Ethereum.

Q: How does the adoption and growth of Polygon compare to Ethereum's?

A: Ethereum is more established and has seen widespread adoption since its inception in 2015. It has a massive developer community and is the leading platform for decentralized applications. Polygon is growing steadily and gaining traction, especially due to its lower transaction costs, but it has a smaller user base and ecosystem than Ethereum.