KYC stands for &ldquo;<strong>Know Your Customer</strong>&rdquo;. It&rsquo;s a set of financial regulations that all banking and financial institutions around the world must comply with, to some extent. Essentially, these institutions must collect information about their customers (identify them), in order to identify and prevent any and all potential fraud, money laundering, and other types of defrauding activities.</p>\n<p>Traditional banking institutions comply with and enact some very strict KYC checks. This is because, by default, traditional banks are very strictly regulated. With cryptocurrencies, things are a bit more in the grey area.</p>\n<p>First, you have DEXs - <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-decentralized-exchange-dex/">decentralized cryptocurrency exchange platforms</strong></a>. Individuals who trade on these platforms are able to remain <strong>completely anonymous</strong> in doing so. As you can imagine, Russian citizens were not an exception in this regard - theoretically, DEXs could have helped Russians avoid all of those aforementioned sanctions.</p>\n<p>The situation isn&rsquo;t all that much better with <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-centralized-exchange-cex/">centralized exchanges</strong></a>, either. While many of them do comply with KYC laws and regulations, this compliance is often very surface-level, and not in-line with other, traditional financial institutions. That&rsquo;s because crypto regulation is still a very uncertain topic, and there are a lot of grey areas and loopholes.</p>\n<p>One of the best examples of this would be <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/goon/kraken/" target=\"_blank\" rel=\"nofollow noindex noopener\"><strong>Kraken</strong></a>, a well-known and highly-respected cryptocurrency exchange. Kraken CEO, Jesse Powel, has said that the exchange will comply with the sanctions as much as the legalities of the matter are concerned, but that the platform won&rsquo;t ban Russian users outright, since this would be unfair, granted that there are plenty of people in the country that did not support Russia&rsquo;s actions in Ukraine.</p>\n<p>To top it all off, Russia developed the so-called &ldquo;<strong>digital ruble</strong>&rdquo;, a virtual version of the country&rsquo;s currency. Back in 2020, Russia&rsquo;s Central Bank had pointed out that the digital ruble would make Russia &ldquo;more independent&rdquo; from the West, and ease many potential sanctions that other countries could impose on them.</p>\n<p>So, with all of that in mind, what&rsquo;s the answer here - could cryptocurrencies truly pose a risk of mitigating, or even nullifying the sanctions imposed on Russia?</p>\n<p><strong>Well, I think that no - not even by a long shot. </strong>Allow me to elaborate on this, and explain why I think so.</p>\n<h3>Devaluation</h3>\n<p>The very first problem for countries sanctioned like Russia is the devaluation of money.</p>\n<p>Devaluation is basically the deliberate downward adjustment of the value of a country's money relative to another currency, usually US dollars.</p>\n<p>So, think of it this way: imagine there is a bank: 50% filled with, say Russian rubles, and 50% with US dollars. One day, everybody starts bringing their rubles to the bank to get US dollars in exchange. Guess what happens? Banks start accumulating more rubles and losing dollars. Which one do you think will grow in price, and which one will become worthless?</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/can_crypto_mitigate_sanctions_3.o.jpg/" alt=\"The practical use of cryptocurrencies: Devaluation.\" width=\"1000\" height=\"1231\" /></p>\n<p>Because of the massive and constant demand for dollars, <strong>the ruble will definitely start to go down</strong> each time a new <em>babushka</em> brings her already low-valued rubles into the bank, compared to the US dollar, which will grow like crazy. The same will happen with rubles and <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-bitcoin-btc/">Bitcoins - the Bitcoin price will grow, because the enormous demand will affect the market, and the ruble will keep going down to the bottom.</p>\n<p>From the governmental point of view, this move is lethal, and they will never allow their own currency to lose value, in exchange for an uncontrolled, not government-specific one.</p>\n<p>So, to be clear, if your average Russian starts using crypto, this will devalue the ruble even more - that, in turn, would weaken Russia&rsquo;s power. It is said that the Russian Central Bank is actually cracking down on crypto, altogether!</p>\n<p>Additionally, very recently,<strong> the Russian government issued new laws</strong> that limited Russian citizens from sending, receiving, and transacting with any foreign currency, such as USD.</p>\n<p>Specifically, upon receiving foreign currency, Russian citizens had to convert 80% of the total sum into rubles in three days, or risk getting fined. So, even if you resided in Russia, and traded your cryptocurrencies into USD or EUR, you would need to switch it to rubles, almost immediately.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/can_crypto_mitigate_sanctions_5.o.jpg/" alt=\"The practical use of cryptocurrencies: Converting 80% of the total sum of foreign currency into rubles.\" width=\"1000\" height=\"533\" /></p>\n<p>This comes with not one, but TWO additional problems - the fact that the <strong>ruble was tanking in price, and was very volatile,</strong> as well as the fact that there simply <strong>wasn't enough liquidity on the market</strong> for the entirety of Russia to swap between crypto and some traditional currency.</p>\n<h3>Mass Adoption</h3>\n<p>The second issue that sanctioned countries such as Russia face is mass adoption.</p>\n<p>Let's say you have a jar of 100 candies. A child comes and eats 97 candies, all at once. However, you manage to stop the child right before he eats all 100 candies, so there are 3 left. Now, do you think that the 3 candies left will make a big difference for the child's health?</p>\n<p>How does this tie into what we&rsquo;re talking about today? Well, a lot of attention was placed on crypto, in regards to Russia and the sanctions - I'm talking about the mainstream media, many politicians, and so on. What the above example illustrates is that <strong>cryptocurrencies were way too small for them to make a difference,</strong> in the grand scheme of things!</p>\n<p>Around 3% of the global population actually hold crypto, in any form. Following that, people usually hold small amounts of crypto, too - very few have all of their life savings invested into the space. A popular number that I&rsquo;ve seen thrown around online is 10% - so, sure, let&rsquo;s say that 10% of crypto holders have their life savings invested into the space.</p>\n<p>So, less than 0,3% of the total global net worth is currently in crypto. Let&rsquo;s transfer this example to Russia - even if 0,3% <em>(and I&rsquo;m being generous with this number)</em> of Russians hold a lot of cryptocurrencies, that&rsquo;s still a very small number. In circumstances like these, <strong>sudden and unexpected mass adoption within the country is simply impossible.</strong></p>\n<p><strong><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/can_crypto_mitigate_sanctions_6.o.jpg/" alt=\"The practical use of cryptocurrencies: Around 3% of the global population holds crypto.\" width=\"1000\" height=\"427\" /></strong></p>\n<p>Where is the rest of all the money, though? Where&rsquo;s the 99,7%?</p>\n<p>Two places - people&rsquo;s pockets, and bank accounts.</p>\n<p>Instead of focusing on crypto, all of the sanctions should be focused on traditional banking and money flow mechanisms - again, crypto is just too small to make a real difference for them!</p>\n<p>Another barrier to mass adoption is your partners. Internally, Russians have no problems getting and spending their rubles, but if they do business with foreign companies, this is a big issue.&nbsp;</p>\n<p><em>Why?</em></p>\n<p>Imagine that you&rsquo;ve swallowed all of the sanctions, and decided to jump into the crypto bandwagon to help your business survive. The problem will appear on the other side - that of your foreign partners.</p>\n<p>As an example, your business is to retail iPhones, and you order them in bulk from international distributors - foreign companies. Even if you become crypto-friendly, it will not change anything, because overseas companies that you deal with will still be aware of the entire situation. No big foreign distributor will sell you iPhones officially, in exchange for crypto!</p>\n<p>The same situation can be applied to ordinary Russians, as well. Say, a babushka&rsquo;s grandson has emigrated into the US and is helping her by sending part of his income every month. Now, his task is to learn how to make those same transactions, but in crypto! On top of that, he will then need to teach his old babushka to use crypto, too. For a big chunk of the old population in Russia, this is a huge \"no-go\" option.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/can_crypto_mitigate_sanctions_7.o.jpg/" alt=\"The practical use of cryptocurrencies: Teaching babushka to use crypto.\" width=\"1000\" height=\"670\" /></p>\n<p>Speaking of mass adoption and partners, a comment that was often made is that <strong>Russia could have simply traded with China, </strong>with the help of crypto. Well, cryptocurrencies are banned in China, at least at the time I&rsquo;m writing this section - same as Russia, the country doesn&rsquo;t look favorably on decentralized and anonymity-preserving currencies.&nbsp;</p>\n<p>Do you really think the great Communist Party of China will agree on crypto matters, just to give you a better option to buy an iPhone plastic cover, fake Ipad, or a couple of low-quality gadgets on AliExpress using crypto?</p>\n<p>Even if this situation was more lenient, that wouldn&rsquo;t really change much, since you then have to think about the entire <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-supply-chain/">supply chain</strong></a>, how the trades would happen, and how they could be hidden from the rest of the world.</p>\n<p><strong>Spoiler alert - they couldn&rsquo;t.</strong></p>\n<h3>Privacy</h3>\n<p>The third issue that sanctioned countries such as Russia face is privacy.</p>\n<p><strong>In Russia - cash is the king.</strong> Think about it this way - normally, you were getting lots of cash in suitcases, and spending it the same way. Buying your Lambo, a house, or simply a burger on a street in cash - this is the reality in Russia, and nobody cares how you got your money. With crypto, it's all impossible. People would be afraid to be tracked and taxed - it&rsquo;s a big deterrent for most Russians!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/can_crypto_mitigate_sanctions_8.o.jpg/" alt=\"The practical use of cryptocurrencies: Privacy.\" width=\"1000\" height=\"638\" /></p>\n<p><strong>Cryptocurrency transactions aren&rsquo;t as untraceable as you might think.</strong> While your trades are anonymous, on the very basic level, there are special companies that are dedicated to analyzing on-chain data, for different types of cryptos.</p>\n<p>So, if you trade Bitcoin, your address might eventually be flagged as being located in Russia. This, in turn, would prevent many centralized exchanges from offering their services to you, and cause a lot of additional issues.</p>\n<p>This is especially so true when you consider the fact that US Senators were looking into the topic by raising the question of how Russia could use digital currencies to overcome and avoid the sanctions imposed on the country.</p>\n<p>Granted that the US was looking into the matter, it was very possible that there couldn't really be a major loophole for Russians to use when it comes to crypto.</p>\n<p>Now, I can hear you asking - <strong>what about privacy coins?</strong> Couldn't Russia have used those, in order to avoid sanctions?</p>\n<p>Alright, let&rsquo;s take a look at them. Specifically, let&rsquo;s take the most popular privacy coin - <strong>Monero</strong> - as an example.</p>\n<p>Monero, at the time of writing this section, had a <strong>market cap of around $3 billion.</strong> That&rsquo;s a large number, for a cryptocurrency that was created to be virtually untraceable! However, the <strong>total GDP of Russia was $1,5 trillion. </strong>So, Monero makes up 0,2% of the total GDP of Russia. Once again, as you can probably imagine, that&rsquo;s practically nothing, in the grand scheme of things.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/can_crypto_mitigate_sanctions_9.o.jpg/" alt=\"The practical use of cryptocurrencies: The total GPD of Russia - $1.5 trillion.\" width=\"1000\" height=\"544\" /></p>\n<p>So, here&rsquo;s an example. Let&rsquo;s imagine that ALL of the $3 billion worth of Monero would be accessible to be used in Russia. That&rsquo;s impossible, but for the sake of this example, let&rsquo;s just assume that.</p>\n<p>If that was the case, only 2 out of 1000 Russians would have access to Monero, on average. Again, though - this is assuming that the entirety of the Monero market cap is located in Russia and that the GDP is spread out equally throughout the country. In reality, that number is much, MUCH worse.</p>\n<h2>Conclusions</h2>\n<p>So, could a country function only on cryptocurrencies? Could crypto substitute traditional currencies and become the one and only payment method? <strong>Well, as of now, no, that's definitely not possible.</strong></p>\n<p>Even though crypto is seemingly everywhere in the news, and everyone&rsquo;s talking about mass adoption, it&rsquo;s still WAY too small and too complicated for countries to use it as the main currency, and this is why it&rsquo;s a huge opportunity for us to dive in as early adopters!</p>","preview_url":"https://www.bitdegree.org/crypto/learn/practical-use-of-cryptocurrencies","youtube_video":{"id":19,"channel_id":1,"sort":43,"video_title":"Can Russia Use Crypto to Bypass Sanctions? (Animated)","description":"Can Russia use crypto to bypass sanctions?\n\nDue to Russia unjustifiably attacking Ukraine, Western countries and their allies are imposing a series of sanctions on Russia. The list of sanctions, as well as foreign companies leaving the country, is getting bigger every day.\n\nThere is a general notion online that Russia could mitigate the damage done by these sanctions by utilizing cryptocurrencies. In this video, I will tell you about the most significant sanctions imposed on Russia thus far, and also, whether or not crypto could help the country minimize the damage done to its economy by those said sanctions.\n\nWhat role do you think cryptocurrencies play, when it comes to the Russia’s war in Ukraine? Share your opinion in the comments below.\n\nVideo Time Table:\n\n0:00 Introduction to Can Russia Use Crypto to Bypass Sanctions\n1:17 Sanctions in Russia\n5:06 Crypto as a Tool to Avoid Sanctions?\n7:16 Issues Faced by Sanctioned Russia: Devaluation\n9:03 Issues Faced by Sanctioned Russia: Mass Adoption\n12:01 Issues Faced by Sanctioned Russia: Privacy\n14:18 Wrap-up: Can Russia Use Crypto to Bypass Sanctions?\n\nGet Quick Crypto Tips on Twitter - Follow:\nhttps://twitter.com/crypto_xplained\n\n#RussiaSanctions #SanctionsAgainstRussia #RussiaCrypto","video_id":"2vVj6jAuBNE","duration":916,"view_count":521,"thumbnail_url":"https://i.ytimg.com/vi/2vVj6jAuBNE/hq720.jpg","thumbnail_width":1280,"thumbnail_height":720,"published_at":"2022-03-31 16:29:44","created_at":"2022-03-31T23:00:01.000000Z","updated_at":"2023-05-21T23:00:04.000000Z","channel":{"id":1,"title":"CryptoFinallyExplained","channel_id":"UCOryUY0yxC08eJtK23mNgiA","main_playlist_id":"UUOryUY0yxC08eJtK23mNgiA"}}},"prevSection":{"id":25,"featured_image_id":6891,"original_id":null,"youtube_video_id":26,"author_id":42,"translator_id":null,"chapter_id":2,"title":"The Bridge Between Blockchains: Polkadot","slug":"what-is-polkadot-in-crypto","definition":"Did you know that in October 2017, about 10 million DOT tokens were minted on Ethereum following a successful ICO that raised $145 million?","status":"published","content":"<p>In this section, I&rsquo;ll tell you about Polkadot. Specifically, I&rsquo;ll tell you what is Polkadot in crypto, how it works, and what it&rsquo;s used for, in the first place.</p>\n<p>Imagine that you have decided to visit a friend who lives in another town. He&rsquo;s organizing a small get-together, and there will be people who will come from multiple other towns and cities. Driving there, however, all of you notice that there&rsquo;s a river that needs to be crossed, in order to get to the friend&rsquo;s house.</p>\n<p>Even though you and the other people are coming from different towns, each and every one of you needs to cross that river in order to be able to meet each other. Thankfully, though, there are bridges that allow you to cross, no sweat. <strong>In the crypto world, these bridges would be called Polkadot.</strong></p>\n<p><em>Now, let&rsquo;s get into more detail!</em></p>\n<h2>What is Polkadot?</h2>\n<p>I&rsquo;ll get back to the example I gave at the beginning of the section shortly. Before I do that, though, let&rsquo;s first explore WHAT Polkadot is.</p>\n<p><strong>Polkadot is a cryptocurrency project.</strong> It&rsquo;s a dedicated blockchain network <em>(meaning, it has its own blockchain)</em>, with <strong>a</strong> <strong>native coin called DOT. </strong>At the time I'm writing this section, Polkadot is the 11th largest cryptocurrency, by market capitalization.</p>\n<p>Polkadot has a very interesting history. It&rsquo;s a crypto project that sometimes gets mixed up with <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-ethereum-eth/">Ethereum, with people thinking that Polkadot actually uses Ethereum in its operations. Well, it does not - however, the two crypto projects are actually related, in a very specific way.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-polkadot-01.o.jpg/" alt=\"What is Polkadot in crypto: Cryptocurrency project.\" width=\"1000\" height=\"556\" /></p>\n<p>Polkadot was created by a man named <strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/who-is-gavin-wood/">Gavin Wood</a>.</strong> If this name sounds familiar to you, it&rsquo;s because Wood was the CTO of Ethereum, and one of the original founders of the cryptocurrency. After all co-founders of ETH left the project (except for <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/who-is-vitalik-buterin/">Vitalik Buterin</strong></a>), some of them went on to create cryptos of their own - Charles Hoskinson creating <a href=https://www.bitdegree.org/"/crypto/learn/what-is-cardano-in-crypto/">Cardano is one of the more well-known examples.</p>\n<p>Gavin Wood, on the other hand, created Polkadot. And, while Cardano is somewhat similar to Ethereum, as far as use cases go, Polkadot is very different.</p>\n<h2>How Does Polkadot Work?</h2>\n<p>In order to understand how Polkadot works, you can simply think about the name of this blockchain network - it has a hint for you to figure out!</p>\n<p>In the real world, polka dots are a pattern of dots on a surface, all placed close to each other, with an equal amount of distance between them. <strong>Imagine these dots as different blockchains - Ethereum, Cardano, Bitcoin, and so on.</strong></p>\n<p>Each of these blockchains is unique, and possesses features and functionalities that are only available on them. <em>However, what happens if two different and unique blockchains would want to communicate with each other?</em> Well, to put it simply, they couldn&rsquo;t - both blockchain networks have different cryptocurrencies associated with them, and are coded differently, too. In order for them to communicate, <strong>they need some sort of a bridge.</strong></p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-polkadot-02.o.jpg/" alt=\"What is Polkadot in crypto: A blockchain bridge.\" width=\"1000\" height=\"606\" /></p>\n<p>This is where the example I gave at the beginning of the section comes in, too. If you want to visit your friend, but need to pass a river to do so, you&rsquo;ll need a bridge. This bridge allows you to get together with your friend on the other side of the river, to communicate and exchange information.</p>\n<p><strong>Well, in the cryptocurrency world, Polkadot acts as that bridge.</strong></p>\n<p>To be more specific, Polkadot allows two different blockchains to communicate with one another. It acts as a bridge between two networks that would otherwise have no ability to communicate!</p>\n<p>So think about it this way - imagine that each blockchain is a drawing tool. Pencils, markers, crayons, and so on. In order to use all of these tools to draw a picture, you need a sheet of paper. In this example, Polkadot would be that sheet of paper, allowing you to use the different drawing tools, and for the tools to interact with each other, forming a picture.</p>\n<p>In the cryptocurrency world, this is called &ldquo;<strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-interoperability/">interoperability&rdquo;. It sounds like a fancy term, but in actuality, it simply means &ldquo;connection&rdquo;, or &ldquo;information sharing.&ldquo;</p>\n<p>Interoperability is something that blockchain networks have struggled with, since the early days. While blockchains could be used on their own, there was no reliable way to connect them with one another, in order to create advanced-level projects in the crypto space. <strong>Polkadot aims to solve this interoperability problem by positioning itself as a &ldquo;<a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-layer-0/">Layer 0</a>&rdquo; network.</strong></p>\n<p><strong><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-polkadot-03.o.jpg/" alt=\"What is Polkadot in crypto: Interoperability.\" width=\"1000\" height=\"420\" /></strong></p>\n<p>Not to get too much into the difficult technicalities, most blockchains out there are considered to be &ldquo;<strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-layer-1-blockchain/">Layer 1</a></strong>&rdquo;. So, the very first layer of the blockchain is the blockchain network itself - <em>that makes sense. </em><strong>However, in Polkadot&rsquo;s case, it positions itself as a &ldquo;Layer 0&rdquo; project</strong> - <em>meaning, it lies beneath the other blockchains.</em> Just like that sheet of paper that I&rsquo;ve mentioned earlier - you can use the drawing tools on it, and your picture will sit on top of the paper sheet!</p>\n<h2>Relay Chain and Parachains</h2>\n<p>So, now you have a better idea of what Polkadot is, and how it works, on the surface level. Moving on with the section, let&rsquo;s now take a closer look at the mechanics behind Polkadot, and how it&rsquo;s able to accomplish this &ldquo;Layer 0&rdquo; functionality. <em>Don&rsquo;t worry, because I will keep everything as simple as possible!</em></p>\n<p>On the surface level, <strong>Polkadot looks like a simple blockchain</strong>, just like any other. Essentially, it&rsquo;s a <strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-proof-of-stake-pos/">Proof-of-Stake network</a>. </strong>In the most basic sense, it means that it uses <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-staking/">staking mechanics, and allows DOT coin holders to earn passive coins by staking some of their own.</p>\n<p>The two things that make Polkadot unique, and stand out from other blockchains, however, are <strong>the relay chain, and the parachains.</strong> <em>Let&rsquo;s break them down.</em></p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-polkadot-04.o.jpg/" alt=\"What is Polkadot in crypto: The relay chain and the parachains.\" width=\"1000\" height=\"261\" /></p>\n<p><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-relay-chain/">The relay chain</strong></a> is the center of the Polkadot network. It&rsquo;s like the largest shopping mall, in the very center of a city. <strong>This is the most important part of the network</strong> - it allows Polkadot to work the way that it does!</p>\n<p><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-parachain/">Parachains are all of the different blockchain networks connecting to the relay chain. It&rsquo;s like the different shops that you&rsquo;ll find in that shopping mall I&rsquo;ve mentioned just now. All of these shops sell their own specific products but, by the end of the day, they are all reachable in that same shopping mall. This means that you don&rsquo;t need to drive to the other side of the city to visit some remote and isolated shop to get what you want.</p>\n<p>All of these different parachains do their own thing, and communicate with their own projects and networks. However, every once in a while, they all have to <strong>sync up with the relay chain.</strong></p>\n<p>It&rsquo;s like you working in a job, together with other employees! All of you have your own responsibilities, and tasks that need to be completed. However, every so often, there are meetings being held, so as to establish a clear direction of where the company is going, and to update each other on your work progress. This is a very similar example to that which is given by Gavin Wood, the founder of Polkadot, when he&rsquo;s explaining parachain functionality.</p>\n<p><em>Now, remember when I said that Polkadot is a Proof-of-Stake network? </em>Well, this is important because, in order to become an active member of the network, and validate the transactions happening on it, you will need to <strong>stake a lot of DOT coins.</strong></p>\n<p><em>What does &ldquo;a lot&rdquo; mean? </em>Well, this number is going to vary quite a bit, depending on the time that you&rsquo;re reading this section. However, it&rsquo;s a number that helps discourage foul play on the blockchain network, and ensures optimal security measures for anyone using it.</p>\n<p><strong>This is the other thing, too - Polkadot is often seen as a very reliable and secure network. </strong>It allows developers to create projects using parachains, which both boosts and innovates the ecosystem of Polkadot, as well as makes it easier to create new platforms and networks, too.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-polkadot-05.o.jpg/" alt=\"What is Polkadot in crypto: A reliable and secure network.\" width=\"1000\" height=\"675\" /></p>\n<p><strong>One of the things that help Polkadot remain secure and reliable are</strong> <strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-validator/">validator nodes</a>.</strong> Since there&rsquo;s a pretty high benchmark that you need to meet to become a validator on the network <em>(or, in other words, you need to have a LOT of DOT coins)</em>, there&rsquo;s a financial responsibility to take network validation seriously.</p>\n<p>Following that, another thing that helps keep the Polkadot network secure and running smoothly is <strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-corporate-treasury/">the treasury</a>.</strong> The absolute majority of public blockchains have their own treasuries - when you trade coins, a certain part of the trading fee that you pay goes to those treasuries.</p>\n<p>The funds of the treasury can then be used to experiment with new updates, make suggestions, and build up the community, as a whole. Speaking of experimentation, though, when figuring out how does Polkadot work, you will also come across the term <strong>&ldquo;Kusama&rdquo;.</strong></p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-polkadot-06.o.jpg/" alt=\"What is Polkadot in crypto: Kusama.\" width=\"1000\" height=\"918\" /></p>\n<p>Not to go into too much technical detail, Kusama is a separate space on the Polkadot blockchain where developers are able to experiment with their projects, and see how they would work in the real world. While not being entirely correct, for simplicity&rsquo;s sake, you can view it as a sort of <strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-testnet/">a testnet</a>.</strong></p>\n<p>Overall, Polkadot is definitely one of the more-interesting blockchain projects that are currently still standing strong. It&rsquo;s being developed constantly, and offers a very unique approach to blockchain cross-chain communication.</p>","meta_title":"What Is Polkadot in Crypto and Why Is It Unique?","meta_description":"Wondering what is Polkadot in the crypto world? Why it's unique and what characteristics does it have? You'll find all the answers here!","meta_keywords":"what is polkadot, what is polkadot crypto, polkadot explained, what is polkadot cryptocurrency, how does polkadot work, what does polkadot do, what is polkadot parachain, what is polkadot crypto used for, who uses polkadot crypto, does polkadot use ethereum, what blockchain is polkadot on, polkadot coin explained, polkadot parachain auction explained","order":11,"language":"en","created_at":"2022-06-07T13:09:20.000000Z","updated_at":"2022-10-17T07:42:08.000000Z","modified_content":"<p>In this section, I&rsquo;ll tell you about Polkadot. Specifically, I&rsquo;ll tell you what is Polkadot in crypto, how it works, and what it&rsquo;s used for, in the first place.</p>\n<p>Imagine that you have decided to visit a friend who lives in another town. He&rsquo;s organizing a small get-together, and there will be people who will come from multiple other towns and cities. Driving there, however, all of you notice that there&rsquo;s a river that needs to be crossed, in order to get to the friend&rsquo;s house.</p>\n<p>Even though you and the other people are coming from different towns, each and every one of you needs to cross that river in order to be able to meet each other. Thankfully, though, there are bridges that allow you to cross, no sweat. <strong>In the crypto world, these bridges would be called Polkadot.</strong></p>\n<p><em>Now, let&rsquo;s get into more detail!</em></p>\n<div class=\"container\">\n <div class=\"row justify-content-center\">\n <div class=\"col-md-10 comparison-suggestion pb-3 mb-4\">\n <div class=\"d-flex flex-row\">\n <div class=\"text-center\">\n <div class=\"img-block-yt\">\n <img src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/images/compare-crypto-exchanges.gif/"/n alt=\"What is Polkadot in Crypto? (DOT Animated Explainer)\"\n title=\"What is Polkadot in Crypto? (DOT Animated Explainer)\" class=\"border-0\">\n <p>Video Explainer</p>\n </div>\n </div>\n <div class=\"col-xs-10 col-sm-10 col-md-10 text-left py-3 yt-info\">\n <h4 class=\"mb-1\">Video Explainer: The Bridge Between Blockchains: Polkadot</h4>\n <p class=\"py-1 mb-0 youtube-video-subtitle\">Reading is not your thing? Watch the \"The Bridge Between Blockchains: Polkadot\" video explainer</p>\n </div>\n </div>\n <div class=\"row justify-content-center text-center\">\n <div class=\"col-12 col-md-11 px-3\">\n <div class=\"wrapper mb-0\">\n <div class=\"youtube mb-4 bg-transparent p-0 video-modal-popup\" data-toggle=\"modal\"\n data-target=\"#video-modal\" data-id=\"WHe8iIRyZIo\" data-title=\"CryptoFinallyExplained\">\n <div class=\"video-gradient-top\"></div>\n <p class=\"text-left dyk-video-title\">What is Polkadot in Crypto? (DOT Animated Explainer)</p>\n <img src=https://www.bitdegree.org/"https://i.ytimg.com/vi/WHe8iIRyZIo/hq720.jpg/"/n alt=\"What is Polkadot in Crypto? (DOT Animated Explainer)\"\n title=\"What is Polkadot in Crypto? (DOT Animated Explainer)\"\n class=\"p-0\">\n <img class=\"play-button\" data-target=\"#video-modal\"\n src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/video-button.png/"/n alt=\"What is Polkadot in Crypto? (DOT Animated Explainer)\">\n </div>\n </div>\n </div>\n </div>\n <div class=\"row justify-content-center text-center\">\n <div>\n <a href=https://www.bitdegree.org/"https://www.youtube.com/c/CryptoFinallyExplained?sub_confirmation=1\%22\n class=\"btn yt-promo mb-2\" target=\"_blank\" rel=\"nofollow noopener\">\n <div class=\"row justify-content-center align-items-center mx-0 text-center\">\n <div class=\"col-4 col-md-4\">\n <i class=\"fab fa-youtube yt-dyk-btn\"></i>\n </div>\n <div class=\"col-8 col-md-8 text-center yt-promo-text\">\n <h4 class=\"m-0 text-white\">SUBSCRIBE</h4>\n <span>ON YOUTUBE</span>\n </div>\n </div>\n </a>\n </div>\n </div>\n </div>\n </div>\n</div>\n<div class=\"modal fade\" id=\"video-modal\" tabindex=\"-1\" role=\"dialog\" aria-labelledby=\"WHe8iIRyZIo\">\n <div class=\"modal-dialog modal-dialog-centered modal-lg\" role=\"document\">\n <div class=\"modal-content\">\n <div class=\"modal-body p-0\">\n <button type=\"button\" class=\"video-modal-close close\" data-dismiss=\"modal\" aria-label=\"Close\">\n <i aria-hidden=\"true\" class=\"fas fa-times\"></i>\n </button>\n <div id=\"iframe\"></div>\n </div>\n <a class=\"text-decoration-none\"\n href=https://www.bitdegree.org/"https://www.youtube.com/c/CryptoFinallyExplained?sub_confirmation=1\%22\n rel=\"nofollow noopener\" target=\"_blank\">\n <div class=\"modal-footer p-0 d-block bg-white\">\n <div class=\"row justify-content-center m-0\">\n <div class=\"col-3 col-md-4 col-lg-2 p-0\">\n <img class=\"w-100 h-100\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/crypto-subscribe.jpg/" alt=\"Subscribe\">\n </div>\n <div class=\"col-9 col-md-8 col-lg-2 px-0 d-flex\">\n <div class=\"modal-subscribe w-100\">\n <p class=\"m-0 mt-1 mr-3\">SUBSCRIBE<br>\n <span class=\"m-0\">ON YOUTUBE</span>\n </p>\n </div>\n </div>\n <div class=\"col-12 col-md-12 col-lg-8 p-0 text-center d-flex justify-content-center align-items-center\">\n <div class=\"modal-subscribe-text\">\n <h4 class=\"m-0\">Understand crypto with ease</h4>\n <span>New explainer videos every week!</span>\n </div>\n </div>\n </div>\n </div>\n </a>\n </div>\n </div>\n</div>\n<h2>What is Polkadot?</h2>\n<p>I&rsquo;ll get back to the example I gave at the beginning of the section shortly. Before I do that, though, let&rsquo;s first explore WHAT Polkadot is.</p>\n<p><strong>Polkadot is a cryptocurrency project.</strong> It&rsquo;s a dedicated blockchain network <em>(meaning, it has its own blockchain)</em>, with <strong>a</strong> <strong>native coin called DOT. </strong>At the time I'm writing this section, Polkadot is the 11th largest cryptocurrency, by market capitalization.</p>\n<p>Polkadot has a very interesting history. It&rsquo;s a crypto project that sometimes gets mixed up with <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-ethereum-eth/">Ethereum, with people thinking that Polkadot actually uses Ethereum in its operations. Well, it does not - however, the two crypto projects are actually related, in a very specific way.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-polkadot-01.o.jpg/" alt=\"What is Polkadot in crypto: Cryptocurrency project.\" width=\"1000\" height=\"556\" /></p>\n<p>Polkadot was created by a man named <strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/who-is-gavin-wood/">Gavin Wood</a>.</strong> If this name sounds familiar to you, it&rsquo;s because Wood was the CTO of Ethereum, and one of the original founders of the cryptocurrency. After all co-founders of ETH left the project (except for <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/who-is-vitalik-buterin/">Vitalik Buterin</strong></a>), some of them went on to create cryptos of their own - Charles Hoskinson creating <a href=https://www.bitdegree.org/"/crypto/learn/what-is-cardano-in-crypto/">Cardano is one of the more well-known examples.</p>\n<p>Gavin Wood, on the other hand, created Polkadot. And, while Cardano is somewhat similar to Ethereum, as far as use cases go, Polkadot is very different.</p>\n<h2>How Does Polkadot Work?</h2>\n<p>In order to understand how Polkadot works, you can simply think about the name of this blockchain network - it has a hint for you to figure out!</p>\n<p>In the real world, polka dots are a pattern of dots on a surface, all placed close to each other, with an equal amount of distance between them. <strong>Imagine these dots as different blockchains - Ethereum, Cardano, Bitcoin, and so on.</strong></p>\n<p>Each of these blockchains is unique, and possesses features and functionalities that are only available on them. <em>However, what happens if two different and unique blockchains would want to communicate with each other?</em> Well, to put it simply, they couldn&rsquo;t - both blockchain networks have different cryptocurrencies associated with them, and are coded differently, too. In order for them to communicate, <strong>they need some sort of a bridge.</strong></p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-polkadot-02.o.jpg/" alt=\"What is Polkadot in crypto: A blockchain bridge.\" width=\"1000\" height=\"606\" /></p>\n<p>This is where the example I gave at the beginning of the section comes in, too. If you want to visit your friend, but need to pass a river to do so, you&rsquo;ll need a bridge. This bridge allows you to get together with your friend on the other side of the river, to communicate and exchange information.</p>\n<p><strong>Well, in the cryptocurrency world, Polkadot acts as that bridge.</strong></p>\n<p>To be more specific, Polkadot allows two different blockchains to communicate with one another. It acts as a bridge between two networks that would otherwise have no ability to communicate!</p>\n<p>So think about it this way - imagine that each blockchain is a drawing tool. Pencils, markers, crayons, and so on. In order to use all of these tools to draw a picture, you need a sheet of paper. In this example, Polkadot would be that sheet of paper, allowing you to use the different drawing tools, and for the tools to interact with each other, forming a picture.</p>\n<p>In the cryptocurrency world, this is called &ldquo;<strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-interoperability/">interoperability&rdquo;. It sounds like a fancy term, but in actuality, it simply means &ldquo;connection&rdquo;, or &ldquo;information sharing.&ldquo;</p>\n<p>Interoperability is something that blockchain networks have struggled with, since the early days. While blockchains could be used on their own, there was no reliable way to connect them with one another, in order to create advanced-level projects in the crypto space. <strong>Polkadot aims to solve this interoperability problem by positioning itself as a &ldquo;<a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-layer-0/">Layer 0</a>&rdquo; network.</strong></p>\n<p><strong><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-polkadot-03.o.jpg/" alt=\"What is Polkadot in crypto: Interoperability.\" width=\"1000\" height=\"420\" /></strong></p>\n<p>Not to get too much into the difficult technicalities, most blockchains out there are considered to be &ldquo;<strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-layer-1-blockchain/">Layer 1</a></strong>&rdquo;. So, the very first layer of the blockchain is the blockchain network itself - <em>that makes sense. </em><strong>However, in Polkadot&rsquo;s case, it positions itself as a &ldquo;Layer 0&rdquo; project</strong> - <em>meaning, it lies beneath the other blockchains.</em> Just like that sheet of paper that I&rsquo;ve mentioned earlier - you can use the drawing tools on it, and your picture will sit on top of the paper sheet!</p>\n<h2>Relay Chain and Parachains</h2>\n<p>So, now you have a better idea of what Polkadot is, and how it works, on the surface level. Moving on with the section, let&rsquo;s now take a closer look at the mechanics behind Polkadot, and how it&rsquo;s able to accomplish this &ldquo;Layer 0&rdquo; functionality. <em>Don&rsquo;t worry, because I will keep everything as simple as possible!</em></p>\n<p>On the surface level, <strong>Polkadot looks like a simple blockchain</strong>, just like any other. Essentially, it&rsquo;s a <strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-proof-of-stake-pos/">Proof-of-Stake network</a>. </strong>In the most basic sense, it means that it uses <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-staking/">staking mechanics, and allows DOT coin holders to earn passive coins by staking some of their own.</p>\n<p>The two things that make Polkadot unique, and stand out from other blockchains, however, are <strong>the relay chain, and the parachains.</strong> <em>Let&rsquo;s break them down.</em></p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-polkadot-04.o.jpg/" alt=\"What is Polkadot in crypto: The relay chain and the parachains.\" width=\"1000\" height=\"261\" /></p>\n<p><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-relay-chain/">The relay chain</strong></a> is the center of the Polkadot network. It&rsquo;s like the largest shopping mall, in the very center of a city. <strong>This is the most important part of the network</strong> - it allows Polkadot to work the way that it does!</p>\n<p><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-parachain/">Parachains are all of the different blockchain networks connecting to the relay chain. It&rsquo;s like the different shops that you&rsquo;ll find in that shopping mall I&rsquo;ve mentioned just now. All of these shops sell their own specific products but, by the end of the day, they are all reachable in that same shopping mall. This means that you don&rsquo;t need to drive to the other side of the city to visit some remote and isolated shop to get what you want.</p>\n<p>All of these different parachains do their own thing, and communicate with their own projects and networks. However, every once in a while, they all have to <strong>sync up with the relay chain.</strong></p>\n<p>It&rsquo;s like you working in a job, together with other employees! All of you have your own responsibilities, and tasks that need to be completed. However, every so often, there are meetings being held, so as to establish a clear direction of where the company is going, and to update each other on your work progress. This is a very similar example to that which is given by Gavin Wood, the founder of Polkadot, when he&rsquo;s explaining parachain functionality.</p>\n<p><em>Now, remember when I said that Polkadot is a Proof-of-Stake network? </em>Well, this is important because, in order to become an active member of the network, and validate the transactions happening on it, you will need to <strong>stake a lot of DOT coins.</strong></p>\n<p><em>What does &ldquo;a lot&rdquo; mean? </em>Well, this number is going to vary quite a bit, depending on the time that you&rsquo;re reading this section. However, it&rsquo;s a number that helps discourage foul play on the blockchain network, and ensures optimal security measures for anyone using it.</p>\n<p><strong>This is the other thing, too - Polkadot is often seen as a very reliable and secure network. </strong>It allows developers to create projects using parachains, which both boosts and innovates the ecosystem of Polkadot, as well as makes it easier to create new platforms and networks, too.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-polkadot-05.o.jpg/" alt=\"What is Polkadot in crypto: A reliable and secure network.\" width=\"1000\" height=\"675\" /></p>\n<p><strong>One of the things that help Polkadot remain secure and reliable are</strong> <strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-validator/">validator nodes</a>.</strong> Since there&rsquo;s a pretty high benchmark that you need to meet to become a validator on the network <em>(or, in other words, you need to have a LOT of DOT coins)</em>, there&rsquo;s a financial responsibility to take network validation seriously.</p>\n<p>Following that, another thing that helps keep the Polkadot network secure and running smoothly is <strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-corporate-treasury/">the treasury</a>.</strong> The absolute majority of public blockchains have their own treasuries - when you trade coins, a certain part of the trading fee that you pay goes to those treasuries.</p>\n<p>The funds of the treasury can then be used to experiment with new updates, make suggestions, and build up the community, as a whole. Speaking of experimentation, though, when figuring out how does Polkadot work, you will also come across the term <strong>&ldquo;Kusama&rdquo;.</strong></p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-polkadot-06.o.jpg/" alt=\"What is Polkadot in crypto: Kusama.\" width=\"1000\" height=\"918\" /></p>\n<p>Not to go into too much technical detail, Kusama is a separate space on the Polkadot blockchain where developers are able to experiment with their projects, and see how they would work in the real world. While not being entirely correct, for simplicity&rsquo;s sake, you can view it as a sort of <strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-testnet/">a testnet</a>.</strong></p>\n<p>Overall, Polkadot is definitely one of the more-interesting blockchain projects that are currently still standing strong. It&rsquo;s being developed constantly, and offers a very unique approach to blockchain cross-chain communication.</p>","preview_url":"https://www.bitdegree.org/crypto/learn/what-is-polkadot-in-crypto","youtube_video":{"id":26,"channel_id":1,"sort":36,"video_title":"What is Polkadot in Crypto? (DOT Animated Explainer)","description":"What is Polkadot in crypto?\n\nPolkadot is a cryptocurrency project that has its own blockchain, as well as a native coin called DOT. What makes Polkadot unique is the fact that it acts as a “Layer 0” blockchain - in other words, its main goal is to increase the interoperability between blockchain networks, and allow different blockchains to communicate with each other better.\n\nWhile Polkadot might seem pretty simple on the surface, it’s an intricate crypto project that has a lot of different and unique details associated with it. In this video, I will tell you what is Polkadot, exactly, explain how it works, and what it’s used for, in the first place.\n\nDo you think Polkadot is an important part of the blockchain world? Does it succeed in its interoperability quest? Share your opinions in the comments section below!\n\nVideo Time Table:\n\n0:00 Introduction to What is Polkadot in Crypto\n0:54 What is Polkadot?\n1:59 How Does Polkadot Work?\n4:15 Relay Chain and Parachains\n7:38 Wrap-up: What is Polkadot in Crypto?\n\nMore Related Videos:\n?Coin vs Token https://www.youtube.com/watch?v=kNAC7CXFOTw\n?What is Cardano? https://www.youtube.com/watch?v=bn6Vxt_RTbI\n?What Does Staking Mean in Crypto? https://www.youtube.com/watch?v=irhlfrCrywo\n\nGet Quick Crypto Tips on Twitter - Follow:\nhttps://twitter.com/crypto_xplained\n\n#WhatisPolkadot #WhatisPolkadotCrypto #PolkadotExplained","video_id":"WHe8iIRyZIo","duration":489,"view_count":534,"thumbnail_url":"https://i.ytimg.com/vi/WHe8iIRyZIo/hq720.jpg","thumbnail_width":1280,"thumbnail_height":720,"published_at":"2022-06-06 15:17:21","created_at":"2022-06-06T23:00:02.000000Z","updated_at":"2023-05-21T23:00:04.000000Z","channel":{"id":1,"title":"CryptoFinallyExplained","channel_id":"UCOryUY0yxC08eJtK23mNgiA","main_playlist_id":"UUOryUY0yxC08eJtK23mNgiA"}}},"chapterTitle":"Cryptocurrencies","cryptoBookSection":{"id":26,"featured_image_id":7085,"original_id":null,"youtube_video_id":27,"author_id":42,"translator_id":null,"chapter_id":2,"title":"Polygon: the Essential Scaling Solution for Ethereum","slug":"what-is-polygon-in-crypto","definition":"Numerous individuals refer to the Polygon network, formerly known as the Matic network, as the \"Polkadot on Ethereum.\"","status":"published","content":"<p>In this section, I&rsquo;m going to tell you what is Polygon in crypto!</p>\n<p>Imagine that you&rsquo;ve bought a new phone. After you start using it, you notice that, while it&rsquo;s super-modern, and supports all of the latest apps, it has a lot of issues - the battery runs out very fast, everything&rsquo;s slow to load, and the apps glitch out every once in a while.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is Polygon in crypto: Ethereum and Polygon.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-polygon-02.o.jpg/" alt=\"What is Polygon in crypto: Ethereum and Polygon.\" width=\"1000\" height=\"687\" /></p>\n<p>You could change your phone, sure, but then you wouldn&rsquo;t be able to use many of the most popular applications that all of your friends are using, since only this phone supports them! However, there&rsquo;s an alternative - a third-party update that would allow your phone to resolve many of these issues. <strong>In essence, this is the relationship between <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-ethereum-eth/">Ethereum and Polygon.</strong></p>\n<p>In this section, I&rsquo;m going to tell you all about Polygon. We&rsquo;ll talk about what it is, how it works, and why it has become the essential tool for all Ethereum users.</p>\n<p><em>Let&rsquo;s get to it!</em></p>\n<h2>What is Polygon?</h2>\n<p>To start off, before we can get into the topic of what is Polygon, you first need to understand Ethereum, and all of the main issues associated with this <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-blockchain/">blockchain. Since this isn&rsquo;t a section about Ethereum, I&rsquo;ll be quick.</p>\n<p>So, as of writing this section, Ethereum is the second-most popular crypto network, right after Bitcoin. It&rsquo;s super popular for a variety of reasons - <strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-smart-contract/">smart contracts</a>, <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-are-decentralized-applications-dapps/">dApps, it being the center hub of <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-defi/">DeFi, and so on. </strong>Having said that, though, this does not mean that ETH is issue-free - in fact, there are quite a few big issues associated with this blockchain!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is Polygon in crypto: Smart contracts, dApps, DeFi, etc.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-polygon-01.o.jpg/" alt=\"What is Polygon in crypto: Smart contracts, dApps, DeFi, etc.\" width=\"1000\" height=\"518\" /></p>\n<p>First and foremost, <strong>Ethereum is a dated blockchain. </strong>There&rsquo;s a variety of different networks that are much faster, easier to use, and that require far fewer resources in order to upkeep and maintain. Ethereum will soon launch its ETH 2.0 update, which will address many of these issues, but as of writing this section, it&rsquo;s a blockchain that certainly lacks in certain areas!</p>\n<p>Among the most notable of these areas is the <strong>&ldquo;TPS&rdquo; metric, also known as</strong> <strong>&ldquo;<a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-transactions-per-second-tps/">transactions per second</a>&rdquo;. </strong>At present time, Ethereum is able to confirm around 30 transactions per second. As you can imagine, for a network as popular as this, a number like this is detrimental. This is especially true when you consider the fact that, say, <a href=https://www.bitdegree.org/"/crypto/learn/what-is-solana-in-crypto/">Solana - a popular competing blockchain - can support over 65,000 TPS. <em>The difference is crazy!</em></p>\n<p>Since Ethereum can only support so few transactions per second, this leads the network to another huge issue - <strong>gas fees. </strong>These are the fees that you pay in order to perform a transaction on Ethereum - say, sending some ETH to your friend or relative, or buying the newest token that has hit the market.</p>\n<p>Essentially, if you want your transaction to be confirmed in a speedy manner, you&rsquo;ll need to pay higher fees than some other individual sending their ETH to their friends or relatives. These fees can become very irrational, fast!</p>\n<p>On the user end of things, this is already super-inconvenient, and isn&rsquo;t how the second-largest blockchain should look like! To add to that, <strong>Ethereum is also difficult to work with</strong>, if you&rsquo;re a developer, and are creating a dApp on this blockchain.</p>\n<p><em>Now, how does all of this tie into the question of what is Polygon?</em> Well, the biggest thing that you should take away from this section is the fact that <strong>Polygon is a separate blockchain that utilizes Ethereum&rsquo;s technology</strong>, with the goal to address and solve all of these issues that I&rsquo;ve just mentioned.</p>\n<p>Polygon was created all the way back in 2017, and from day one, its main goal was to tackle all of the shortcomings associated with ETH. Initially, <strong>Polygon was called Matic</strong>, but at some point, it rebranded to its current name - the native coin of the network, however, is still referred to as <strong>the Matic Coin.</strong></p>\n<h2>How Does Polygon Work?</h2>\n<p>Continuing on with the section, I admit - it&rsquo;s pretty simple to just say that Polygon aims to solve the issues that are present with the Ethereum blockchain, and leave it at that. However, it&rsquo;s also important to tackle the question of HOW Polygon achieves this, in the first place!</p>\n<p>Think about the example I gave at the beginning of the section. <strong>Ethereum would be that awesome new phone that you&rsquo;ve bought</strong> - it&rsquo;s full of issues, sure, but it&rsquo;s still the most popular and widely-used phone, since it&rsquo;s both established, and supports all of the most popular applications - something that no other phone is able to claim.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is Polygon in crypto: How does Polygon work?\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-polygon-03.o.jpg/" alt=\"What is Polygon in crypto: How does Polygon work?\" width=\"1000\" height=\"226\" /></p>\n<p><strong>Polygon would be that aforementioned update to your phone.</strong> In the world of crypto, Polygon is referred to as a <strong>&ldquo;<a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-layer-2/">Layer-2 scaling solution</a>&rdquo;.</strong> It&rsquo;s a complex topic, but essentially, the way you can look at it is this - Polygon allows developers and end-users on the Ethereum blockchain to connect to its network and avoid many of the shortcomings associated with ETH.</p>\n<p>So, to put it in other words, imagine that you want to purchase a computer game, for cryptocurrencies. The game is based on the Ethereum blockchain, and costs a crazy amount of ETH to buy - the price itself isn&rsquo;t all that big, but the <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-transaction-fee/">transaction fees</strong></a> are double that of the price! Well, what if you could purchase that same game for Matic coins, pay very small transaction fees, and then still play the game with all of the benefits that are available on the Ethereum blockchain?</p>\n<p><em>Sounds awesome, right? </em>Well, put simply, this is possible, and it&rsquo;s one of the core features of Polygon! That&rsquo;s because of how similar Polygon is to Ethereum, blockchain development-wise. <strong>Some places around the internet use the term &ldquo;EVM&rdquo; to describe the way that Polygon works. </strong>This term abbreviates as <strong>&ldquo;<a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-ethereum-virtual-machine-evm/">Ethereum Virtual Machine</a>&rdquo;,</strong> and it essentially describes the ecosystem that is powered by Ethereum&rsquo;s code, but is based on a third-party blockchain.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is Polygon in crypto: Ethereum Virtual Machine.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-polygon-04.o.jpg/" alt=\"What is Polygon in crypto: Ethereum Virtual Machine.\" width=\"1000\" height=\"429\" /></p>\n<p><em>Why is EVM functionality important?</em> Well, it allows different projects to migrate between blockchains, in an almost seamless manner. For example, developers of the earlier-mentioned game could take it from the Ethereum blockchain, and transfer it to Polygon, and it would essentially work in the exact same manner. Just with all of the added benefits of Polygon - small gas fees, super-quick transactions, and so on. In this sense, <strong>Polygon is helping Ethereum to scale!</strong></p>\n<p>This is actually one of the core goals of Polygon, too! Since it&rsquo;s a Layer-2 blockchain, it aims to <strong>help Ethereum manage all of the transactions that it deals with</strong>, and by doing so, help scale the main network, indefinitely.</p>\n<p>To help you better understand how this works, you can think about it in a visual manner - imagine the Ethereum blockchain as the main, huge network where a large variety of important processes happen every second. Since the network is so huge, it gets congested, and all of the issues that we&rsquo;ve talked about earlier start to arise.</p>\n<p>So, a much smaller network called Polygon enters the scene. It communicates with Ethereum, and says: <em>\"Hey! Redirect all of that huge amount of data to me, I&rsquo;ll condense it to some much smaller units of information, and send it back to you!\"</em></p>\n<p>By utilizing its <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-proof-of-stake-pos/">Proof-of-Stake consensus mechanism, Polygon is able to do just that, and in this way, it alleviates the load that the Ethereum mainnet receives. This is why Polygon is called a Layer-2 scaling solution - it&rsquo;s literally a smaller network that works alongside Ethereum, with the goal to help this large network manage its processes!</p>\n<p>It needs to be mentioned, though, that <strong>Polygon is a much larger project than just a &ldquo;Layer-2 scaling solution for Ethereum&rdquo;.</strong> While this is its main functionality that we - the everyday users - see, Polygon allows developers to work on complex, Ethereum-based projects in an approachable, multi-chain-oriented manner. It&rsquo;s an entirely different field, and I won&rsquo;t get into it here, since it would require a separate section in and of its own. Just keep in mind that Polygon is a much larger project than it might seem, initially!</p>\n<h2>The Matic Coin</h2>\n<p>Before I let you go, the one last thing that I want to tell you about in this section is the Matic coin. I mentioned it earlier - it&rsquo;s the native cryptocurrency of the Polygon blockchain. <em>However, what is it used for?</em></p>\n<p>Well, essentially, <strong>Matic is a <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-utility-token/">utility token</a>. </strong>It has staking functionality, which means that the coin can be staked in order to earn passive rewards, in the form of more Matic. If you&rsquo;d like to learn more about staking, I have <a href=https://www.bitdegree.org/"/crypto/learn/what-is-staking-in-crypto/">a section on that</strong></a>, too!</p>\n<p>The second large purpose of the Matic coin is to <strong>incentivize developers and users </strong>on the Polygon blockchain to perform different processes on the network! It does tie in with staking, but if you provide your computational resources to Polygon, and are an active developer on the network, this can result in Matic rewards!</p>\n<p>Lastly, the coin is used to <strong>pay for transaction fees</strong>, whenever you perform those transactions on the blockchain.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is Polygon in crypto: The Matic coin.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-polygon-05.o.jpg/" alt=\"What is Polygon in crypto: The Matic coin.\" width=\"1000\" height=\"841\" /></p>\n<p>As of writing this section, Matic currently has a market cap of $4,4 billion and is worth around $0,64. At its highest point back in December of 2021, it was worth $2,88. The coin currently has inflationary mechanics, due to the staking functionality - however, the team behind <strong>Polygon aims to make the coin</strong> <strong>deflationary</strong>, at some point in time. This could theoretically help it increase in value, too!</p>\n<p>Wrapping things up, whether you&rsquo;re a developer or a crypto enthusiast, Polygon is definitely one of the more-interesting projects that are certainly worth checking out, especially if you&rsquo;re fascinated with all-things Ethereum.</p>","meta_title":"What Is Polygon in Crypto and What Makes It Unique?","meta_description":"Trying to figure out what is Polygon in crypto? Want to know how it differs from other chains and what makes it interesting? Find out here!","meta_keywords":"what is polygon crypto, what blockchain is polygon helping to scale, is polygon a good crypto, polygon matic crypto, ethereum polygon matic,","order":12,"language":"en","created_at":"2022-06-21T06:44:52.000000Z","updated_at":"2022-10-17T07:48:45.000000Z","modified_content":"<p>In this section, I&rsquo;m going to tell you what is Polygon in crypto!</p>\n<p>Imagine that you&rsquo;ve bought a new phone. After you start using it, you notice that, while it&rsquo;s super-modern, and supports all of the latest apps, it has a lot of issues - the battery runs out very fast, everything&rsquo;s slow to load, and the apps glitch out every once in a while.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is Polygon in crypto: Ethereum and Polygon.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-polygon-02.o.jpg/" alt=\"What is Polygon in crypto: Ethereum and Polygon.\" width=\"1000\" height=\"687\" /></p>\n<p>You could change your phone, sure, but then you wouldn&rsquo;t be able to use many of the most popular applications that all of your friends are using, since only this phone supports them! However, there&rsquo;s an alternative - a third-party update that would allow your phone to resolve many of these issues. <strong>In essence, this is the relationship between <a href=https://www.bitdegree.org/"https://www.bitdegree.org/crypto/buy-ethereum-eth/">Ethereum and Polygon.</strong></p>\n<p>In this section, I&rsquo;m going to tell you all about Polygon. We&rsquo;ll talk about what it is, how it works, and why it has become the essential tool for all Ethereum users.</p>\n<p><em>Let&rsquo;s get to it!</em></p>\n<div class=\"container\">\n <div class=\"row justify-content-center\">\n <div class=\"col-md-10 comparison-suggestion pb-3 mb-4\">\n <div class=\"d-flex flex-row\">\n <div class=\"text-center\">\n <div class=\"img-block-yt\">\n <img src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/images/compare-crypto-exchanges.gif/"/n alt=\"What is Polygon in Crypto? (Animated Explainer)\"\n title=\"What is Polygon in Crypto? (Animated Explainer)\" class=\"border-0\">\n <p>Video Explainer</p>\n </div>\n </div>\n <div class=\"col-xs-10 col-sm-10 col-md-10 text-left py-3 yt-info\">\n <h4 class=\"mb-1\">Video Explainer: Polygon: the Essential Scaling Solution for Ethereum</h4>\n <p class=\"py-1 mb-0 youtube-video-subtitle\">Reading is not your thing? Watch the \"Polygon: the Essential Scaling Solution for Ethereum\" video explainer</p>\n </div>\n </div>\n <div class=\"row justify-content-center text-center\">\n <div class=\"col-12 col-md-11 px-3\">\n <div class=\"wrapper mb-0\">\n <div class=\"youtube mb-4 bg-transparent p-0 video-modal-popup\" data-toggle=\"modal\"\n data-target=\"#video-modal\" data-id=\"V19wb3rf67U\" data-title=\"CryptoFinallyExplained\">\n <div class=\"video-gradient-top\"></div>\n <p class=\"text-left dyk-video-title\">What is Polygon in Crypto? (Animated Explainer)</p>\n <img src=https://www.bitdegree.org/"https://i.ytimg.com/vi/V19wb3rf67U/hq720.jpg/"/n alt=\"What is Polygon in Crypto? (Animated Explainer)\"\n title=\"What is Polygon in Crypto? (Animated Explainer)\"\n class=\"p-0\">\n <img class=\"play-button\" data-target=\"#video-modal\"\n src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/video-button.png/"/n alt=\"What is Polygon in Crypto? (Animated Explainer)\">\n </div>\n </div>\n </div>\n </div>\n <div class=\"row justify-content-center text-center\">\n <div>\n <a href=https://www.bitdegree.org/"https://www.youtube.com/c/CryptoFinallyExplained?sub_confirmation=1\%22\n class=\"btn yt-promo mb-2\" target=\"_blank\" rel=\"nofollow noopener\">\n <div class=\"row justify-content-center align-items-center mx-0 text-center\">\n <div class=\"col-4 col-md-4\">\n <i class=\"fab fa-youtube yt-dyk-btn\"></i>\n </div>\n <div class=\"col-8 col-md-8 text-center yt-promo-text\">\n <h4 class=\"m-0 text-white\">SUBSCRIBE</h4>\n <span>ON YOUTUBE</span>\n </div>\n </div>\n </a>\n </div>\n </div>\n </div>\n </div>\n</div>\n<div class=\"modal fade\" id=\"video-modal\" tabindex=\"-1\" role=\"dialog\" aria-labelledby=\"V19wb3rf67U\">\n <div class=\"modal-dialog modal-dialog-centered modal-lg\" role=\"document\">\n <div class=\"modal-content\">\n <div class=\"modal-body p-0\">\n <button type=\"button\" class=\"video-modal-close close\" data-dismiss=\"modal\" aria-label=\"Close\">\n <i aria-hidden=\"true\" class=\"fas fa-times\"></i>\n </button>\n <div id=\"iframe\"></div>\n </div>\n <a class=\"text-decoration-none\"\n href=https://www.bitdegree.org/"https://www.youtube.com/c/CryptoFinallyExplained?sub_confirmation=1\%22\n rel=\"nofollow noopener\" target=\"_blank\">\n <div class=\"modal-footer p-0 d-block bg-white\">\n <div class=\"row justify-content-center m-0\">\n <div class=\"col-3 col-md-4 col-lg-2 p-0\">\n <img class=\"w-100 h-100\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/assets/crypto-subscribe.jpg/" alt=\"Subscribe\">\n </div>\n <div class=\"col-9 col-md-8 col-lg-2 px-0 d-flex\">\n <div class=\"modal-subscribe w-100\">\n <p class=\"m-0 mt-1 mr-3\">SUBSCRIBE<br>\n <span class=\"m-0\">ON YOUTUBE</span>\n </p>\n </div>\n </div>\n <div class=\"col-12 col-md-12 col-lg-8 p-0 text-center d-flex justify-content-center align-items-center\">\n <div class=\"modal-subscribe-text\">\n <h4 class=\"m-0\">Understand crypto with ease</h4>\n <span>New explainer videos every week!</span>\n </div>\n </div>\n </div>\n </div>\n </a>\n </div>\n </div>\n</div>\n<h2>What is Polygon?</h2>\n<p>To start off, before we can get into the topic of what is Polygon, you first need to understand Ethereum, and all of the main issues associated with this <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-blockchain/">blockchain. Since this isn&rsquo;t a section about Ethereum, I&rsquo;ll be quick.</p>\n<p>So, as of writing this section, Ethereum is the second-most popular crypto network, right after Bitcoin. It&rsquo;s super popular for a variety of reasons - <strong><a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-smart-contract/">smart contracts</a>, <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-are-decentralized-applications-dapps/">dApps, it being the center hub of <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-defi/">DeFi, and so on. </strong>Having said that, though, this does not mean that ETH is issue-free - in fact, there are quite a few big issues associated with this blockchain!</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is Polygon in crypto: Smart contracts, dApps, DeFi, etc.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-polygon-01.o.jpg/" alt=\"What is Polygon in crypto: Smart contracts, dApps, DeFi, etc.\" width=\"1000\" height=\"518\" /></p>\n<p>First and foremost, <strong>Ethereum is a dated blockchain. </strong>There&rsquo;s a variety of different networks that are much faster, easier to use, and that require far fewer resources in order to upkeep and maintain. Ethereum will soon launch its ETH 2.0 update, which will address many of these issues, but as of writing this section, it&rsquo;s a blockchain that certainly lacks in certain areas!</p>\n<p>Among the most notable of these areas is the <strong>&ldquo;TPS&rdquo; metric, also known as</strong> <strong>&ldquo;<a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-transactions-per-second-tps/">transactions per second</a>&rdquo;. </strong>At present time, Ethereum is able to confirm around 30 transactions per second. As you can imagine, for a network as popular as this, a number like this is detrimental. This is especially true when you consider the fact that, say, <a href=https://www.bitdegree.org/"/crypto/learn/what-is-solana-in-crypto/">Solana - a popular competing blockchain - can support over 65,000 TPS. <em>The difference is crazy!</em></p>\n<p>Since Ethereum can only support so few transactions per second, this leads the network to another huge issue - <strong>gas fees. </strong>These are the fees that you pay in order to perform a transaction on Ethereum - say, sending some ETH to your friend or relative, or buying the newest token that has hit the market.</p>\n<p>Essentially, if you want your transaction to be confirmed in a speedy manner, you&rsquo;ll need to pay higher fees than some other individual sending their ETH to their friends or relatives. These fees can become very irrational, fast!</p>\n<p>On the user end of things, this is already super-inconvenient, and isn&rsquo;t how the second-largest blockchain should look like! To add to that, <strong>Ethereum is also difficult to work with</strong>, if you&rsquo;re a developer, and are creating a dApp on this blockchain.</p>\n<p><em>Now, how does all of this tie into the question of what is Polygon?</em> Well, the biggest thing that you should take away from this section is the fact that <strong>Polygon is a separate blockchain that utilizes Ethereum&rsquo;s technology</strong>, with the goal to address and solve all of these issues that I&rsquo;ve just mentioned.</p>\n<p>Polygon was created all the way back in 2017, and from day one, its main goal was to tackle all of the shortcomings associated with ETH. Initially, <strong>Polygon was called Matic</strong>, but at some point, it rebranded to its current name - the native coin of the network, however, is still referred to as <strong>the Matic Coin.</strong></p>\n<h2>How Does Polygon Work?</h2>\n<p>Continuing on with the section, I admit - it&rsquo;s pretty simple to just say that Polygon aims to solve the issues that are present with the Ethereum blockchain, and leave it at that. However, it&rsquo;s also important to tackle the question of HOW Polygon achieves this, in the first place!</p>\n<p>Think about the example I gave at the beginning of the section. <strong>Ethereum would be that awesome new phone that you&rsquo;ve bought</strong> - it&rsquo;s full of issues, sure, but it&rsquo;s still the most popular and widely-used phone, since it&rsquo;s both established, and supports all of the most popular applications - something that no other phone is able to claim.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is Polygon in crypto: How does Polygon work?\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-polygon-03.o.jpg/" alt=\"What is Polygon in crypto: How does Polygon work?\" width=\"1000\" height=\"226\" /></p>\n<p><strong>Polygon would be that aforementioned update to your phone.</strong> In the world of crypto, Polygon is referred to as a <strong>&ldquo;<a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-layer-2/">Layer-2 scaling solution</a>&rdquo;.</strong> It&rsquo;s a complex topic, but essentially, the way you can look at it is this - Polygon allows developers and end-users on the Ethereum blockchain to connect to its network and avoid many of the shortcomings associated with ETH.</p>\n<p>So, to put it in other words, imagine that you want to purchase a computer game, for cryptocurrencies. The game is based on the Ethereum blockchain, and costs a crazy amount of ETH to buy - the price itself isn&rsquo;t all that big, but the <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-transaction-fee/">transaction fees</strong></a> are double that of the price! Well, what if you could purchase that same game for Matic coins, pay very small transaction fees, and then still play the game with all of the benefits that are available on the Ethereum blockchain?</p>\n<p><em>Sounds awesome, right? </em>Well, put simply, this is possible, and it&rsquo;s one of the core features of Polygon! That&rsquo;s because of how similar Polygon is to Ethereum, blockchain development-wise. <strong>Some places around the internet use the term &ldquo;EVM&rdquo; to describe the way that Polygon works. </strong>This term abbreviates as <strong>&ldquo;<a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-ethereum-virtual-machine-evm/">Ethereum Virtual Machine</a>&rdquo;,</strong> and it essentially describes the ecosystem that is powered by Ethereum&rsquo;s code, but is based on a third-party blockchain.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is Polygon in crypto: Ethereum Virtual Machine.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-polygon-04.o.jpg/" alt=\"What is Polygon in crypto: Ethereum Virtual Machine.\" width=\"1000\" height=\"429\" /></p>\n<p><em>Why is EVM functionality important?</em> Well, it allows different projects to migrate between blockchains, in an almost seamless manner. For example, developers of the earlier-mentioned game could take it from the Ethereum blockchain, and transfer it to Polygon, and it would essentially work in the exact same manner. Just with all of the added benefits of Polygon - small gas fees, super-quick transactions, and so on. In this sense, <strong>Polygon is helping Ethereum to scale!</strong></p>\n<p>This is actually one of the core goals of Polygon, too! Since it&rsquo;s a Layer-2 blockchain, it aims to <strong>help Ethereum manage all of the transactions that it deals with</strong>, and by doing so, help scale the main network, indefinitely.</p>\n<p>To help you better understand how this works, you can think about it in a visual manner - imagine the Ethereum blockchain as the main, huge network where a large variety of important processes happen every second. Since the network is so huge, it gets congested, and all of the issues that we&rsquo;ve talked about earlier start to arise.</p>\n<p>So, a much smaller network called Polygon enters the scene. It communicates with Ethereum, and says: <em>\"Hey! Redirect all of that huge amount of data to me, I&rsquo;ll condense it to some much smaller units of information, and send it back to you!\"</em></p>\n<p>By utilizing its <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-proof-of-stake-pos/">Proof-of-Stake consensus mechanism, Polygon is able to do just that, and in this way, it alleviates the load that the Ethereum mainnet receives. This is why Polygon is called a Layer-2 scaling solution - it&rsquo;s literally a smaller network that works alongside Ethereum, with the goal to help this large network manage its processes!</p>\n<p>It needs to be mentioned, though, that <strong>Polygon is a much larger project than just a &ldquo;Layer-2 scaling solution for Ethereum&rdquo;.</strong> While this is its main functionality that we - the everyday users - see, Polygon allows developers to work on complex, Ethereum-based projects in an approachable, multi-chain-oriented manner. It&rsquo;s an entirely different field, and I won&rsquo;t get into it here, since it would require a separate section in and of its own. Just keep in mind that Polygon is a much larger project than it might seem, initially!</p>\n<h2>The Matic Coin</h2>\n<p>Before I let you go, the one last thing that I want to tell you about in this section is the Matic coin. I mentioned it earlier - it&rsquo;s the native cryptocurrency of the Polygon blockchain. <em>However, what is it used for?</em></p>\n<p>Well, essentially, <strong>Matic is a <a href=https://www.bitdegree.org/"/crypto/learn/crypto-terms/what-is-utility-token/">utility token</a>. </strong>It has staking functionality, which means that the coin can be staked in order to earn passive rewards, in the form of more Matic. If you&rsquo;d like to learn more about staking, I have <a href=https://www.bitdegree.org/"/crypto/learn/what-is-staking-in-crypto/">a section on that</strong></a>, too!</p>\n<p>The second large purpose of the Matic coin is to <strong>incentivize developers and users </strong>on the Polygon blockchain to perform different processes on the network! It does tie in with staking, but if you provide your computational resources to Polygon, and are an active developer on the network, this can result in Matic rewards!</p>\n<p>Lastly, the coin is used to <strong>pay for transaction fees</strong>, whenever you perform those transactions on the blockchain.</p>\n<p><img style=\"display: block; margin-left: auto; margin-right: auto;\" title=\"What is Polygon in crypto: The Matic coin.\" src=https://www.bitdegree.org/"https://assets.bitdegree.org/crypto/storage/media/what-is-polygon-05.o.jpg/" alt=\"What is Polygon in crypto: The Matic coin.\" width=\"1000\" height=\"841\" /></p>\n<p>As of writing this section, Matic currently has a market cap of $4,4 billion and is worth around $0,64. At its highest point back in December of 2021, it was worth $2,88. The coin currently has inflationary mechanics, due to the staking functionality - however, the team behind <strong>Polygon aims to make the coin</strong> <strong>deflationary</strong>, at some point in time. This could theoretically help it increase in value, too!</p>\n<p>Wrapping things up, whether you&rsquo;re a developer or a crypto enthusiast, Polygon is definitely one of the more-interesting projects that are certainly worth checking out, especially if you&rsquo;re fascinated with all-things Ethereum.</p>","preview_url":"https://www.bitdegree.org/crypto/learn/what-is-polygon-in-crypto","youtube_video":{"id":27,"channel_id":1,"sort":35,"video_title":"What is Polygon in Crypto? (Animated Explainer)","description":"What is Polygon?\n\nPolygon is one of the major names in the crypto world. 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Make sure to share your experience with this blockchain project in the comments below!\n\nVideo Time Table:\n\n0:00 Introduction to What is Polygon in Crypto\n0:59 What is Polygon?\n3:31 How Does Polygon Work?\n7:06 What is the Matic Coin Used For?\n8:20 Wrap-up: What is Polygon in Crypto?\n\nGet Quick Crypto Tips on Twitter - Follow:\nhttps://twitter.com/crypto_xplained\n\n#WhatisPolygonCrypto #WhatBlockchainisPolygonHelpingtoScale #IsPolygonaGoodCrypto","video_id":"V19wb3rf67U","duration":536,"view_count":454,"thumbnail_url":"https://i.ytimg.com/vi/V19wb3rf67U/hq720.jpg","thumbnail_width":1280,"thumbnail_height":720,"published_at":"2022-06-19 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Tokens?","featured_image_id":null,"status":"published","chapter_id":8,"language":"en","order":4,"modified_content":null,"preview_url":"https://www.bitdegree.org/crypto/learn/how-to-track-new-crypto-coins","featured_image":null,"youtube_video":null},{"slug":"how-to-research-crypto","title":"Crypto Research Fundamentals & Social Signals: Your Daily Trading Strategy","featured_image_id":null,"status":"published","chapter_id":8,"language":"en","order":5,"modified_content":null,"preview_url":"https://www.bitdegree.org/crypto/learn/how-to-research-crypto","featured_image":null,"youtube_video":null}]},{"id":9,"title":"Mining","slug":"mining","updated":false,"chapter":"https://assets.bitdegree.org/crypto/assets/crypto-book/chapters/learn-crypto-mining.jpg","chapter_simple":"https://assets.bitdegree.org/crypto/assets/crypto-book/chapters-simple/crypto-mining-101.jpg","rating":80,"sections":[]},{"id":10,"title":"Crypto Terms","updated":false,"chapter":"https://assets.bitdegree.org/crypto/assets/crypto-book/chapters/crypto-101-glossary.jpg","chapter_simple":"https://assets.bitdegree.org/crypto/assets/crypto-book/chapters-simple/crypto-glossary-101.jpg","rating":100,"sections":["A","B","C","D","E","F","G","H","I","J","K","L","M","N","O","P","Q","R","S","T","U","V","W","X","Y","Z"]}],"currentChapter":"cryptocurrencies","currentSection":"what-is-polygon-in-crypto","readingTime":8,"readingLevel":"easy"},"url":"/crypto/learn/what-is-polygon-in-crypto","version":"cdd198d50cbe5c9c21c9329d7c096ffc"}" class="container-fluid d-flex crypto-book p-0">

All Crypto From

Scratch!

Crypto 101 Handbook

Chapter 1: Blockchain

• 1.1

  What is the Blockchain?
  1.2

  Anonymous & Decentralized Blockchains: The Cornerstone of Crypto
  1.3

  What is a Blockchain Transaction in Crypto?
  1.4

  The Different Types of Crypto Fees Explained
  1.5

  The Key Notion Behind the Concept of Bridging in Crypto
  1.6

  Different Types of Blockchains: What to Look Out For?

Chapter 2: Cryptocurrencies

• 2.1

  What is a Cryptocurrency?
  2.2

  How Does Cryptocurrency Work?
  2.3

  Is Cryptocurrency a Good Investment? The Pros & Cons
  2.4

  Coin VS Token: How Do They Differ?
  2.5

  What are Stablecoins, Altcoins & Wrapped Coins?
  2.6

  Bitcoin: the Pioneer of the Crypto World
  2.7

  The Ultimate Blockchain for dApp Creation: Ethereum
  2.8

  What is Cardano and What is It Used For?
  2.9

  Shiba Inu: the Dogecoin Killer
  2.10

  Is Solana an Improved Version of Ethereum?
  2.11

  The Bridge Between Blockchains: Polkadot
  2.12

  Polygon: the Essential Scaling Solution for Ethereum
  2.13

  The Practical Use of Crypto

Chapter 3: Crypto Exchanges

• 3.1

  How do Cryptocurrency Exchanges Work?
  3.2

  DEX VS CEX: Two Sides of the Crypto Exchange Industry
  3.3

  Crypto Day Trading: The Difference Between Buying, Trading, and Swapping
  3.4

  KYC & AML: The Key to Complying With Legal Industry Standards
  3.5

  From Fiat to Crypto: How to Buy Crypto for the First Time
  3.6

  Taking Profits: Turning Crypto Into Fiat
  3.7

  You’ve Got Crypto: What Can You Do With It?

Chapter 4: Crypto Wallets

• 4.1

  What is a Crypto Wallet?
  4.2

  Hot Wallet VS Cold Wallet: Which One to Pick?
  4.3

  What are Non-Custodial Crypto Wallets?
  4.4

  Metamask: The Leading Non-Custodial Wallet
  4.5

  The Key Crypto Wallet Safety Practices: How Safe Can Crypto Be?

Chapter 5: NFTs

• 5.1

  What are Non-Fungible Tokens (NFTs)?
  5.2

  NFT Trading: The Ins and Outs
  5.3

  Tips and Tricks of Choosing the Right NFTs
  5.4

  How to Store NFTs: Best Practices
  5.5

  How to Create Your Own NFTs?
  5.6

  Making Passive Money with NFTs

Chapter 6: dApps & Defi

• 6.1

  What is Decentralized Finance (DeFi)?
  6.2

  DeFi 2.0: The New Version of Decentralized Finance
  6.3

  What Are dApps and How Do They Work?
  6.4

  Picking the Right dApps: Dos and Don'ts
  6.5

  Web 3.0: The Future of the Internet
  6.6

  What is the Core Purpose of Smart Contracts?
  6.7

  The Notion of a Decentralized Autonomous Ogranization (DAO)
  6.8

  What is the Goal of Staking Crypto Assets?
  6.9

  What is a Liquidity Pool and How Does It Work?
  6.10

  Automated Market Maker: the Cornerstone of the Decentralized Crypto Exchange Industry
  6.11

  The Main Yield Farming Techniques
  6.12

  Crypto Oracles: The Link Between Blockchain and Outside World Data
  6.13

  The Peculiarities of Decentralized Crypto Gambling
  6.14

  Metaverse: A New Perception of Reality

Chapter 7: Trading & Investing

• 7.1

  Where Can You Trade Cryptocurrencies?
  7.2

  Investing in Crypto: What Investing Options Do You Have?
  7.3

  ICO vs IDO vs IEO: Which One is the One?
  7.4

  What are Crypto Airdrops and How to Get Them?
  7.5

  How to Get Free Crypto Assets?
  7.6

  What is Crypto Arbitrage: The Main Principles
  7.7

  What is FUD: How to Use It to Your Advantage While Investing in Crypto?
  7.8

  Investing in Cryptocurrency: How to Manage Your Risks?
  7.9

  What is a Rug Pull in Crypto?
  7.10

  How to Spot and Avoid Rug Pulls?
  7.11

  The Key Legal Techniques of Avoiding Crypto Taxes

Chapter 8: Crypto Analysis

• 8.1

  Bearish and Bullish Markets: Do They Matter?
  8.2

  5 Best Crypto Technical Analysis Indicators You Must Know About
  8.3

  Technical Analysis: What are Candlesticks, Trendlines, and Patterns?
  8.4

  Crypto Tracking: How to Track Your Favorite Coins & Tokens?
  8.5

  Crypto Research Fundamentals & Social Signals: Your Daily Trading Strategy

Chapter 9: Mining

coming soon

Chapter 10: Crypto Terms

• 10.1

  All Crypto Terms

# ABCDEFGHIJKLMNOPQRSTUVWXYZ

Handbook Cover Page

Chapter 2: Cryptocurrencies

Polygon: the Essential Scaling Solution for Ethereum

Numerous individuals refer to the Polygon network, formerly known as the Matic network, as the "Polkadot on Ethereum."

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In this section, I’m going to tell you what is Polygon in crypto!

Imagine that you’ve bought a new phone. After you start using it, you notice that, while it’s super-modern, and supports all of the latest apps, it has a lot of issues - the battery runs out very fast, everything’s slow to load, and the apps glitch out every once in a while.

You could change your phone, sure, but then you wouldn’t be able to use many of the most popular applications that all of your friends are using, since only this phone supports them! However, there’s an alternative - a third-party update that would allow your phone to resolve many of these issues. In essence, this is the relationship between Ethereum and Polygon.

In this section, I’m going to tell you all about Polygon. We’ll talk about what it is, how it works, and why it has become the essential tool for all Ethereum users.

Let’s get to it!

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What is Polygon?

To start off, before we can get into the topic of what is Polygon, you first need to understand Ethereum, and all of the main issues associated with this blockchain. Since this isn’t a section about Ethereum, I’ll be quick.

So, as of writing this section, Ethereum is the second-most popular crypto network, right after Bitcoin. It’s super popular for a variety of reasons - smart contracts, dApps, it being the center hub of DeFi, and so on. Having said that, though, this does not mean that ETH is issue-free - in fact, there are quite a few big issues associated with this blockchain!

First and foremost, Ethereum is a dated blockchain. There’s a variety of different networks that are much faster, easier to use, and that require far fewer resources in order to upkeep and maintain. Ethereum will soon launch its ETH 2.0 update, which will address many of these issues, but as of writing this section, it’s a blockchain that certainly lacks in certain areas!

Among the most notable of these areas is the “TPS” metric, also known as “transactions per second”. At present time, Ethereum is able to confirm around 30 transactions per second. As you can imagine, for a network as popular as this, a number like this is detrimental. This is especially true when you consider the fact that, say, Solana - a popular competing blockchain - can support over 65,000 TPS. The difference is crazy!

Since Ethereum can only support so few transactions per second, this leads the network to another huge issue - gas fees. These are the fees that you pay in order to perform a transaction on Ethereum - say, sending some ETH to your friend or relative, or buying the newest token that has hit the market.

Essentially, if you want your transaction to be confirmed in a speedy manner, you’ll need to pay higher fees than some other individual sending their ETH to their friends or relatives. These fees can become very irrational, fast!

On the user end of things, this is already super-inconvenient, and isn’t how the second-largest blockchain should look like! To add to that, Ethereum is also difficult to work with, if you’re a developer, and are creating a dApp on this blockchain.

Now, how does all of this tie into the question of what is Polygon? Well, the biggest thing that you should take away from this section is the fact that Polygon is a separate blockchain that utilizes Ethereum’s technology, with the goal to address and solve all of these issues that I’ve just mentioned.

Polygon was created all the way back in 2017, and from day one, its main goal was to tackle all of the shortcomings associated with ETH. Initially, Polygon was called Matic, but at some point, it rebranded to its current name - the native coin of the network, however, is still referred to as the Matic Coin.

How Does Polygon Work?

Continuing on with the section, I admit - it’s pretty simple to just say that Polygon aims to solve the issues that are present with the Ethereum blockchain, and leave it at that. However, it’s also important to tackle the question of HOW Polygon achieves this, in the first place!

Think about the example I gave at the beginning of the section. Ethereum would be that awesome new phone that you’ve bought - it’s full of issues, sure, but it’s still the most popular and widely-used phone, since it’s both established, and supports all of the most popular applications - something that no other phone is able to claim.

Polygon would be that aforementioned update to your phone. In the world of crypto, Polygon is referred to as a “Layer-2 scaling solution”. It’s a complex topic, but essentially, the way you can look at it is this - Polygon allows developers and end-users on the Ethereum blockchain to connect to its network and avoid many of the shortcomings associated with ETH.

So, to put it in other words, imagine that you want to purchase a computer game, for cryptocurrencies. The game is based on the Ethereum blockchain, and costs a crazy amount of ETH to buy - the price itself isn’t all that big, but the transaction fees are double that of the price! Well, what if you could purchase that same game for Matic coins, pay very small transaction fees, and then still play the game with all of the benefits that are available on the Ethereum blockchain?

Sounds awesome, right? Well, put simply, this is possible, and it’s one of the core features of Polygon! That’s because of how similar Polygon is to Ethereum, blockchain development-wise. Some places around the internet use the term “EVM” to describe the way that Polygon works. This term abbreviates as “Ethereum Virtual Machine”, and it essentially describes the ecosystem that is powered by Ethereum’s code, but is based on a third-party blockchain.

Why is EVM functionality important? Well, it allows different projects to migrate between blockchains, in an almost seamless manner. For example, developers of the earlier-mentioned game could take it from the Ethereum blockchain, and transfer it to Polygon, and it would essentially work in the exact same manner. Just with all of the added benefits of Polygon - small gas fees, super-quick transactions, and so on. In this sense, Polygon is helping Ethereum to scale!

This is actually one of the core goals of Polygon, too! Since it’s a Layer-2 blockchain, it aims to help Ethereum manage all of the transactions that it deals with, and by doing so, help scale the main network, indefinitely.

To help you better understand how this works, you can think about it in a visual manner - imagine the Ethereum blockchain as the main, huge network where a large variety of important processes happen every second. Since the network is so huge, it gets congested, and all of the issues that we’ve talked about earlier start to arise.

So, a much smaller network called Polygon enters the scene. It communicates with Ethereum, and says: "Hey! Redirect all of that huge amount of data to me, I’ll condense it to some much smaller units of information, and send it back to you!"

By utilizing its Proof-of-Stake consensus mechanism, Polygon is able to do just that, and in this way, it alleviates the load that the Ethereum mainnet receives. This is why Polygon is called a Layer-2 scaling solution - it’s literally a smaller network that works alongside Ethereum, with the goal to help this large network manage its processes!

It needs to be mentioned, though, that Polygon is a much larger project than just a “Layer-2 scaling solution for Ethereum”. While this is its main functionality that we - the everyday users - see, Polygon allows developers to work on complex, Ethereum-based projects in an approachable, multi-chain-oriented manner. It’s an entirely different field, and I won’t get into it here, since it would require a separate section in and of its own. Just keep in mind that Polygon is a much larger project than it might seem, initially!

The Matic Coin

Before I let you go, the one last thing that I want to tell you about in this section is the Matic coin. I mentioned it earlier - it’s the native cryptocurrency of the Polygon blockchain. However, what is it used for?

Well, essentially, Matic is a utility token. It has staking functionality, which means that the coin can be staked in order to earn passive rewards, in the form of more Matic. If you’d like to learn more about staking, I have a section on that, too!

The second large purpose of the Matic coin is to incentivize developers and users on the Polygon blockchain to perform different processes on the network! It does tie in with staking, but if you provide your computational resources to Polygon, and are an active developer on the network, this can result in Matic rewards!

Lastly, the coin is used to pay for transaction fees, whenever you perform those transactions on the blockchain.

As of writing this section, Matic currently has a market cap of $4,4 billion and is worth around $0,64. At its highest point back in December of 2021, it was worth $2,88. The coin currently has inflationary mechanics, due to the staking functionality - however, the team behind Polygon aims to make the coin deflationary, at some point in time. This could theoretically help it increase in value, too!

Wrapping things up, whether you’re a developer or a crypto enthusiast, Polygon is definitely one of the more-interesting projects that are certainly worth checking out, especially if you’re fascinated with all-things Ethereum.

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