BlocksInform
Polygon Network’s MATIC token continues to rally in a sign of persistent demand for layer 2 scaling projects helping decentralized finance (DeFi) protocols bypass Ethereum’s high transaction costs and attract more users.
MATIC reached a new record high of $0.9459 early today, surpassing the previous lifetime high of $0.92 reached on Thursday, according to data provided by CryptoCompare. Messari puts the cryptocurrency’s daily high at $1.05.
The token has rallied by 150% this month, outperforming ether’s 45% rise.
“The ongoing capital rotation into all things Polygon is showing no signs of abating,” Denis Vinokourov, head of research at Synergia Capital said.As evidenced by the sharp rise in the total value locked in, layer 2 scaling solution has recently attracted capital inflows at an astronomical rate.
Scaling refers to increasing the throughput of the system, as measured by transactions per second.
Layer 2 scaling solutions facilitate faster and cheaper transactions by running sidechains or tangential networks alongside the main Ethereum blockchain. Demand for these projects has picked up in the wake of network congestion and high transaction costs on Ethereum’s blockchain., with prominent DeFi protocols like Aave announcing integration with Polygon earlier this month.
Derivatives market data shows the focus has shifted to Ethereum-based scaling solutions in recent weeks from rival blockchains like Solana.
Open interest in MATIC futures listed on Binance, FTX, and Huobi has skyrocketed along with the cryptocurrency’s price.Essentially, open interest refers to the number of contracts traded that have not been matched with an offsetting position.
Open interest in Solana’s SOL token has turned south since mid-April, having seen a solid rise in preceding months.Vinokourov expects Polygon to continue its growth at the expense of Solana.
“Non-ethereum based solutions, such as Solana, may suffer in the short term due to Polygon’s growth,” Vinokourov said.In the future, Polygon’s dominance is expected to strengthen, and its position as an aggregator could spur interest in a broad range of Ethereum-scaling solutions.”
Ethereum’s scalability might be improved, bringing transaction fees down once the sharding upgrade is implemented.However, Polygon’s Sandeep Nailwal doesn’t foresee Ethereum’s improved scalability affecting demand for sidechains.
"Ethereum 2.0 will become 64 times more scalable than Ethereum is now, but demand is more than 1,000 times higher than where we have been."You will need L2 scalability,” Nailwal told CoinDesk.
Ethereum’s founder Vitalik Buterin plans to implement the sharding upgrade after the completion of the switch to proof-of-stake mechanism by early next year.
