Crypto

This crypto will be the Ethereum of 2023 | The Motley Fool

When Ethereum (ETH 0.39%) started to receive wide public notice in 2020 and 2021, it already had a huge lead over other blockchains launching in the middle of the crypto bubble. Developers had spent years building tools and frameworks that projected like non-fungible tokens (NFT) and new tokens could build on.

As we start a new year, there is a cryptocurrency that has a different kind of momentum that could make it the Ethereum of 2023. It is Polygon (MATIC -2.21%)the blockchain has become essential for American companies.

Image source: Getty Images.

What is Polygon?

Polygon is a layer 2 blockchain built on top of Ethereum. It combines the transactions together and then places a transaction on the main Ethereum blockchain. The idea is to reduce the cost of each transaction and make the blockchain more scalable while being able to use Ethereum’s infrastructure.

Business partners have flocked to Polygon, partly because of its scalability and developer resources and partly because Polygon pays millions of dollars to attract them. Metaplatforms(META -1.18%) Instagram has enabled NFTs on its platform, Stripe uses Polygon for payments and Starbucks (SBUX -0.45%) uses it for a new NFT loyalty program.

The momentum sets in

Cryptocurrency values ​​have largely been driven by momentum. There is a natural network effect in cryptocurrencies for investors and developers. Why develop business models for a blockchain that has no use?

Although it doesn’t have as many users, Polygon manages to take advantage of Ethereum’s development capacity while attracting businesses with its lower costs. And once businesses start flocking to Polygon, others will naturally follow.

It was a similar dynamic to the NFT wave of 2021. Ethereum has become the go-to blockchain, so why build elsewhere? It looks like that will probably be the case for Polygon, but it’s corporate money that’s flowing into Polygon this time.

Not all business projects will hold up

I think 2023 will be defined by companies trying to figure out their best strategies for blockchain and decentralized Web3, a contrast to the version of the web we have today with its dominance by a few large corporations. I’ve mentioned some of the companies to watch above, but there are dozens more experimenting with NFT loyalty programs, lower-cost payment rails, and digital goods for sale in the crypto market. . Most rely on Polygon.

What is not entirely clear is whether companies will develop winning strategies for crypto and Web3 in 2023. There are a few examples, like Adidas and Nike launched successful projects with the Bored Ape Yacht Club and RTFKT (which Nike acquired), respectively. But many companies saw NFTs as a cash grab that they would like to participate in. It will not be a sustainable strategy, and those who are not in crypto for the long term will eventually die out.

The fact that businesses rely on Polygon during a bear market may be enough to make it the best cryptocurrency for 2023. Some blockchains will fail as users and developers flee, but it looks like Polygon is here to to stay.

Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a board member of The Motley Fool. Travis Hoium has positions in Ethereum. The Motley Fool holds and recommends Ethereum, Meta Platforms, Nike, Polygon, and Starbucks. The Motley Fool recommends the following options: long call January 2025 at $47.50 on Nike and short buy January 2023 at $92.50 on Starbucks. The Motley Fool has a disclosure policy.

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