This past year has been a painful one for crypto investors. The asset class hit an all-time high in November 2021, topping out at nearly $3 trillion, but has since shed around 70% of its value. Some sort of correction was likely inevitable after the monumental run cryptocurrency went on in 2020 and 2021, but this correction has been exacerbated by a series of controversial events that have caused many investors to lose faith in the industry.
Yet despite numerous bankruptcies, mass layoffs, and some cryptocurrencies becoming completely worthless, not all of 2022 was doom and gloom. To the surprise of some, one cryptocurrency had a phenomenal year of achievements.
While its price hasn’t necessarily reflected its level of success, likely the result of ongoing macroeconomic factors, Polygon (MATIC 0.21%) has earned the spot as my crypto MVP of 2022. It has remained resilient compared to other cryptocurrencies despite its price being down nearly 70% year to date. While that price might sound like bad news to investors, Polygon’s market cap jumped into the top 10 market caps of all cryptocurrencies amid the crypto winter.
But for Polygon to remain as resilient, investors must have had a reason for being optimistic that its blockchain was becoming more valuable — and that list of reasons is lengthy.
Top companies tap Polygon for new business models
Anecdotally, the number of partnerships Polygon made with companies this year might be the highest of any cryptocurrency — the list of companies is lengthy. All of them used Polygon a bit differently, but that shows the blockchain’s versatility in serving various needs for companies pursuing unique ways to utilize blockchain technology for new applications.
I won’t be able to get into the details of every partnership, but Polygon’s list of companies that began using it for things like non-fungible tokens (NFTs) and decentralized finance transactions includes household names like Nike, Disney, Meta, Coca-Cola, JPMorgan, and Starbucks.
Of more importance, though, is why these companies decided on Polygon as the blockchain of choice to begin their blockchain endeavors. Polygon does one specific thing very well: make Ethereum (ETH -0.03%) faster and cheaper to use.
A symbiotic partnership
Over the last couple of years, Ethereum has risen to prominence as one of the most popular blockchains. Its smart contracts are used to program decentralized applications, NFTs, lending protocols, and much more. Due to its range of use, Ethereum sometimes becomes bogged down with traffic. As the traffic increases on its blockchain, speeds can slow to a trickle, and the costs to settle transactions can spike. But with Polygon, all of this becomes a thing of the past.
Ethereum is popular not only for its smart contracts and wide-ranging use cases but also for its security and decentralization. Companies like those mentioned want to utilize Ethereum, but that can be a little costly. They can mitigate this by using Polygon, which processes transactions in bundles rather than one by one and later adds them to the Ethereum blockchain for much cheaper.
These companies using Polygon more are using it for one primary reason — its compatibility with Ethereum. So Polygon became the most viable option for companies wanting a more cost-effective blockchain but still looking for the benefits of Ethereum’s popularity, decentralization, and security.
Likely just the beginning
There is plenty of optimism for Polygon to continue its run into 2023 and beyond. Unlike other blockchains, which had mass layoffs, Polygon went on a hiring spree this year — a sign the company is remaining diligent in its development. In addition, there are plans for the blockchain to become even faster and cheaper to use. The technology known as zkEVMs will bundle transactions in a more streamlined fashion and likely attract more companies to utilize the blockchain.
Considering its low price, long list of accomplishments in 2022, and future potential, I believe all crypto investors looking to capitalize on the wave of companies deciding to move operations to the blockchain should prioritize Polygon. Of course, that isn’t to say it will return to its all-time high next month or even by the end of 2023. But over the long term, as Polygon serves more use cases, its value should rise as more companies look to get in on the blockchain race.
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. RJ Fulton has positions in Ethereum and Polygon. The Motley Fool has positions in and recommends Ethereum, JPMorgan Chase, Meta Platforms, Nike, Polygon, Starbucks, and Walt Disney. The Motley Fool recommends the following options: long January 2024 $145 calls on Walt Disney, long January 2024 $47.50 calls on Coca-Cola, long January 2025 $47.50 calls on Nike, short January 2023 $92.50 puts on Starbucks, and short January 2024 $155 calls on Walt Disney. The Motley Fool has a disclosure policy.
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