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What is Polygon?

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What is Polygon?

Polygon, formerly known as MATIC Network, serves as a “Layer 2” or “sidechain” scaling solution for the Ethereum blockchain. In essence, Polygon is designed to work seamlessly with Ethereum, functioning as a high-speed parallel blockchain running alongside the Ethereum network. Its primary purpose is to tackle various scalability and performance challenges that the Ethereum network faces, such as high rates for transaction fees (or “gas”). 

The Polygon Network enables users to perform many of the same activities as the Ethereum network, including engaging in Decentralised Finance (DEFI) activities and purchasing NFTs, but it does so swiftly and at a fraction of the cost.

What is MATIC?

MATIC serves as the native cryptocurrency of the network. It’s used to pay for transactions on the blockchain and for staking, which plays a crucial role in securing the network, rewarding participants with MATIC tokens for their valuable contributions. Beyond this, the token can also be used for governance. This grants MATIC holders the capacity to influence and vote on Polygon’s developments.  

It’s worth noting that MATIC is an ERC-20 token. This means it adheres to a set of precise technical standards and exists as a digital asset created on the Ethereum blockchain.

Why MATIC can be appealing for a crypto portfolio?

Cryptocurrencies can make up a small or even a significant portion of a well-diversified portfolio, depending on a person’s knowledge and risk tolerance*. MATIC has a current crypto capitalisation of over USD 5 billion. Here are some reasons people may want to add MATIC to their cryptocurrency portfolio:

  • Scalability and Layer 2 solution: If these Layer 2 solutions gain widespread adoption, it could increase the utility and demand for MATIC tokens.
  • Ecosystem growth: Polygon has a growing ecosystem of decentralised applications (DApps) and DeFi projects. This could drive demand for MATIC as new users and developers join the network. 
  • Staking and governance: MATIC holders can accrue passive income via staking.
  • Ethereum compatibility: MATIC is closely associated with Ethereum, a dominant blockchain, and aims to enhance the Ethereum ecosystem.

How does Layer 2 scaling work?

Polygon enhances the throughput and scalability of the Ethereum Layer 1 network, often referred to as a “settlement layer”, by processing transactions and smart contracts off-chain. It then periodically uploads, or “anchors”, them to the Ethereum network for enhanced security.  The benefits of a Layer 2 scaling solution include reduced transaction costs, increased transaction speeds, and improved overall efficiency of the Ethereum network. 

Layer 2 blockchain networks include Polygon (MATIC) and the Lightning network for Bitcoin. Xapo Bank stands as the world’s first regulated bank to support Lightning network payments and offer MATIC tokens for buying and selling. 

Is Polygon a Proof of Work (PoW) or Proof of Stake (PoS) blockchain?

Similarly to Ethereum, Polygon uses a proof-of-stake consensus mechanism for processing transactions on the blockchain, or “on-chain”. In a PoS system, the network employs validators, not miners, to validate new transactions and add them to the blockchain. Validators and delegators, a lower-commitment form of staking, receive a share of fees and newly created MATIC.

Can I buy MATIC through Xapo Bank?

Yes, Xapo Bank provides its members with access to buy, hold and sell MATIC. While many banks around the world are worried about the popularity of cryptocurrencies and the chance they could usurp some of the bank’s functions and revenue streams, Xapo Bank embraces the opportunity to increase its crypto offerings. It is the first regulated bank in the world to offer such a service. To execute a purchase, select the ‘Wealth’ tab and navigate to the cryptocurrencies section. You will be able to see the available cryptocurrencies.

How difficult is it to buy MATIC via Xapo Bank?

It’s very simple. With Xapo Bank, you can buy, hold and sell MATIC at the click of a button. This is in contrast to many other banks, where purchasing cryptocurrencies directly can be cumbersome, often involving extensive documentation and explanation about the transaction’s purpose.

What will happen when I want to cash out of my MATIC?

You can sell your MATIC quickly and easily into US Dollars from the Xapo Bank app.

I’ve been told I should use a digital wallet like Metamask to store my MATIC, but can I rather store it with Xapo Bank?

You’ve probably heard the well-used crypto slogan, ‘Not your keys, not your coins’. Crypto holders are encouraged to self-custody their assets in either a cold wallet (not connected to the internet), or an internet-enabled hot wallet like Metamask. However, self-custody wallets, where you own your own private keys, come with a host of issues. Over USD 100 billion worth of cryptocurrency stored in self-custody wallets has been lost forever due to forgotten seed phrases or faulty devices. Is the digital equivalent of keeping your money under the mattress really the most secure way to keep your cryptocurrency safe? It’s simpler and more secure to store your crypto assets with Xapo Bank, a licensed virtual asset currency provider by the Gibraltar Financial Services Commission. We follow strict security rules for the assets we protect using ultra-secure MPC wallets.

What are the fees for buying MATIC, and are there any limits to how much I can buy and sell in a day?

The fee for buying and selling MATIC is a flat 1% for all order types. For example, if you buy USD 100, your fee will be USD 1 upon purchase. If you sell the cryptocurrency for USD100, your fee will again be USD 1.

In addition, you can buy or sell unlimited times per day. The minimum USD amount for purchase is USD 10 and the minimum USD amount for selling is USD 1.

When can I buy MATIC?

The market is open 24/7. Xapo Bank members can access, monitor and rebalance their crypto portfolio anytime. 

*Capital at risk. This information is not investment advice. Crypto asset values can go up as well as down and you could lose all the money you invest. This is a high‑risk investment and you are not protected if it loses all or some of its value. Past performance is not indicative of future results.

Xapo Bank is a crypto-enabled bank licensed by the Gibraltar Financial Services Commission. We give our members access to a US Dollar and Bitcoin account, successfully bridging the gap between traditional banking and crypto. USDC deposits into Xapo are immediately converted to USD on a 1:1 basis, giving instant dollar cash value with zero exchange fees.

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