Like with traditional computer networks, every blockchain protocol has a different capacity tolerance. There is only so much traffic they can take before they become congested. In turn, this traffic overload results in high transaction fees, especially when it comes to the largest smart contract platform—Ethereum.
The solution to this network congestion problem is simple—layer 2 networks attaching to Ethereum’s core, layer 1 chain. These L2 scalability solutions act like roads connecting to Ethereum’s highway, offloading traffic so that it runs smoothly and affordably. Here, we’ll look at some of the most popular Ethereum L2 scaling solutions, commonly called sidechains.
1. Polygon (MATIC)
By far, Polygon is the most widely adopted layer 2 solution for Ethereum. Unlike Ethereum, which is limited to 13–17 transactions per second (TPS), Polygon can execute up to 7,000 TPS, making it comparable to Visa.
As a proof-of-stake (PoS) network—to which Ethereum is transitioning soon—Polygon relies on MATIC tokens to verify transactions. Therefore, those who hold MATIC tokens can become the network’s validators, earning a cut whenever a transaction occurs. This process is called staking.
Likewise, MATIC holders can delegate their MATIC stash to trusted validators, serving the same purpose but indirectly. That’s why they are called delegators. Either way, staking MATIC yields up to a 9.5% annual percentage rate (APR). This is far beyond the national average offered by banking savings accounts at 0.06%. Polygon’s calculator shows exactly how much one can earn with MATIC staking.
Presently, Polygon offers nearly 900 decentralized applications (DApps), ranging from lending, borrowing, and blockchain gaming to NFT marketplaces and gambling. The more we use these DApps, the more valuable MATIC token becomes as Polygon’s native cryptocurrency.
However, Polygon’s TVL (total…
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