Bitcoin continues to be the class act of crypto, and therefore one of the less risky plays in digital currency
Ethereum’s the market leader in smart contracts, showing up in everything from NFT marketplaces to digital games
Polygon is a sidechain that makes Ethereum better
Bitcoin
It’s not a surprise to see the largest crypto holding up the best in the recent sell-off. The same “flight to quality” we’ve seen in the stock market when the going gets tough also applies to Bitcoin.
The world’s most valuable digital currency isn’t perfect. It lacks the use cases of Ethereum and pales in efficiency when pitted against Polygon. However, it’s an essential building block in a crypto portfolio.
Bitcoin is the equivalent of basic cable when it comes to crypto. It’s bland, but it’s the standard that everyone knows. Financial-services companies stepping into the crypto waters or companies wanting to keep some of their cash in digital currencies flock to Bitcoin first. You can do a lot worse than buying in at a 35% discount to November’s peak.
Ethereum
If Bitcoin is the basic cable of crypto, Etherum is the basic cable of decentralized apps (dApps). The programmable blockchain is at the heart of more than 3,000 dApps.
Ethereum pioneered smart contracts, but being first is never a guarantee of the networking effect that has made Ethereum the second most valuable crypto on the planet. Developers flock to the platform to launch projects quickly, as Ethereum implementation reduces the programming learning curve and has a vibrant developer community. It’s also easy to monetize apps in the blockchain’s ecosystem.
Ethereum isn’t flashy when it comes to speed or bandwidth in tackling a large number of transactions, but we’ll get into how that isn’t necessarily a deal breaker when we talk about Polygon. Ethereum will get better. It’s in the process of converting to a proof-of-stake model, a move that will help it make up ground in terms of speed and costs to settle transactions. The shift will also move it away from its current mining process that has been criticized by environmentalists for its energy-inefficient ways.
Investors will want to keep an eye on some of the digital currencies that may threaten Ethereum’s market leadership in dApps, but for now, it’s the top dog when its comes to use cases. Getting Ethereum at a 38% discount to where it was less than four months ago is the cherry on top.
Polygon
Polygon isn’t an Ethereum killer. If anything, Polygon is extending Ethereum’s lifeline until the shift to Ethereum 2.0 is complete. Polygon is a layer-2 network that helps boost Ethereum’s efficiency. It’s a scaling solution — a sidechain — that helps make Ethereum feasible for developers.
Will Polygon be toast when Ethereum itself gets better, likely as early as this summer? No. Layer-2 networks like Polygon will continue to be in demand.
The scaling solution should still make it faster and cheaper to work within Ethereum’s blockchain, and that’s ultimately what’s attracting developers to Polygon in the first place. It’s currently the eighth largest crypto in terms of Total Value Locked (TVL) — the sum of all assets deposited in decentralized-finance protocols — with more than 200 protocols leaning on Polygon to make Ethereum even better.
If Bitcoin and Ethereum seem like good deals at more than a third off their November highs, Polygon would have to almost double to get back to its all-time high set in December. Crypto may be moving higher right now, but the runway is still long for your risk-tolerant capital.
