Polygon (CCC:MATIC-USD) is but one of the rising star altcoins looking to take on Ethereum’s (CCC:ETH-USD) dominance of the DeFi (decentralized finance) space. It’s one of the touted “Ethereum killers” crypto speculators have been buzzing about.
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Based on its post-crash resiliency, it’s safe to say the crypto community remains confident in its prospects. Given the features and advantages this network possibly has over the more widely used one, this makes sense. At least for now.
But once Ethereum, as well as other emerging blockchains like Cardano (CCC:ADA-USD) implement upgrades, MATIC could go from front-runner to also-ran. In turn, this could mean a big decline in its prospects. And a big pullback in its token price.
So, what’s the call on MATIC, as it holds steady around $1.30? For now, the positive sentiment around it could hold. But a few months down the line, that may not be the case.
Will Polygon Crush the Competition?
When it comes to features that could give it an edge against Ethereum, Polygon checks all the boxes. Namely, with regards to greater scalability, and lower transaction fees. And even as Ethereum’s much-disdained high “gas fees” continue to come down, DeFi developers continue flocking to it.
Not only that, but it also now has a noteworthy whale in its corner, in the form of Mark Cuban. At the recent DeFi Summit, the billionaire (who has invested in the coin directly), discussed how momentum is on its side. Comparing things to the early days of the dot-com era, Cuban sees just a few platforms (like this one) dominating the market. The vast majority of blockchain projects? In his words, he sees them “going out of business.”
Is Cuban correct, that this possible “Ethereum killer” will end up the big winner once the DeFi space matures? Only time will tell whether his take is correct and his wager pays off. But there is a factor just around the corner that could put the brakes on its recent momentum.
That would be the pending upgrades, from not only Ethereum itself, but another top DeFi coin contender, Cardano, as well. Add in the potential for other platforms, like Solana (CCC:SOL-USD), to rise in usage and the ascension of this particular platform is far from guaranteed.
From Front Runner to Also Ran
Some cryptocurrency analysts may be skeptical that “Ethereum 2.0” will hurt Polygon’s momentum. But these upgrades could materially increase transaction speeds and reduce transaction fees. In turn, this could help the incumbent maintain its lead and reverse the pivoting away from it to alternative platforms.
How does this hurt MATIC? If the shift to this token’s network starts to slow down, its trading price could start falling. The 72x run-up in its value so far this year has been due to its potential to become one of the leading DeFi networks. If at best it’s going to be an also ran, it’s going to be hard for it to maintain its current market capitalization (around $9.1 billion).
The upgrades to Ethereum aren’t the only factor that could threaten the still-bullish sentiment around Polygon. So too, could the upcoming enhancements to Cardano. That altcoin’s upgrades could make its platform the one DeFi developers start flocking to with full force. To top it all off, names like Solana, which offers even faster transaction speeds, could start to break out in terms of usage.
In short, it may still have a lot of buzz surrounding it. But the current leader could maintain its commanding lead, via its pending upgrades. Rival Ethereum killers continue to make their networks even more formidable competitors through upgrades as well. This platform could quickly go from being the hottest blockchain, to yesterday’s news. That’s not good, if you’re expecting MATIC to rally, or at least hold steady, from here.
The Bottom Line
Calling this token a high-risk crypto play may be a case of stating the obvious. But the future has yet to be written when it comes to who will dominate the blockchain/DeFi economy down the road. There’s still great uncertainty over which blockchains will prevail and which will fizzle. It may be best not to get ahead of oneself and believe that one altcoin or another is destined to become the Ethereum killer.
There’s no problem with rolling the dice sometimes. If Cuban’s bull case plays out, the payoff could be massive. Yet, as its rivals continue to upgrade their platforms, there’s a good chance the recent enthusiasm surrounding Polygon quickly changes course.
On the date of publication, Thomas Niel held a long position in Ethereum. He did not have (either directly or indirectly) any positions in any other securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.