Ethereum (ETH -1.68%) has been a phenomenal investment by nearly every yardstick. If you had invested in Ethereum back in 2015, you could now be up an astounding 211,200%. Even if you had waited to invest in Ethereum until August 2020, you would still have made nearly five times your initial investment in just two years.
Even though those stratospheric gains may never be coming back, there are still plenty of ways to participate in the future upside potential of Ethereum at a much lower entry price. One of these is by investing in Polygon (MATIC -3.32%), a popular scaling solution for Ethereum. Polygon is trading for less than $1 and could see an extended rally after Ethereum completes the long-anticipated technological upgrade known as the Merge.
The value and utility of Polygon
What makes Polygon so attractive as an investment opportunity is that it is a Layer 2 blockchain built on top of the main Ethereum blockchain. As a Layer 2 blockchain, Polygon helps to solve two of the major problems facing Ethereum now: congestion and high transaction fees. Right now, Ethereum can only process about 15 transactions per second, so it needs all the help it can get to alleviate the massive congestion on its blockchain. Moreover, users have long complained about high transaction fees on Ethereum.
That’s why some crypto investors have started to pay attention to Layer 2 scaling solutions such as Polygon — they provide enormous utility and are poised to grow alongside Ethereum. Currently, Polygon stands out as the most popular and powerful Layer 2 scaling solution. Polygon might not be a household name with casual investors, but savvy figures in the crypto world are taking notice. For example, billionaire investor Mark Cuban, already a heavy investor in Ethereum, became an investor in Polygon in May 2021.
Gaming, entertainment, and the metaverse
The niche where Polygon has made the biggest splash so far is NFTs. Again, that has to do with the speed, efficiency, and low cost of the Polygon blockchain. It’s cheaper and easier to mint NFTs on Polygon than on Ethereum. As a result, some of the most famous brands in the world have released NFTs on the Polygon blockchain network. The most recent example is Coca-Cola, which released a series of limited-edition NFTs for International Friendship Day.
Image source: Getty Images.
Polygon is also getting a lot of attention these days for its moves into the worlds of gaming and entertainment. Disney, for example, recently added Polygon to its prestigious Accelerator program for 2022. This could be a unique opportunity for Polygon to get involved in cutting-edge technology projects featuring one of the most iconic entertainment brands in the world.
Polygon also has plenty of other projects in the pipeline related to the metaverse. In fact, in a recent interview, a top developer at Polygon Studios suggested that “the metaverse will be powered by Polygon.” If brands are interested in building new metaverse worlds, they will now be able to build them on top of the Polygon blockchain. Understandably, the future upside potential here is enormous given that consulting firm McKinsey & Company recently estimated the future market potential of the metaverse at $5 trillion by 2030.
What happens after the Merge?
The big question, of course, is what happens to Polygon after the Merge. Some analysts have suggested that Ethereum might not need Layer 2 blockchains after the Merge. Obviously, this would be bad news for Polygon. However, Vitalik Buterin, the founder of Ethereum, has suggested that the blockchain will continue to need Layer 2 solutions after the platform update, simply due to all the activity that will take place on the main blockchain after the upgrade is complete.
There is also the possibility that the Merge fails to take place as planned. After all, it has already been postponed several times this year, and this is an extraordinarily difficult upgrade to complete. Any type of setback would weigh heavily on Polygon’s fortunes, given its close ties to Ethereum. For now, however, people remain optimistic about the Merge.
Buying Polygon, still trading for under $1, could turn out to be a fantastic way to participate in the full upside potential of Ethereum after the Merge. As Ethereum grows, so will Polygon. By getting in at a very low entry price, Polygon investors could be at the start of an exhilarating ride.
Dominic Basulto has positions in Ethereum and Polygon. The Motley Fool has positions in and recommends Ethereum and Polygon. The Motley Fool has a disclosure policy.