Question today is: Can Ethereum 2.0 kill the $9 billion project known as Matic? All right, so to answer this, we're going to have a take a quick look at it and have Ethereum 2.0 explained. When the schedule is, what changes it's going to have. and Matic, how Matic came to be. how it fits into this whole ecosystem. That'll help us take a look and see if Ethereum 2.0 really can have the impact that some people are saying it will. All right? In the meantime, do me a favor, hammer that like button. let YouTube know that you appreciate this video, tap on that subscribe. that way you'll get more updates down the road as I find out more about Matic and Ethereum 2.0 rollout. And I’ll make sure to share all that information with you. All right, let's start.

Warning: I am not a financial advisor and this is not investment advice. Seek a professional.

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Understanding Ethereum 2.0 & Matic?

All right, so to understand how Ethereum 2.0 and Matic are so intertwined. we really need to look back at the beginning of 2021. That is when NFT growth and gaming growth took off on the Ethereum blockchain. and set those gas prices absolutely sky high. There was a point earlier this year where you were paying $50, maybe even $60 per transaction on Ethereum. You can't run a game. you can't run an NFT network when you're having to pay that much for each and every transaction. Well, this led to some major, major growth for Matic, for Polygon. Now, Matic had been around for a while. They have been in development. They saw this problem coming, they saw some of the scalability problems with Ethereum, and so, they built Matic. 

If you don't know, Matic is what's known as an L2, layer two protocol. So you've got the base blockchain of Ethereum. on top of it, you've got a separate side chain known as Matic. The side chain handles a lot of the fast transactions and quickly processes the information. and then relays that back to the Ethereum blockchain and finalizes it there. This allows for much faster and much cheaper transactions. On average, Ethereum can handle 200 transactions per second, whereas Matic can handle 50,000 transactions per second. Ethereum gas fees even today are still in the $8, $10, sometimes $20 range. whereas Matic gas fees are fractions of a penny per transaction. 

How matic solve scalability problem?

This is why Matic was created and why it was put into place. It really solves some of the scalability problems as applications grow on Ethereum. Because, once one application gets popular and busy on Ethereum, it can completely cripple the network. Whereas Matic, they can just add more and more side chains and handle the volume of transactions that are coming through. Along with this, there are some additional drawbacks that come from having layer one and layer two protocols. So when you're trying to reconcile transactions between the two layers. sometimes it can be a little bit of a slow process, that can be a problem. It also can be very confusing for developers as well as for users.

I know from my own experience. Figuring out whether I had Ethereum on Ethereum blockchain or on the Polygon blockchain. Whether my Matic token was on the Ethereum blockchain or on the polygon blockchain can be confusing. and there's a bridge that moves the assets back and forth, and that can be more confusing. So while it did speed up the throughput of the network and dropped the gas fees dramatically. it wasn't without a cost. Now, recently Ethereum has undergone an upgrade. It's called the London hard fork, and this aim to help at least clarify what gas fees would be. It allows people to see what the gas fees are and understand them ahead of time. although it really hasn't done a lot to drop the cost of these gas fees. That step is coming up when Ethereum 2.0 released.

When Will Ethereum 2.0 come?

Now, Ethereum 2.0 has been talked about for years and years. So for many in the crypto industry, it's one of those things that they don't even believe will ever come to be. But I do think from the news coming out. That it is actually something we're going to be seeing within the next year. And Ethereum 2.0 is a major shift. Currently, the Ethereum blockchain works on proof of work. which means it takes massive computations, and it's slow just like Bitcoin is. To be able to process and reconcile each and every transaction on the blockchain. But with Ethereum 2.0, they're moving to proof of stake. Now, this will allow for much, much faster, much much cheaper transactions on the blockchain. Because instead of using these complicated computations, it's based upon people staking their Ethereum. 

In addition to this, Ethereum 2.0 is going to allow for sharding, and this is one of the big steps. Sharding will allow the blockchain to basically broken into lots and lots of little pieces. And then reassemble together. It's a complicated process. It is not an easy step. it has taken Ethereum a long time to come up with the technology and to test it and do it. but the theory behind this is that it should dramatically increase the throughput and speed at which the blockchain can react. And that's really the big core problem that Matic was solving is speed and throughput.

Can Ethereum handle high volume transactions?

So the question then becomes, once an Ethereum is capable of handling high volumes of transactions at low gas fees. Is there really a reason for Matic anymore? And this is a difficult question to answer. Because Matic's main sales right now are the fact that it's much cheaper, and much faster. Now, will Ethereum become as inexpensive as Matic? Highly unlikely. It probably may get down into the pennies or 10 cents a transaction. but it's going to take some real, real major changes to get Ethereum down to the point that it's as cheap as Matic. So Matic still has some hope there. And Ethereum 2, like I said, has been slow to come. So this isn't something that's going to happen tomorrow. There's talk of it being by the end of the year, most likely, it'll be first, second quarter of 2022. 

It's unlikely to see this within six to eight months. It's probably more likely a year out before this even happens. And then, it's not going to be an instant process where the moment Ethereum 2 comes out. The gas fees just drop, the speed goes up, everything happened. It's going to still take some time for the gas fees to drop for the sharding to come into effect. So if you're a Matic holder, you're going to have some time. This is a point at which you're going to want. When you see Ethereum 2.0 come out. you're going to want to start watching and seeing what happens. If it seems like those gas fees are going down and down, and the speed of the blockchain is going up and up. maybe a sign that Matic is not going to be as useful going forward.

But there are some other hopes for Matic. First and foremost, are the games and the DeFi projects that are currently being inundated with Matic. Currently Matic is being used as a prime vehicle for these different projects. that were going to be developed on Ethereum or were already developed on Ethereum. and have now been ported over. It's unlikely that they're going to remove Matic from the equation when Ethereum 2.0 comes out. So if Matic has a nice head start, they will get a nice backlog of projects up and running. and they should be able to hold on to those which will keep some good value for the token. 

Benefit of Matic

Along with this, one of the biggest benefits for Matic is the polygon SDK. If you're not familiar with it. this is a set of technologies that allows anyone to build an Ethereum compatible blockchain. It makes it, you know, obviously, you can code your own Ethereum compatible blockchains. Right now as people are doing as Matic has done. But this is a set of protocols that prebuilds it. That allows you, sort of – it's like, instead of hard coding the web, you use a prebuilt webpage builder. Well, this allows you instead of hard coding a blockchain on Ethereum, to use these technologies. Pick and choose elements and put them in there. And you're automatically going to have a nice, secure, well-functioning blockchain that works on top of Ethereum. 

So this is a totally separate benefit that Eth 2.0 doesn't even touch, which will keep some value in Matic. On top of this, it's fast, it's secure. And any of these projects that are build with the SDK are going to need this to be maintained. So as more and more projects roll out in the next year, year and a half, using the the polygon SDK. You're going to see them sort of locked into this because it's very, very hard once you're using a system like that to change over.

In the end, I think this leads to the conclusion that Matic is not going to go away. Matic is going to remain. It is going to remain a very viable and valuable part of the ecosystem. but it may not be as valuable when Ethereum 2.0 and the sharding protocols come into effect. So, as a Matic holder myself, this is something I’m going to continue to watch. If I start to see the Ethereum gas fees dropping once Eth2.0 comes out. If I start to see the transactions per second and the speed going up dramatically once Eth2.0 comes out. It may be time to lighten my basket of tokens. because there's a good chance that the token won't be as valuable since it won't have as many crucial features.

All right, well, I hope this has been useful for you. If it has, hit that like button, hit that subscribe button. It helps me to know which videos are useful. it helps YouTube to know which videos are useful. helps them to share, and I'll keep making great videos for you guys. Thank you. Aloha.