In a market with over 5,000 cryptocurrencies — each with its own set of values and financial policies — newer coins are usually overlooked. Polygon’s MATIC, however, is standing out. Launched in late 2017, MATIC, the native token of Polygon, is now among the top 15 cryptocurrencies by market capitalization and has surged by over 30% this week despite other crypto prices falling in a market-wide downturn.
Polygon’s scope extends beyond being just another digital asset. First, it is a layer-2 scaling solution for Ethereum, designed to improve the network’s transaction processing speed and reduce transaction costs, also known as gas fees.
Second, Polygon is a platform where developers can launch their own sovereign blockchains and decentralized applications, empowered by a set of advanced modules that enable the deployment of interconnected blockchain networks, with easily customizable functionality.
To understand Polygon’s vision and how it aims to create the borderless future of the blockchain industry, we’ll first take a look at how the network functions and what makes it stand out among hundreds of other projects.
Here’s what you’ll learn in this Forkast.News explainer on Polygon:
- What is Polygon?
- Polygon’s roots
- How does Polygon work?
- Polygon’s vision and how it is changing the blockchain industry
- What makes Polygon different?
- What lies in Polygon’s future?
1. What is Polygon?
Polygon, formerly known as Matic Network, is a blockchain scalability platform and framework for connecting and building blockchain networks compatible with Ethereum. The network also refers to itself as “Ethereum’s internet of blockchains” because one of Polygon’s main missions is aggregating scalable solutions to support a multichain Ethereum ecosystem.
The Polygon network is Ethereum-native, aligned to be interoperable with all of Ethereum’s existing and even future infrastructures while offering a framework for its interoperability with other layer-2 solutions, sidechains and sovereign blockchains.
The Polygon network is thus also categorized as a layer-2 aggregator, aiming to create a multichain ecosystem of Ethereum-compatible blockchains with superior interoperability.
A layer-2 solution refers to a framework built on the base chain, to take some strain off it and complement its fundamental pain points. Polygon is a Plasma-based aggregator,
which is a layer-2 solution for Ethereum, that provides a framework for building decentralized apps (dApps) off-chain that have fortified security, scalability and speed. The Plasma framework is one of the driving developments behind blockchain technology’s mass adoption.
Polygon has its own implementation of Plasma in what’s known as Polygon Plasma Chains. Besides constituting a framework for dApps, Polygon Plasma Chains also enable transactions to be offloaded from the main blockchain into secondary chains, for cheaper and faster transactions.
Polygon network also has a native token, $MATIC, currently trading at US$2.35, with a US$16.1 billion market cap, making it the 14th largest cryptocurrency. MATIC has a max supply of 10 billion coins, with a circulating supply of around 6.87 billion coins, or 63% of the max supply.
MATIC is used to power the network and serve as a utility token for Polygon. It functions as the network’s main transactional currency and as a financial incentive for those who want to contribute to the ecosystem. It is also used as collateral in a process called staking, which enables users to participate in Polygon’s consensus mechanism to validate transactions in return for MATIC tokens.
2. Polygon’s roots
Initially called Matic Network, India-based Polygon was founded in October 2017 by Jaynti Kanani, Sandeep Nailwal and Anurag Arjun — India’s first crypto billionaires. The three initial co-founders developed Polygon to address the issues associated with Ethereum’s high gas fees and congested network, as described in the protocol’s original white paper.
The decentralized, multidisciplinary team behind Polygon is led by the founding three — Kanani is acting CEO — plus Mihailo Bjelic, who joined the company soon after it was rebranded to Polygon and became the fourth co-founder. Polygon also partners with Decentraland, Chainlink and MakerDAO. Its investors include Mark Cuban, the billionaire owner of the NBA team, the Dallas Mavericks.
As a decentralized, global team, Polygon enables like-minded people to contribute to their vision of creating a borderless world. Developers can start contributing to the core protocol or building their own dApps by joining the developer support program.
3. How does Polygon work?
Polygon aims to transform Ethereum into a complete, multichain system, or internet of blockchains, similar to ecosystems like Polkadot and Cosmos, with the added advantages of Ethereum’s robust protocol and security.
In its early days, the ecosystem was known as Matic Network, a simple scaling solution based on Plasma technology to process transactions at lower gas fees. Polygon has since grown into a more complex platform, dedicated to building and launching fully interoperable blockchains. Developers can launch preset networks with customized features using Polygon’s growing range of modules that can be further tailored to meet their needs.
Blockchains launched on the Polygon network are based on its proof-of-stake (PoS) sidechain, which leverages a network of validators off the blockchain and then finalizes the transactions on Ethereum’s main chain afterward. This can take significant strain off the main blockchain, which results in less network congestion, faster transaction speed and lower gas fees.
The Polygon network supports two types of chains: stand-alone chains, which are self-sovereign blockchains on the Matic PoS chain and compatible with Ethereum, and secured chains, which fortify their security using a network of professional validators.
Polygon offers a range of scaling architecture for Ethereum, namely the Matic PoS Chain and Plasma Chain, that are already implemented at the time of writing. The network is working on developing further scaling infrastructure to help prepare Ethereum for mass adoption, such as:
- Polygon Plasma: A layer-2 solution that provides a framework for building dApps off-chain, benefiting from Ethereum’s secure infrastructure.
- ZK Rollups: A layer-2 solution based on zero-knowledge proof, meaning that it executes the transactions off-chain, only submitting the proof of validity to the main Ethereum chain.
- Optimistic Rollups: A layer 2 solution based on fraud proofs, that also executes the transactions off-chain, only submitting proof of fraud to the main blockchain if an invalid block is discovered.
- Validum Chains: A layer 2 solution almost identical to ZK Rollups, except data availability is kept off-chain to prevent funds from being stolen.
- Stand-Alone Chains: Sovereign Ethereum sidechains, secured by their validators, that can be connected to the main blockchain via bridges.
- Shared Security Chains: Blockchains based on security as a service, meaning that their validation service is provided by a shared pool of PoS validators, managed on the Ethereum main chain.
All of the above-mentioned scaling mechanisms are built to boost the transaction throughput of Ethereum without sacrificing the network’s security and user experience. Experts hope that these will represent a solution for slow blockchain transactions without compromising the network’s decentralized nature.
Polygon is actively developing these scaling solutions, with Optimistic Rollups being the next major update. Unlike most major blockchain projects, however, Polygon doesn’t have a roadmap with exact dates, since the project will technically never be complete. As a layer-2 aggregator, new scalability solutions will continuously arise, as blockchain technology is developing. This is why Polygon is preparing to launch additional mainnets like Optimistic Rollups and Validum Chains.
4. Polygon’s vision and how it’s changing the blockchain industry
Polygon envisions a truly decentralized world without digital borders, where people can freely exchange value on a global scale without any third-party intermediaries or gatekeepers. For the blockchain industry, this implies a global ecosystem without technological or brand-related divides, where all the blockchain networks can exchange information frictionlessly.
Polygon has already brought more interoperability to the industry — and made the most important steps towards a borderless digital world — by creating Ethereum’s internet of blockchains, a multichain ecosystem of blockchains compatible with Ethereum. The network provides a fairly simple framework for developers who are interested in launching their own Ethereum-compatible blockchain protocols with a single click.
The solutions presented by Polygon are the answers to some of the most pressing issues of Ethereum, like high gas fees, low transaction throughput and consequently a poor user experience. Polygon’s scaling mechanisms are designed to solve these challenges and make Ethereum a faster and cheaper multichain ecosystem.
More than a simple layer-scaling solution, Polygon can provide the infrastructure for a network of distinct and self-sovereign blockchains that will benefit from absolute interoperability.
5. What makes Polygon different from other blockchain projects?
Polygon is considered one of the most exciting projects focused on blockchain interoperability and scaling, which are some of the technology’s most commonly criticized issues. The network has already surpassed its initial vision for Matic, by offering an exhaustive set of tools for developers to create high-performance, high-scaling blockchain protocols and dApps.
Polygon is a unique player in its league, as it is the only scalability solution to fully support the Ethereum Virtual Machine (EVM), Ethereum’s blockchain-based software that enables developers to create dApps. This makes Polygon accessible and intuitive to use by the Ethereum community, which is already accustomed to building in Solidity, an object-oriented programming language for writing smart contracts. Thus, dApps built in the Polygon network will benefit from Ethereum’s network effect without sacrificing its robust security.
Another unique feature of Polygon is that its security protocol is optional, meaning that blockchains can retain their self-sovereignty. Hence, connected blockchains can enjoy full interoperability with the Ethereum mainchain, without opting for Polygon’s security-as-a-service model.
Polygon’s flexibility is key in enabling developers to build truly interoperable dApps that can benefit from the attributes of multiple interconnected blockchains.
Lastly, Polygon’s well-rounded approach to scaling solutions can future-proof the network, during these times of rapid technological development. Since Polygon offers multiple scaling mechanisms, they don’t risk becoming obsolete, in case one particular solution becomes the industry standard in the future.
The value of Polygon’s scaling technologies is also reflected in MATIC’s price action, as the token surged during two major crypto market corrections this year. In May, MATIC was up by 120% despite Bitcoin’s price crash dragging down most of the rest of the crypto market. According to research by IntoTheBlock, this is because numerous DeFi protocols were switching to Polygon’s Ethereum sidechain to avoid high gas fees, which grew over 845% within a year on Ethereum.
This week, MATIC once again defied the market conditions, as it was up 37% mid-week since the seven days, despite the total crypto market cap shedding around US$400 billion. While it’s difficult to pinpoint a single catalyst behind MATIC’s most recent price rally, part of it may be attributable to Polygon and Wanchain joining forces as well as excitement in the community building up to Polygon zk day — a Dec. 10 virtual event on zero-knowledge proofs that promises a “special exciting announcement live from the Polygon team.” MATIC prices also might have benefited from recent media reports that venture capital heavyweights Sequoia Capital India and Steadview Capital are in talks to back Polygon.
6. What lies in Polygon’s future?
Speculating on the future of such a unique layer-2 project as Polygon is challenging. One way of approaching this is by looking at the race for the best interoperability solution in the cryptocurrency space. The Polygon network’s biggest rivals are Cosmos Network’s Stargate and Polkadot. Polygon gained significant attention recently because its native currency, MATIC, outperformed most major coins during May’s market crash and again this week when most of the crypto market tumbled.
MATIC has been one of the most profitable cryptocurrencies of 2021, starting the year at $0.0178 on the 1st of January 2021, rallying to an all-time high of $2.62 on May 18 and therefore generating more interest among crypto investors. Coinpedia ventured a prediction that MATIC prices could rally as high as US$50 in the next five years if everything goes well for the network.
Institutional interest in Polygon is also on the rise, as approximately 65% of the daily stablecoin transaction volume on Polygon came from transactions above US$1 million, according to one analysis of data from June.
Ethereum-native DeFi protocols are also starting to migrate to Polygon, due to lower gas fees and faster transactions. Most recently, Kyber Network announced the launch of the Rainmaker liquidity mining program on Polygon, while Aave is offering over US$85 million in liquidity rewards for its Polygon markets. Polygon also announced that Filecoin is joining the network, to provide free storage for developers and to accelerate Web 3.0 interoperability between the Polygon and Filecoin ecosystems.
Daily transactions reportedly have increased by almost 400% on the Polygon network in June. At the time of writing, Polygon is outperforming Ethereum in terms of daily transactions, with 3.5 million transactions on Polygon versus 1.2 million transactions on the Ethereum blockchain. But, now that Polkadot and Cosmos Network are each developing their own protocol, the race for the most robust interoperability solution is still closely tied.