Polygon Network
Polyon improves the efficiency of the Ethereum network. In this article we will explain how Polygon is making Ethereum faster and more efficient.
Ethereum is the second largest cryptocurrency after Bitcoin and has over 629,000 RC20 token contracts. The Ethereum network struggles with scalability and the rise in DEX and NFT user numbers has led to congested transactions, longer wait times, and higher costs.
Polygon is a decentralized scaling platform for Ethereum and aims to upgrade Ethereum to a multichain ecosystem. The platform enables developers to build user-friendly apps without sacrificing Ethereum’s network effect.
Ecosystem and Partners
By combining the framework and different scaling solutions, decentralized projects can run on Polygon without leaving the Ethereum ecosystem.
This makes Ethereum significantly more efficient. For comparison, Ethereum currently handles about 15 transactions per second, while Polygon on average handles 7000, using the plasma framework technology.
Even more, with proof of stake checkpoints, up to 65,000 transactions per second can be processed on a single sidechain. A new valid block can be declared valid within two seconds, which is 4000 times faster than Ethereum.
The costs on average amount to 0.00, and are 10,000 times lower in terms of cost per transaction than Ethereum.
Moving on to the ecosystem and partners, the performance of Polygon has attracted numerous DeFi and NFT projects from the finance and gaming sectors, as they can integrate Polygon and MATIC to handle transactions faster and more cheaply. Decentralized exchanges benefit from faster peer-to-peer trades, and the trading speed can increase dramatically as a result.
Decentralized exchanges benefit from faster trades, causing a significant increase in trading speed.
Polygon is currently used by over 19,000 apps, with over 135 million individual users and over 3 million daily transactions. Known names such as Sushi Swap and Uniswap are on the list.
In the NFT and gaming sector, the well-known gaming platform, Decentraland, has started to integrate Polygon since 2021.
The largest NFT marketplace, OpenSea accepts MATIC token as a payment method on OpenSea. Anyone who carries out transactions on Polygon with Open Sea must pay their fees with MATIC.
Companies outside the blockchain industry have also become aware of Polygon, to name a few. Starbucks announced its intention to use Polygon for an NFT-based loyalty program. Customers can win NFTs through mini-games and activities, and the NFT stamps can be used for many benefits. Another step for Starbucks is to use Polygon for the Web3 experience Starbucks Odyseey
Dolce & Gabbana announced in June 2021 that they would be producing an exclusive NFT collection based on the fashion of Venice. Adobe integrated Polygon into its social media platform Behorse in March 2022, allowing artists to create their own NFPs in a more environmentally friendly way.
MATIC Token
The Polygon token is called MATIC and is currently ranked 13th by market capitalization with a value of over 6.6 billion euros. Polygon’s architecture is like a knight’s armor and is designed to enhance Ethereum’s efficiency and security. The network consists of a framework and protocol, and decentralized projects can run on Polygon without leaving the Ethereum ecosystem.
„Polygon makes Ethereum faster and more efficient“
The numerous crypto projects are supposed to have a compatible, efficient, and secure space where developers can build their apps as user-friendly as possible while still taking advantage of Ethereum’s network effect.
At them time this article was written, the MATIC token is listed at rank 13 on CoinMarketCap with a current market capitalization of over 6.6 billion euros.
Polygon makes Ethereum faster and more efficient by equipping it with custom-made „armor“. Imagine Ethereum as a knight and Polygon as the armor. The armor, made by Polygon, fits the knight perfectly and helps him to fight more efficiently and securely. In the blockchain world, the knight represents Ethereum and the armor represents Polygon.
The Polygon architecture is built as a second layer, much like armor, with a range of options for different solutions, settlement services, and modules. The Polygon network is compatible with Ethereum and has two main components: the framework and the protocol.
A Little About History
Polygon was initially founded in 2017 as an open-source protocol, with three prominent founders, two of whom were blockchain developers and one a product manager and consultant. The current CEO of Polygon, Canani, had a challenging childhood but started earning money through side projects, including a website where people could bet on the next Game of Thrones character to die. He was searching for alternative payment solutions to integrate into the website when he discovered cryptocurrency and Ethereum. At first, no one wanted to invest in it due to the bad image of cryptocurrencies. The founders borrowed money from their families and did not give up.
In 2019, they switched from Ethereum to their own platform, which led to worldwide success. The Binance listing on Imagine Exchange brought in 5 million dollars for the team. In 2021, the company rebranded from MATIC to Polygon, and today, it attracts investment from superstars like the former CTO of Coinbase. In a recent financing round, Polygon raised around 450 million US dollars from various investors, increasing its valuation to 20 billion dollars.
Ecological Footprint and Sustainability
Furthermore, Polygon aims to be a sustainable platform and described its environmental goals in a „Green Manifesto“. The team stated that to live and work, we need environmentally friendly solutions, as climate change will greatly restrict the freedom of future generations. In 2021, Polygon had a CO2 equivalent of 90,000 tons, close to PayPal’s level.
To change this, the company purchased tokenized carbon certificates for 400,000 US dollars, which corresponds to 90,000 tons of emissions, making Polygon carbon negative in 2022. Additionally, 20 million dollars are to be invested in various green initiatives and project development to make the platform climate positive. Independent platforms like klimadau or Kryptocarbon Rating Institute are supposed to track the carbon footprint.
Tokenomics
The MATIC Token is the native token of the Polygon network. It is an ERC 20 Token and serves as the root or base blockchain within Polygon’s second network. The token performs various functions.
Firstly, it acts as gas fees, serving as an internal payment and exchange medium within the Polygon ecosystem. Every transaction on the Polygon side chains or using a Polygon application requires MATIC, with an additional fee being charged in MATIC.
Secondly, it provides network security, with fees being paid to the validators who then declare the new blocks with transactions to be valid. Polygon uses a Proof of Stake consensus mechanism for this. MATIC also serves as a staking and reward token for the work of the validators.
A third function will be governance, with MATIC token holders being able to vote on Polygon improvements in the future. The votes will be called Polygon Improvement Proposals. Based on the classification by the Swiss financial authority, I would personally classify the MATIC Token as a combination of a utility token with an additional payment function. The Whitepaper refers to MATIC as a utility token.
The total supply of MATIC Tokens is around 10 billion, with 7.4 billion in circulation according to CoinGecko.
Where to Buy MATIC?
To purchase and store MATIC, it can be bought on popular exchanges like Binance, Coinbase, or Crypto.com.
Which Wallet to Use for MATIC?
MATIC is supported by software such as Trust Wallet or Metamask, and hardware wallets such as biometric Decent Wallet or Ledger also support storage once purchased. You also have the option to delegate your MATIC tokens to a validator. Many centralized exchanges and centralized exchanges offer staking for MATIC.
Which Impact has the Ethereum Merge on Polygon?
With regards to Polygon, the Ethereum merge upgrade to 2.0 will renovate the network in several phases, with September 15, 2020, being the merge phase initiation date. Ethereum switched from proof of work to proof of stake. The impact of the merge on Polygon is that the network’s energy efficiency will reduce by 99% and worldwide energy consumption will decrease by 0.2%. However, the switch to proof of stake does not make Ethereum transactions cheaper or faster, and for Polygon, it’s business as usual. The next milestones of ETH 2.0 include the development of its scalability solutions, which will not make Polygon redundant. In fact, Polygon supports Ethereum’s scalability solutions, and any improvement to Ethereum makes it more future-proof.
What’s the use of having a good armor if the knight beneath it is weak? Moreover, even after that, Ethereum will still be dependent on additional second-layer scaling solutions to continue solving the blockchain trilemma. A strong knight alone won’t suffice in battle, he will still need armor to protect himself from blows.
The upgrade to Ethereum 2.0 is also a long, long, long process. Polygon wants to be an established part of the network, both during and after the process, and the armor will receive some improvements too, better material, a sword or two.
Scaling Technologies
First, Polygon’s Proof of Stake multichains, side chains. You already know this basic principle from my other videos about the Polka, Kosmos, Constellation, and Visie projects. Polygon can similarly provide side chains to Ethereum to relieve the main network. Side chains are alternative blockchains to a parent chain, or root chain. Polygon’s side chains use a Proof of Stake mechanism, called Polygon Proof of Stake. Each side chain is connected to the root chain, or Ethereum’s main network, through various control points. This leads to exchange between the XXX root and side chains, and consensus is achieved when a series of transactions or blocks are agreed upon by a majority of the control points.
Sidechains can be either private or public, and developers have the choice of which network type to use. They can choose a standalone chain, which is independent and fully flexible, ideal for larger enterprise projects or existing ecosystems with bigger communities. Alternatively, smaller startups or security-focused projects can opt for the security provider service, in which Ethereum or a selected group of validators takes care of the staking mechanism.
Next, there are Polygon Plasma sidechains, which include the plasma bridging framework in addition to proof of steak. This type of sidechain is even more secure and scalable, thanks to the dual consensus architecture. Additional second-layer technologies, such as zero-knowledge and optimistic rollups, are in development to increase the scalability and security of Ethereum. For example, optimistic rollups prevent malicious operators from uploading false transaction data to the Ethereum main network.
Framework
Polygon provides a modular framework with the Polygon Edge framework, allowing developers to choose from a set of different presets for projects with a single click. If that’s not fast enough, they can take advantage of an additional service, which is called the Supernet Program. The Supernet Program is a kind of QuickSet on a guide to accelerate the setup of one’s own blockchain.
Interoperability
Polygon also wants to be interoperable, for example with bridges. Bridges provide a direct communication channel between Polygon and Ethereum, allowing tokens to be transferred between Polygon and Ethereum without involving a third party.
In addition to pure proof of stake bridges, there are also plasma bridges, XXX the differences of which can be found in this overview. The idea is that individual applications can exchange within the ecosystem, which is super interesting for games and LFT trading platforms. Polygon also shows openness to supporting additional blockchains in the future based on community suggestions.
However, one point I see in Polygon’s concentration of MATIC tokens by large investors, as the top 50 addresses own over 81% of all MATIC tokens, making MATIC a token that is relatively centralized by large holders. Just for comparison, the top 50 addresses hold 67% of Link tokens at Chainlink and 78% of Shiba Inu tokens. As for decentralization, this applies to the validators and the staking mechanism. Developers can choose optional security protocols for their applications and choose the validator pool of polyber for consensus. This service is used to quickly integrate a project into existing infrastructure.
Validators and Security
The validators of Polygon are professionally selected mediators who must meet certain criteria for a full node. The drawback is that the number is currently limited to 100 validators. Operating a node for consensus involves three levels of Ethereum, Heimdall, and Bollinger. A node operator would have to deal with all three levels, each of which performs different tasks.
Heimdall verifies the blocks, Bollinger produces the blocks, but I wouldn’t go into more detail here as it gets too technical. A layman, non-developer would never do this, he would only delegate it. This creates a dependency on Polygon at first for both developers and token owners who want to participate in the stacking process. However, Polygon is trying to counteract this dependency by allowing developers to choose an independent standalone chain with their own validators for the project, for more decentralization.
Polygon also wants to introduce a governance function for MATIC token owners to the community and last year founded the Polygon ecosystem DAO, a platform supported by a million US dollars. Polygon already committed to the development of this platform. By the way, Polygon was hacked once at the end of 2021, but only around 800,000 MATIC tokens were stolen, worth around 2 million US dollars at the time.
Two white hat hackers discovered a flaw and informed the team internally. After fixing the flaw, Polygon rewarded the hackers with over 3 million US dollars. The Polygon Foundation covered the cost of the theft, and since then, there have been no further incidents.
