Polygon is a layer-2 scaling solution for the Ethereum blockchain. Its purpose is to speed transactions on Ethereum while cutting down costs by a significant amount. “Layer-2” is a collective term known to describe any technology that exists on top of the core (“Layer 1”) blockchain (in this case Ethereum). Its main purpose is to compensate for the shortcomings of the Layer-1 chain. The proof-of-stake Polygon sidechain can process up to 65,000 transactions per second (tps) and cost less than a cent, while Ethereum can only do ~15 tps and cost $25 per transaction. Let’s take a closer look at this protocol.
Who Made Polygon?
Formerly known as Matic Network, Polygon is the first crypto unicorn based out of India. The company was founded in October 2017 by Jaynti Kanani, Sandeep Nailwal, and Anurag Arjun. The leadership also includes Mihailo Bjelic, an Information Systems Engineer. Polygon has an impressive list of partners, including Chainlink, MakerDAO, and Decentraland. In addition, Mark Cuban, the famous billionaire “Shark” and owner of Dallas Mavericks, happens to be an investor in the project.
The Technology Behind Polygon
At a glance, this is what the overall framework and architecture look like:
- Polygon Plasma: The plasma technology is a layer-2 scalability solution that allows the base blockchain, in this case, Ethereum, to delegate complex computations to plasma sidechains.
- Zk-Rollups: Polygon is working closely with the zk-rollup technology. In simple terms, this technology uses zero-knowledge proofs to execute the transactions off-chain.”Rollups” is a technique wherein a batch of transactions are “rolled up” from the chain and processed off-chain before committing them back into the chain. They currently offer multiple products that use this technology.
– Polygon Zero: An Ethereum-compatible ZK Rollup that uses plonky2 – a speedy and recursive proof system.
– Polygon Hermez: A layer-2 solution based on zk-Rollups.
– Polygon Nightfall: A unique privacy-focussed rollup solution that combines both zk-rollups with optimistic rollups.
- Stand-alone Chains: Stand-alone chains are sovereign Ethereum chains with their own validator or miner pool. These are a good fit for enterprises, projects that don’t need a high degree of security, and projects with a healthy community.
- Secured Chains: These are scaling solutions reliant on Ethereum for its security instead of a validator or miner pool. Secured chains are a good fit for projects requiring the highest security level and young projects with nascent communities.
What Is Polygon Proof-of-Stake?
Polygon uses the proof-of-stake (PoS) consensus mechanism to mint newer MATIC tokens. The nodes participating in the ecosystem are – Validators and Delegators.
- Validators: Validators are responsible for verifying transactions and adding blocks to the blockchain. Anyone can become a validator by staking their MATIC and running their own node. The algorithm punishes irresponsible validators by slashing their MATIC.
- Delegators: These users stake their MATIC tokens indirectly via a validator. They get a share of the rewards (proportional to their delegated stake) every time their chosen validator successfully adds a block. If the validator acts maliciously, the delegators will also stand to lose their stake.
While the project has rebranded from Polygon to Matic, the token name remains MATIC. There is a total supply of 10 billion MATIC tokens and, as of writing, over 7.3 billion have already been minted and released into the system. On January 18, 2022, Polygon went through the EIP-1559 upgrade, which introduced a deflationary effect on the token. As per the team, the MATIC tokens would go through annual burns that would remove 0.27% of the token’s total supply (about 27 million MATIC).
Why Polygon Is Important
Ethereum is one of the most innovative platforms we have ever seen. However, its lack of speed and high costs makes it almost unusable. This is why we need layer-2 protocols like Polygon that empower developers worldwide to create their applications without worrying about factors like performance and costs.
Let’s take a look at some charts to visualize the growth of the Polygon ecosystem. Up first, we have a list of Ethereum bridges. “Bridges” are cryptographical structures that allow protocols to jump from one chain to another. In this case, from Ethereum to multiple chains (and back). Bridges are crucial for ensuring interoperability within the ecosystem.
As of now, Polygon has the second-largest Ethereum bridge in the market, following the Avalanche bridge. Speaking about the DeFi ecosystem itself, as per DeFiLlama, Polygon has the sixth-largest platform globally with over $5.40 billion total value locked (TVL).
When it comes to NFTs, Polygon has been doing very well too. It’s one of the three blockchains available in OpenSea (along with Ethereum and Klaytn). Around 2 million Polygon NFTs were sold in December 2021 alone, while 1.4 million NFTs were already sold by mid-January 2022. In addition, Polygon NFTs have seen over 1 million in sales for three months in a row.
Not only does Polygon have strong fundamentals, but it has found immense utility as well. It will be interesting to see how this protocol grows in the future, especially after the Ethereum 2.0 upgrade.