What is Polygon (MATIC)?
Key points
- Polygon is a network of secured layer-2 (L2) solutions and standalone sidechains. Its goal is to scale the Ethereum blockchain and reduce transaction costs.
- Alongside its own Matic PoS Chain and Matic Plasma Chains, Polygon supports ZK-Rollups. It also plans to implement Optimistic Rollups and Validium.
- As of June 2022, more than 7,000 decentralised applications in DeFi, the metaverse, gaming and NFTs run on Polygon.
Who created Polygon, and when?
The platform’s testnet went live in October 2017 under the name Matic Network.
The project has four co-founders:
- Polygon Network CEO Jaynti Kanani — a specialist in data processing and analytics;
- executive director Sandeep Nailwal — a management consultant;
- director of production control Anurag Arjun — a product manager;
- Mihailo Beli [Mihailo Bjeli] — a developer.
The founders see Polygon as a way to address blockchain networks’ scaling and efficiency problems.
The Polygon team created the Plasma Chains scaling model and the Ethereum sidechain Matic PoS Chain, based on Proof-of-Stake (PoS). Over time this sidechain became a popular scaling option for various applications.
In April 2019 the company held an IEO for the MATIC token, raising $5.6m. In February 2021 the Matic Network developers changed the project’s name to Polygon. The rebrand marked a shift from an Ethereum L2 solution to a multichain system akin to Polkadot.
What are Polygon’s technical features?
Polygon extends Ethereum’s infrastructure to tackle scalability. It provides mechanisms that boost throughput and lower transfer costs. Polygon’s architecture comprises four layers:
- The Ethereum layer secures Polygon blockchains via mainnet smart contracts. This enables checkpointing, staking, dispute resolution and information exchange with the “parent” chain.
- The security layer provides access to validators. It lets nodes connect, interact and distribute rewards.
- The Polygon layer consists of several independent blockchains. These build hierarchical links between transactions and achieve consensus. This layer handles user-to-user transfers.
- The execution layer processes transactions and stores data. Here, EVM-compatible networks execute smart contracts.
Polygon enables both sovereign and secured blockchains. Sovereign networks use PoS with their own validator sets. Secured networks can lean on Ethereum’s infrastructure, offering high security and privacy.
What consensus mechanisms does Polygon use?
The ecosystem includes the Matic sidechain. It operates separately from Ethereum on PoS, with its own validator pool, and is EVM-compatible. The network’s design allows slashing of staked funds, providing additional security.
The sidechain has two levels: block production and validators. The latter ensures node operation, reward distribution and unstaking. The design allows sidechain blocks to be embedded into Ethereum.
Polygon also hosts layer-2 solutions built with ZK-Rollups. These rely on cryptographic proofs to verify state changes. “Rollups” are formed for batches of transactions. State changes are represented as ZK verifiers that are committed to Ethereum.
The algorithm relies on zero-knowledge proofs. Each operation requires an initial verification. Proofs for a batch of transactions are generated from the verifiers for each of them.
Only the final state is needed for verification. A small amount of data is sent to the main chain, improving scalability. ZK-Rollups offer immediate transaction verification, though they are not fully EVM-compatible.
What role does the MATIC token play in the Polygon ecosystem?
MATIC has a total supply of 10bn. It is used for fees and peer-to-peer settlements. Sidechains employ MATIC to implement PoS. The asset also pays validator rewards.
MATIC is emitted gradually on a schedule running to December 2022. The tokens are intended for decentralised governance of Polygon. A redesign of the cryptocurrency (including a name change) is also envisaged, to be integrated across the ecosystem’s products.
What products are in the Polygon ecosystem?
The Polygon ecosystem includes the Matic sidechain and six products that support ZK-Rollups. Hermez, Miden and Zero implement the technology directly, while Nightfall uses ZK algorithms. Avail and Edge are designed for building modular infrastructure.
Polygon Hermez is a ZK-Rollup built on Ethereum. The open-source product processes 2,000 transactions per second but is not EVM-compatible. It uses a decentralised governance model.
Polygon Zero — an L2 for building decentralised applications — uses recursive ZK-SNARK proofs. The approach raises throughput via parallel data processing. Proofs for all transactions are aggregated into one. Plonky2 is planned for generating the aggregate SNARK.
Polygon Miden uses ZK-STARK proofs. The solution is computationally intensive but EVM-compatible. Developers can program in Solidity, Move and Vyper.
Polygon Nightfall — a privacy-focused solution — targets the enterprise segment.
Polygon Avail enables operation with partial data. It allows a network of “light” nodes that download a random subset of information from the blockchain. Security and data recording are outsourced to Avail, enabling off-sidechain storage.
Polygon Edge— an open-source development framework — lets teams build L2 solutions and sidechains with separate validator sets. Edge includes modules for blockchain operations, consensus mechanisms and libraries for architecture design. It supports PoS and Proof-of-Authority.
What are Polygon’s advantages?
Polygon is an ecosystem hosting more than 7,000 decentralised applications across DeFi, the metaverse, gaming and NFTs. It features L2 solutions based on ZK-Rollups. Polygon’s architecture offers developers a broad toolkit suited to varied use cases.
For DeFi, algorithms that maximise security are preferable. They typically use Ethereum as the base layer. For startups, a simple, low-cost solution is more practical, for example a validator pool shared by several projects.
Polygon enables special-purpose applications optimised for rapid execution, using a blockchain with minimal block times. The platform allows applications to interoperate across layers and move between them.
A key advantage of Polygon-based networks is EVM compatibility. Built atop Ethereum, the project can tap its resources and community.
How does Polygon’s corporate fund work?
Polygon’s development is supported by a dedicated investment fund. Priority backing goes to projects built on the platform.
Polygon currently has four investment partners, each managing joint capital:
- Wintermute ensures token listings on exchanges and business development;
- 776 specialises in building Web3 applications;
- Outlier Ventures — an accelerator for platform projects;
- StableNode facilitates engagement with node operators, staking and asset management.
There is also a separate fund supporting solutions on the platform. It manages $100m, of which $15m has been invested across 50 projects.
Polygon Studios, focused on blockchain gaming and NFT projects, has significant capital. It works with 500 studios, helping attract 100,000 gamers. Polygon Studios collaborates with The Sandbox, Decentraland, and developers including DraftKings, Electronic Arts and Atari.
How is Polygon developing?
The Polygon team focuses on product development and partnerships for integration. Many major decentralised projects are deployed on Polygon, including Aave, Curve and SushiSwap. In December 2021 the decentralised exchange Uniswap launched on the platform.
Polygon plans to use a centralised governance model while preserving autonomy for each team. In January 2022 the developers added a mechanism to burn a portion of transaction fees, similar to Ethereum.
At the time of writing, the ecosystem’s TVL is $2.9bn, according to DeFi Llama. In October 2021 Polygon’s active addresses exceeded those of Ethereum. At the time of writing the network has 142m addresses, and throughput tops 4m transactions per day.
More than 50 digital assets have been issued on the network, including leading stablecoins USDT, USDC and DAI.
In May 2021 billionaire Mark Cuban invested in Polygon; the amount was not disclosed. In February 2022 the platform raised $450m from Sequoia Capital India and other investors.
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