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There are many protocols competing to be the first interoperability solution for the DeFi ecosystem. Among them is Polygon, formerly known as Matic Network. So, what is Polygon?
Polygon is an Ethereum layer-2 protocol and framework for building interconnected blockchain ecosystems, launched in 2017.
Despite its early development and rebranding in February 2021, Polygon still maintains the MATIC ticker for its native utility token. There isn’t a roadmap yet detailing future objectives for the company, but this has not stopped the protocol from becoming an attractive alternative to developers and DeFi users. Besides, anyone can become a contributor —the team behind Polygon welcomes anyone who would like to contribute with code, ideas, or anything that makes Polygon’s vision a reality.
Polygon is composed of a team of contributors spread all around the world. Jaynti Kanani, Anurag Arjun, Sandeep Nailwal, and Mihailo Bjelic are Polygon’s co-founders. They work with advisors from several elite companies and foundations Anthony Sassano from EthHub, Pete Kim from Coinbase, and Hudson Jameson, from the Ethereum Foundation.
After its launch, the team has focused on forging partnerships including Mogul Productions, Umbria, Atari, and OpenPredict, launching a speculation market product on Polygon. The protocol is backed by MIH Ventures, Coinbase, and Binance.
How does Polygon work, and what is its underlying technology? Polygon is a DeFi ecosystem where developers can launch interoperable blockchains.
Polygon takes the best of the Ethereum network and ETH-compatible blockchains into a full-fledged multi-chain system, providing developers with the best of Ethereum without its current limitations —like low throughput (scalability) and high gas fees. Polygon strives to be “Ethereum’s internet of blockchains” —referring to the vast multi-chain network ecosystem compatible with Ethereum and allowing developers to launch their preset Ethereum-compatible blockchain.
Developers can customise their blockchains with a set of modules to set specific tasks for their needs. All blockchains created with the protocol are compatible with all the existing Ethereum tools, including Metamask, MyCrypto, and are fully interoperable with Ethereum.
Polygon is similar to other layer-2 solutions like Polkadot, but some aspects make it stand out:
We can describe Polygon as a multi-layer infrastructure in which each part takes a particular role:
Polygon Network: this is a mandatory layer, next to the execution layer explained below. Each network on Polygon has, naturally, its own community, and it’s responsible for running its local consensus, block production, and transaction collation. All of these networks constitute Polygon’s ecosystem of blockchains. Chains launched on Polygon are interoperable —they can communicate with each other and with the Ethereum mainnet thanks to Polygon’s arbitrary message passing. This also allows dapps (decentralised applications) to communicate with each other on both protocols.
Polygon uses an adapted version of Plasma (a framework that allows creating “child blockchains” —semi-independent chains that use the Ethereum main chain as a layer of trust and arbitration). This version has Proof of Stake-based side chains to bring massive scale to Ethereum.
Polygon recently launched Polygon SDK, described as the “gateway to multi-chain Ethereum.
Polygon SKD is a modular and extensible framework for building ETH-compatible networks, written in Golang —an open-source programming language. The program was created to keep Poilygon’s core layers at their best performance while maintaining a high pluggability level. It also enhances transaction speed at a lower cost than Ethereum.
Polygon co-founder, Sandeep Nailwal, said its release is “an essential addition to one of the most exciting periods in Ethereum’s history".
Developers can implement their own extensions or use the ones provided as part of the software kit. They can also choose between a stand-alone chain, which is better for large projects that can run validator networks, or a secured chain, better for smaller projects that want to keep ETH’s security model.
Polygon supports two types of Ethereum-compatible blockchains: stand-alone chains and secured chains.
Everybody in the crypto world knows about scalability issues that Ethereum and Bitcoin have on their main chain, which can cause a relatively poor user experience. Polygon intends to implement several scaling solutions, and ZK rollup and Optimistic Rollup are two of them.
Let’s sum up what a rollup is first. It refers to the act of wrapping or accruing several transactions into a single one through a blockchain’s layer-2, also called sidechains.
ZK Rollup (Zero Knowledge Rollup) is an alternative scaling technology used to wrap up several off-chain token transactions into a single one. However, ZK Rollups aren’t fully developed yet —but once done, developers can port their Ethereum dapps and other services smoothly. ZK Rollups are focused on applications and token transfers but might work to implement general-purpose smart contracts, solving the scalability problem with Ethereum today.
Optimistic Rollup also works for scaling general-purpose smart contracts on Ethereum. This function assumes most transactions are valid by default. But if an incorrect state transition is published, other operators can point to the invalid transaction and revert the incorrect block, and slashing malicious operators.
MATIC is Polygon’s native token, issued on the ERC-20 standard, and serves as the main utility token. Its valuation soared from US$ 26 million market cap in 2019 to over US$ 10 billion by 2021, becoming one of the top 100 largest cryptocurrencies by market cap.
The token is used mainly to participate in network governance by voting on Polygon Improvement Proposals (PIPs), staking to receive additional rewards, and paying gas fees. Holders must stake their tokens as collateral to commit to the network and keep it secure —receiving MATIC in return.
But users that don’t necessarily want to stake can simply delegate their MATIC tokens to another validator, taking part in their staking process and receiving a share of the staking rewards.
MATIC can be bought on almost any major centralised and decentralised exchange, including Binance, Uniswap, Coinbase Pro, or Huobi Global. Let’s take, for example, Binance and how you can buy with a debit/credit card.
What makes Polygon unique is its approach to enhance the Ethereum network by implementing emerging technologies. Polygon’s vision is to become the first interoperability solution for Ethereum — enabling an open and borderless ecosystem where anyone can interact with decentralised applications.
Most Proof of Work (PoW) networks like Bitcoin have to solve complex mathematical problems. A miner will need complex computers that consume a lot of electricity —something environment-unfriendly. Polygon, however, uses Proof of Stake (PoS), and as the names suggested, users have to stake tokens to commit to the network. Mining is just a tiny fraction within PoS networks.
There are exciting projects already building with Polygon, including:
A dramatic price boost came for Polygon after famous billionaire Mark Cuban invested in the protocol. Cuban is a DeFi advocate now, and he recently integrated Lazy.com into Polygon. Lazy.com is an NFT platform that works with Ethereum —which can be expensive considering gas fees. With Polygon, gas fees will be significantly lower, allowing to sell NFTs at a much lower price.
Polygon is a U.S.-listed company and regulated with their listing on Coinbase, bringing institutional investors to Polygon.
Polygon is now competing with various sidechain projects that are now pushing their offerings live. By now, the objective is to become the most efficient and scalable sidechain for Ethereum. While the team behind Polygon has said they are not in a rush to push new products or make significant changes, they are carefully planning their strategies —and onboarding experienced individuals who could give a greater value to the protocol.
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