What is Polygon?
The Polygon Network is a crypto project dedicated to making the Ethereum blockchain increasingly user-friendly. The origins of Polygon date back to 2017 when developers Jaynti Kanani, Sandeep Nailwal, and Anurag Arjun began exploring ways to improve Ethereum's throughput without sacrificing its decentralization. To do this, Polygon's team focused on building distinct blockchain solutions that interact with Ethereum's main chain.
After raising millions in initial coin offerings (ICOs), Polygon went live in 2020. The India-based software company Polygon Technology is primarily responsible for building the Polygon Network. Polygon also has a nonprofit organization called the Polygon Foundation that helps organize, raise funds, and coordinate development on the Polygon blockchain.
Since its debut, Polygon has attracted considerable attention from businesses, Web3 developers, and prominent investors like Mark Cuban. As of 2022, the Polygon Network estimates more than 20,000 dApps are using Polygon's services. Other big companies that have partnered with Polygon include Facebook's Meta, the Walt Disney Company, and Atari.
What is Polygon MATIC token?
One confusing aspect about Polygon is that it recently changed its name and brand image. Those following Polygon pre-2021 would have known this project as "Matic Network." The team rebranded to "Polygon Network" in 2021 to better reflect its goal of bringing multiple Ethereum-compatible scaling solutions to Web3.
Despite the name change, the cryptocurrency powering the Polygon Network is still called "MATIC." Investors will still see MATIC tokens listed on major exchanges like Coinbase or Binance.
Anyone building or using a dApp on Polygon needs MATIC tokens to pay for transaction costs. Token holders can also stake their MATIC on-chain to secure Polygon's proof-of-stake (PoS) blockchain and receive rewards. It’s, thus, similar to the Ether token on Ethereum or the SOL token on Solana.
MATIC was created on the Ethereum Virtual Machine (EVM) using the ERC-20 token standard. Because Polygon leverages the EVM, developers can easily port over applications built on Ethereum, which caused several projects to move over once Ethereum gas fees go too high. The max supply of MATIC tokens is 10 billion.
How does Polygon work?
There's a lot of heady tech involved in the Polygon Network, but its key goal can be summed up in two words: Ethereum scalability. It's important to note that Polygon doesn't offer just one solution to this issue. Indeed, the Polygon team wants to provide developers and users with multiple tools to build on Ethereum.
Since every scaling solution has pros and cons, Polygon wants to give people as many options as possible to create a dApp that fits their specifications. For instance, some dApp developers may prioritize security over speed, while others may be willing to sacrifice some safety for cheaper fees. Polygon is building multiple Ethereum-based scaling solutions with slightly different features.
At the start, Polygon offered two services:
- Plasma chains
- The Polygon PoS sidechain
Plasma chains vs. Sidechain
Plasma chains and sidechains share some similarities, but they are slightly different technologies. Plasma chains are always connected (or “rooted”) to a primary blockchain like Ethereum. Sometimes called “child chains,” plasma chains derive all of their security from their layer one blockchain (aka the “root chain”). Even though plasma chains can resolve transactions off-chain, they are intertwined with the root chain thanks to bridges and smart contracts.
By contrast, sidechains run parallel to the main chain and have their own consensus and governance mechanisms. For instance, Polygon’s sidechain uses a separate Proof-of-Stake consensus mechanism independent of Ethereum. Instead of bridging transaction data to the main chain, sidechains usually take “snapshots” of transaction history at regular intervals. The sidechain will communicate this data with the main chain using smart contracts to ensure they agree.
The relative freedom sidechains enjoy gives them greater flexibility and speed. However, since sidechains rely heavily on independent governance and consensus mechanisms, they don’t have the robust security of the primary blockchain. Remember that plasma chains are always “rooted” to the main chain, which means they enjoy the same decentralization as the Ethereum network. This gives plasma chains greater security, but they might limit the freedom developers would have on a sidechain.
To this day, Polygon's top offering is its PoS sidechain, which can handle about 7,000 transactions per second. Network participants need to lock their MATIC tokens in smart contracts on the blockchain to get a chance to create new blocks. Whenever someone gets picked to create a new block in Polygon's sidechain, they receive a percentage of transaction fees. Polygon validators routinely take "snapshots" of transaction history and compare it with the Ethereum main chain to ensure security.
Theoretically, anyone can stake MATIC and become a Polygon validator, but most retail investors choose to delegate their MATIC to a staking pool. Delegators don't have as much responsibility as validators, which is why they receive fewer rewards. Also, there's always the risk that a validator misbehaves and gets slashed, which means they lose all their MATIC tokens.
Although this PoS sidechain remains Polygon's signature option, it's only one of Polygon’s many scaling solutions. For instance, Polygon recently launched its "Nightfall" protocol that focuses on providing institutional clients superior privacy. Polygon plans to release many other Ethereum scaling options as it grows.
What are scaling solutions?
Scaling is a significant part of Polygon, which is why we must review scaling solutions. A crypto scaling solution refers to any project trying to enhance a pre-existing blockchain without disrupting its operations.
There are many ways developers can contribute to a blockchain's scalability, including layer-two sidechains, plasma chains, and zkRollups. All these technologies have unique functions, but they work in tandem with a "core" blockchain to securely confirm and record transactions.
In Polygon’s case, everything works with projects in the Ethereum ecosystem. A few of Polygon's key competitors include Optimism and Abritrum.
Although Ethereum gets most of the attention for scalability concerns, you can find scalability solutions on any blockchain network. For example, the Lightning Network on Bitcoin (BTC) is a sidechain scalability solution.
What are Polygon's features?
Since Polygon is intertwined with Ethereum, people can do almost everything they would on Ethereum when using Polygon. Indeed, many of Ethereum's most popular dApps have already integrated with Polygon's PoS sidechain. This means people can take advantage of Polygon's lower fees and faster speed while technically interacting with Ethereum dApps.
People interested in swapping cryptocurrencies in decentralized exchanges (DEXs) can turn to websites like Uniswap, SushiSwap, or 1Inch on Polygon. Crypto DeFi platforms like Aave now have a Polygon option for those interested in lending or borrowing crypto. There are also many NFT markets and metaverse games on Polygon.
Polygon vs. Ethereum
Many people are gravitating toward the Polygon PoS sidechain. But why? Well, here are a few key reasons people choose Polygon over Ethereum:
- Low gas fees: People prefer Polygon over Ethereum because the former costs less per transaction. As a PoS sidechain, Polygon can quickly process "batches" of transactions, resulting in cheap gas fees. On average, people don't have to pay more than a penny to make a trade on Polygon.
- Fast transaction speed: Related to the last point, Polygon provides faster transactions per second versus the Ethereum main chain. Polygon claims it can handle 7,000 transactions per second, thus eliminating the congestion-related worries on Ethereum.
- High-profile and secure: Although Polygon's PoS chain may not be as decentralized as Ethereum, it has a strong reputation for security in the crypto industry. As one of the leading layer-two blockchains, Polygon is well-funded and has many of the most talented Web3 developers. It also derives its security from Ethereum, the oldest and most prominent smart contract blockchain.
However, there are also some critiques:
- More centralized: Some have criticized how much control Polygon’s founders have over the protocol. According to some reports, Polygon’s leadership holds the majority of private keys to access the protocol’s central multi-signature crypto wallet. Also, Polygon has yet to introduce robust decentralized governance initiatives like other Web3 projects. Some have concerns these central points of failure can make it easier to hack into Polygon.
- Massive Business Development Budget: Polygon has spared no expense on spending its tokens to scale operations. As one example, Polygon bought another Web3 project called Mir protocol in 2021 for $400 million worth of MATIC tokens. Proponents see these high-cost acquisitions as essential for growth, while others worry Polygon may be spending too much and weakening its token’s value.
Other Polygon projects
Polygon wants to offer the most comprehensive assortment of scaling solutions for people involved in the Ethereum ecosystem. Although Polygon's PoS sidechain is its most influential offering, plenty of other projects are in the works. Here are a few new protocols:
- Polygon Hermez ZK-Rollups: This highly anticipated scaling solution helps speed up transactions on Ethereum using an advanced technology called zero-knowledge rollups (zk-rollups). These zk-rollups help confirm multiple transactions at one time, thus ramping up efficiency on Ethereum.
- Polygon Avail: It’s a decentralized data storage service for Ethereum.
- Polygon Nightfall: This is a privacy-focused protocol that's targeted toward institutional clients.
- Polygon Edge: This has been designed to provide developers with the tools they need to customize their Ethereum-based dApps.
Wrapping up
Polygon has positioned itself as one of the top crypto projects helping bring more people into the Ethereum ecosystem. As Ethereum's core developers continue to refine the main chain, Polygon allows people to enjoy all Ethereum offers without exorbitant gas fees and slow transaction confirmations.
While there are questions over Polygon's use case after Ethereum's main chain upgrades, there's no question Polygon serves a purpose in today's crypto ecosystem. Scaling solutions like Polygon will likely continue introducing innovative ways to attract more people to Web3.
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