Monolith Spotlights: Polygon, the rising Layer 2 scaling solution
Ethereum has become the de facto settlement layer for trustless transactions on a decentralised network. Averaging around 1 million transactions daily, it’s currently the world’s most used blockchain, but it does suffer from some limitations. The network is restricted by slow block times, which often leads to congestion and high gas fees. While Ethereum 2.0 hopes to solve the scaling problem, it’s likely still years away from completion. Polygon is focussed on fixing the issue today by providing a scaling solution for instant transactions, and it’s growing at a fast rate. To give the Monolith community an idea of how it works, we profiled the project for our latest Monolith Spotlights feature.
Ethereum’s scaling issues
The key problems Ethereum faces are similar to those faced by other blockchains such as Bitcoin. Transactions have to be approved by every node on the network so that they can be recorded on the blockchain when consensus is reached. That can cause slow block times, and when a lot of people are using the network, it can cause congestion issues. We saw that with crazes like CryptoKitties in late 2017 and yield farming in the summer of 2020, when the vast number of people using Ethereum pushed gas fees to extreme highs.
Other networks have attempted to circumvent scaling issues by increasing throughput via fewer nodes, but they usually compromise on one of the fundamental qualities of the blockchain: decentralisation.
It’s hoped that these issues will be solved with the completion of Ethereum 2.0, though the popularity of the network today means scaling solutions are needed now.
Polygon seeks to solve the problem.
Polygon, which was previously known as Matic, is a Layer 2 scaling solution running on Ethereum. It enables scalable transactions at a faster speed than on the main chain by using a variation of the plasma framework. It runs its own Proof-of-Stake mechanism, and effectively acts as a sidechain to Ethereum.
The network uses plasma checkpoint nodes which run on a similar proof-of-stake system to Ethereum.
This allows for faster and cheaper transactions than those finalised on the main chain, and it means that the side chain can achieve many more transactions per block — up to 65,000 of them.
As Ethereum nodes record every transaction on the blockchain, Polygon only needs to store data from the last to latest block in the chain, which makes the network faster.
One of the key focuses of the project is the user experience. Ethereum users can sometimes suffer from long waiting times, gas issues or failed transactions, but Polygon solves these problems by providing a smooth experience that feels like any regular app in your smartphone.
In addition to Matic Plasma, Polygon will soon implement several other Layer 2 solutions, including ZK rollups, optimistic rollups, and validium chains.
Though Polygon runs on Ethereum, it will soon allow for cross-chain interoperability with assets from other blockchains.
The MATIC token
As Polygon relies on a proof-of-stake consensus algorithm, it needs to incentivise users to participate in staking to run the network.
That’s where the MATIC token comes in.
Staking on the network allows users to earn rewards in the form of the MATIC token.
It’s an ERC-20 token, meaning that it’s compatible with Ethereum.
It’s also supported in Monolith; it can be used to top up our card.
Polygon’s use cases
Polygon has a number of use cases that could see the network grow significantly.
Polygon Sidechains are ideal for protocols to build on, and they could prove to be a fundamental layer of the DeFi ecosystem in the future.
Due to the faster block speed, transactions are faster and cheaper than on the Ethereum network. This offers a viable payments system for decentralised mobile apps to build on.
The Sidechains could also provide a fundamental layer for protocols in the DeFi ecosystem, while giving users easy access to DeFi at a lower cost. Decentralised exchanges, for example, can benefit from providing fast, cheap trades to users.
Polygon can also be used for micropayments, high-speed transactions that rely on low cost by design. This could prove to be a fundamental use case for the gaming and gambling industries in the future.
Polygon also enables Atomic Swaps, meaning that users can exchange between crypto tokens and receive payments in assets of their choice. This is made possible by Polygon’s cross-chain swaps functionality.
Polygon is already used by a number of popular Web3 apps, including:
- Polymarket, a betting platform and information market
- Tradestars, a sports game in which users own and trade NFTs
- Alethea AI, a synthetic media marketplace for creating and monetising AI-generated media
- Badbit, a casino and gaming platform running on smart contracts
- Aavegotchi, an NFT game that leverages elements of DeFi through Aave
- Injective, a Layer 2 DEX for margin trading, futures and derivatives
In summary, Polygon is a powerful scaling solution for the Ethereum blockchain. By acting as a sidechain with its own proof-of-stake mechanism, it provides an alternative transactional layer to Ethereum’s Layer 1. Transactions are high-speed and low-cost, which offers innumerable use cases and benefits. The team has achieved all of this by placing their focus on the user experience, something that could help to usher in a wave of mass adoption that blockchain technology is currently moving towards.