What is Polygon (MATIC)
Originally, it was called Matic Network but now Polygon is a revolutionary technological advancement within the blockchain sector. Compared to other Decentralized Finance (DeFi) projects based on Ethereum, Polygon has become an important player in the world of decentralization because of its unique approach to scalability and interoperability within the Ethereum ecosystem.
At the end of this article, you will learn the intricate details of Polygon, how it works and its history, its ERC-20 token, and its potential investment in the crypto industry.
Key Takeaways:
- Polygon (MATIC) is an intricate system aimed at improving scalability as well as interoperability within the Ethereum network.
- It performs through an adapted version of a proof-of-stake (PoS) mechanism that enables fast and cheap transactions.
- Despite its numerous strengths, including rapid transaction processing and low fees, Polygon faces challenges such as dependency on Ethereum and limited MATIC use cases outside governance and transaction payments.
Understanding Polygon’s Technology
What is Polygon (MATIC)?
Polygon (formerly known as Matic Network) started with trying to address how to scale up Ethereum without compromising security. Its design supports a multi-chain ecosystem referred to as “the internet of blockchains” which are tailor-made for Ethereum infrastructures.
The core of Polygon’s efficiency lies in its adjusted PoS (proof-of-stake) consensus mechanism that facilitates faster transaction confirmations without resorting to power-hungry procedures typical in conventional Proof-of-Work systems. This does not only increase transaction speeds but also reduces costs making it favorite among developers and users alike.
Over the years, Ethereum has brought all kinds of advancements into the cryptocurrency space, including smart contracts and high interest paying decentralized applications. However, it faces three big challenges.
- Low Throughput / Speed
This is a fancy way of saying that Ethereum can only handle thirty transactions per second. For the amount of people that are actually using Ethereum, this processing speed is considerably low since many alternatives can process many more transactions in the same time-frame.
For example, the Cardano blockchain performs around 257 transactions per second while Polkadot can do up to a 1000, and Solana all the way up to 65,000.
2. Expensive Gas Fees
The second big problem is that the Ethereum network is not really user-friendly. Since you are bidding in an auction against everyone else who wants to be one of those 30 transactions. In short, this means it is expensive. You would need $20 dollars just to send your friend $1.
3. Scalability / Limited Options for Developers
Lastly, the Ethereum blockchain presents developers with limited options. All Ethereum projects run on the same network and have a similar throughput. This implies that they all share Ethereum’s problems with no exceptions.
Now, what if there is a blockchain that leverages Ethereum’s technology while also offering higher throughput, extremely low transaction fees and better options? Here is where Polygon comes into play.
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Brief History of Polygon (MATIC)
So in 2016, three Indian Developers sought to find a solution to Ethereum’s problems. This resulted in the creation of the Matic network which is now rebranded as the Polygon network. One thing to note here is that even though they rebranded to the Polygon network, their native coin is still called Matic coin.
Polygon (MATIC) network is a Layer 2 scaling platform that allows Ethereum-based applications to tackle the problems that were mentioned earlier. This firm also leverages Ethereum’s security. Its primary focus is to increase the usage of DeFi tools and applications by basically connecting blockchains together. The network hosts over 53,000 decentralized applications as of 2022 data, of which a lot of market leaders migrated from the Ethereum main chain.
Since Polygon is a lot similar to Ethereum, many developers that develop useful tools will actually move them from Ethereum to other EVM blockchains like Polygon. In this way, they can increase their reach and usage.
What is EVM?
Now, if you are wondering what EVM is, it stands for Ethereum Virtual Machine. It is the actual code that is run by computers around the world to actually carry out the blockchain’s smart contracts. Just like Binance smart chain, Phantom, and other market leaders in crypto industry, Polygon actually has an EVM.
“Polygon zkEVM will unlock unprecedented scalability in web3. A great way for developers to actualize these benefits is with Alchemy’s infrastructure, that guarantees infinite scalability, with the highest reliability in the ecosystem.”
- Sandeep Nailwal, Polygon co-founder
These networks utilize the main Ethereum code and since they basically run all the same code, it makes sense how developers can simply move their projects over to a new network and it will basically be the same way without making any changes.
Polygon is More Than Just a PoS
Moving on, when we think about Polygon, most people think about the Polygon proof-of-stake chain. Which is simply a side chain to Ethereum utilizing a proof-of-stake consensus mechanism.
There’s a few other changes to this side-chain, but what’s really important is that it is way faster and can handle way more transactions per second. Meaning, it is much more affordable to the end user.
Technically, the Polygon network is a lot more than just a side-chain. One of the core ideas behind Polygon is to equip developers with user-friendly and flexible tools. That way, they can fast track Ethereum’s transformation into a multi-chain platform.
To put this in simpler words, Polygon is not just a single proof-of-stake chain that we usually think of. They are a series of blockchains that can help scale Ethereum. When they actually achieve this, developers can easily create all kinds of different scaling solutions that they can use with Ethereum.
For example, they completely separate chains such as:
- zk-Rollup chains;
- Optimistic Rollup chains; and
- Other side chains they desire.
They are unique and creative ways to bundle up data and save space on the main Ethereum chain. The Polygon proof-of-stake chain is just one way to scale Ethereum. In reality, Polygon plans to create many different solutions for users to scale it.
So, at first glance, you may think that Polygon is pretty simple. But when you look at its internals, there’s a lot more than what the regular users see.
For users like you and me, we can sum up Polygon in one sentence. It is basically Ethereum but with super cheap gas fees.
Right now to transfer your Ethereum from one account to another, the fee is about $20. However, on the Polygon network, it is less than a penny. This means, users are free to try out new apps and test things out without the fear of losing a lot of over a token swap.
Polygon and Binance smart chain are the two DeFi blockchains that are recommended by experts to new users. Now let’s get into a little bit more about how Polygon actually works.
What is Polygon Commit Chain?
So Polygon is driven by the Layer 2 scaling solution and the Proof of Stake protocol serving as what is called a commit chain to the main Ethereum chain. Now if you don’t know what a commit chain is, it functions as a transaction network that operates close to the real chain. Therefore, in Polygon’s case, it actually works alongside Ethereum. Its perks are:
- Ease of Development: Easy (100% EVM Compatible)
- Medium Security
- 2–30 mins Deposits/Withdrawals
- Periodic Checkpoints Use for NFT/Gaming and high throughput Dapps
The Polygon commit chain groups up clusters of transactions and processes them all together before sending the data back to the main Ethereum chain.
Think of it like this. Instead of sending an entire video of all the transactions, Polygon simply takes a single snapshot every now and then so that the Ethereum chain can still understand what is happening but without processing a ton of data.
This is why the Polygon network can actually process up to 65,000 transactions per second. Some experts predict that a time will come when developers will host thousands of chains that work hand-in-hand with Ethereum to increase throughput all the way up to millions of transactions per second.
What is the Polygon’s Architecture?
Now let’s get a little more technical. Polygon’s architecture runs on a four-layer system comprising of the:
- Ethereum layer;
- Security layer;
- Polygon Networks layer; and
- Execution layer
The Ethereum layer is made up of different Ethereum-based smart contracts. These contracts are in charge of:
- Staking;
- Transaction approval; and
- Interaction between the Ethereum blockchain and the numerous Polygon chains.
This layer is how Polygon actually checks in with Ethereum from time to time.
Next up we have the security layer, and it works alongside Ethereum to provide validator services giving chains an additional layer of security.
That said, it’s important to note that both the security layer and the Ethereum layer are actually optional. They are not required for Polygon to work. Layer 3 is the Polygon Networks layer, and it’s the ecosystem of projects or blockchain networks developed on Polygon.
Basically, every project or blockchain that exists within this ecosystem has its own community where local consensus is reached and then blocks are produced.
Finally, we have the Execution layer. This is popularly known as Polygon’s Ethereum Virtual Machine (EVM) and its main function is to execute smart contracts on the actual Polygon blockchain. The compatibility with the EVM like I mentioned earlier smoothens the user experience for developers and programmers using the Ethereum chain.
Finally, let’s get into Polygon’s tokenomics. The Polygon network has a native token. It’s called MATIC, which has been trading around $1.23 with a market capitalization value of around $11.3 billion (as of 8:52 AM, March 11, 2024, UTC). MATIC tokens are dispersed monthly and have a total supply of 10 billion tokens of which nearly $6.8 billion is already in circulation.
Initially, the developers sold around 3.8% of MATIC’s total supply in their initial private launch all the way back in 2017. Then later, they had an initial exchange offering where they sold another 19% of the max supply.
If you’re wondering where the other tokens are, then the development team owns 16% of the supply, the advisors have 4%, staking rewards come to around 12%, the ecosystem already has 23%, while around 22% went to the Polygon Foundation. And since MATIC tokens are technically being printed to reward stakers, right now it is technically inflationary.
However, MATIC does have a limited supply, and soon they will be implementing their version of EIP-4484. If you have no idea what that is, it basically means that base transaction fees will effectively be burned, which means MATIC will eventually be a deflationary token.
Now you might be wondering, how are they going to reward the stakers when the funds run out? Well, the Polygon team hope by then, the extra transaction fees that the users add to prioritize their transactions, above the base fee, will be enough to incentivize staking validators to keep doing their thing.
The Role of the MATIC Token
Polygon’s native token, MATIC, is very important in the ecosystem; it is used for governance purposes, securing networks through stake-holding and paying transaction fees. This value shows how valuable this token is within the Polygon system.
Table 1: Polygon at a Glance
Advantages and Disadvantages of Polygon
Advantages
- Scalability and Speed: With its unique PoS consensus mechanism, Polygon has become one of the fastest networks when it comes to processing transactions which are way faster than traditional blockchain networks.
- Reduced Transaction Costs: One of the most appreciated features of Polygons is its ability to impose minimal transaction fees on its users hence being cost-effective for both users and developers.
- Ethereum Compatibility: The infrastructure created by Polygon can easily integrate with Ethereum thereby providing scaling solutions for Ethereum based projects.
Disadvantages
- Dependence on Ethereum: Even though Polygon is strong, its functionality is entirely dependent on Ethereum. Major improvements or disruptions in Ethereum may end up affecting the stability and performance of Polygon.
- Limited Use Cases for MATIC: Although essential to the Polygon ecosystem, MATIC’s use cases beyond governance and fee payments are rather limited making it less desirable to a wider audience.
These sources may be helpful to you:
- To get more insight into Polygon, its strengths and weaknesses see the Investopedia comprehensive article about the company.
- To understand this in context of broader blockchain space, visit Wikipedia’s page on Polygon.
- Find out more about the official information for MATIC tokenomics and its role within the Polygon network at Polygon’s MATIC Token page.
MATIC is an ERC-20 Token
The ERC-20 standard specifies the functions and activities which an Ether contract should support to ensure that it works well with other ethereum tokens. This covers basic features like token transfers, checking token balances for a particular address, and allowing others to transfer tokens on behalf of the token holder.
MATIC was originally launched as an ERC-20 token on the Ethereum network before undergoing rebranding to become Polygon. It was important in many ways:
- Interoperability: Being an ERC-20 token allowed MATIC to easily interface with other tokens and applications within the Ethereum ecosystem. This is necessary for facilitating smooth transactions and integrations across dApps.
- Compliance and Standardization: By following this ERC 20 convention, MATIC ensured its technical compliance that is required by tokens on Ethereum blockchain. This makes developers’ work easier for them as they do not have to define unique rules each time they develop a new coin.
- Access to a Broader Market: ERC-20 standard is widely recognized and supported by cryptocurrency exchanges and wallets thus giving MATIC an instant access into a huge market. Its adoption and liquidity would heavily rely on how accessible it can be to many people.
Polygon vs. Ethereum: A Complementary Relationship
Although both platforms have a PoS consensus mechanism, Polygon is built to augment Ethereum by giving it more capability and better scalability and user experience without sacrificing security or decentralization.
Table 2: Polygon vs. Ethereum
The Future of Polygon
Innovations and Expansion
Polygon continuously innovates in its bid to deliver a decentralized internet. The establishment of Polygon Studios is a significant milestone towards the formation of its position in the emerging area of blockchain gaming and NFTs.
Through strategic partnerships as well as developments, Polygon shows a promising future, which places it at the forefront of technology providers for decentralized applications. Its ability to adapt to blockchain technology is evident by constant innovation while still remaining deeply connected with Ethereum.
Table 3: Recent Milestones in Polygon’s Journey
Polygon (MATIC) is a breakthrough technology in the blockchain space that seeks to overcome traditional network limitations while at the same time building a scalable, interoperable and user-friendly ecosystem for developers. Its latest technology, advantages, and future plan highlight its capability to influence decentralized apps direction.
Continue Your Exploration:
- Watch “Why POLYGON (MATIC) is my #1 Cryptocurrency for 2024!” for insights about Polygon’s position in DeFi and beyond.
- You can also learn more about Polygon’s zkEVM at their page on technical details regarding this Ethereum Improvement Proposal (EIP).
Investing in MATIC
If you want to venture into cryptocurrencies like MATIC, you must understand market dynamics, tokenomics as well as underlying technology potential. MATIC is the native currency of Polygon and it plays a central role in its ecosystem where it not only facilitates transactions but also through staking it helps in governance and security.
Check out why Polygon is a good investment in 2024 here.
How to Buy MATIC
MATIC can be bought from well-known digital asset exchanges like Coinbase and Kraken. One way to buy MATIC tokens is to open an account in these platforms and pass through KYC procedures before making deposits of fiat or crypto assets for trading.
Price History and Market Analysis
The history of the token’s price has shown high volatility which is typical for the cryptocurrency market as a whole. Its value rose significantly since its inception due to Polygon’s growing ecosystem and increased acceptance. However, potential investors have to conduct extensive research and examine market trends before investing their funds.
Table 4: MATIC Price Milestones
Polygon in the Ecosystem
Polygon’s contribution to the blockchain ecosystem goes far beyond just providing scalability solutions. It is one of the key elements of Web 3.0 that supports many different applications such as DeFi projects and NFTs.
Decentralized Applications (dApps) on Polygon
Numerous dApps have been attracted by low transaction fees and high throughput on this platform; it has created a vibrant ecosystem that spans across many sectors including finance, entertainment and art.
Table 5: Popular dApps on Polygon
Polygon’s Role in Web 3.0
Polygon leads the way in the move towards decentralized internet with developer focused solutions that are scalable. The commitment to innovation ensures it plays a central role in shaping Web 3.0.
Explore Further:
- “Polygon MATIC: Everything You Need To Know!” is an intensive look at Polygon’s technology and how it could potentially change blockchain in the future.
- To learn more about Polygon’s governance model or how the community interacts within this ecosystem, please refer to Polygon Governance Portal.
Frequently Asked Questions
- What Makes Polygon Unique Compared to Other Layer 2 Solutions?
With a multi-chain framework like no other, Polygon is designed to enable scalability and interoperability for Ethereum without compromising security. A number of scaling solutions are made possible through this system including sidechains, optimistic rollups and zk-rollups.
- Can Polygon Transactions Revert Back to Ethereum?
Indeed, Polygon has a bridge that helps in asset transfer between its network and Ethereum which guarantees interoperability and flexibility among users
- Is Staking MATIC Worth It?
In particular, staking MATIC can result in receiving transaction fee shares as well as securing the network but personal risk limits and market conditions should be considered before taking such a step.
You may check out this article if you want to know how to stake MATIC with Ledger Live in a step-by-step procedure.
- How Does Polygon Ensure the Security of Its Network?
Polygon relies on a modified PoS consensus mechanism supported by validators spread across the globe for transaction validation. Furthermore, this infrastructure provides the advantages of Ethereum’s security through the bridging mechanism.
Wrapping Up
Polygon (MATIC) is a groundbreaking advancement in solving the blockchain trilemma as it provides a scalable, secure, and developer-friendly platform. With its innovative technology, strong community, and strategic partnerships, Polygon has potential to be a key player in the development of the blockchain space. The era of decentralized technology is upon us where platforms such as Polygon become increasingly relevant for developers and investors who want more efficient and cost-effective blockchain solutions.
Polygon’s vision for a scalable and interoperable blockchain ecosystem resonates with the broader goals of the cryptocurrency community that aim to achieve mass adoption. It overcomes challenges like high fees and slow transaction speed thereby improving end user experience thus making Blockchain Technology accessible to people all over the world.
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