The quest for decentralization and scalability is one of the biggest challenges in the blockchain industry. Several blockchain projects have sprung up trying to solve this problem without getting impressive results.
What if the solution is not creating a new blockchain but improving on an existing blockchain network to ensure scalability. Layer-2 platforms have emerged as a possible solution to this problem as they exist as sidechains on the main blockchain offering faster speeds, scalability and more.
Polygon (formerly known as Matic Network) is the leading layer-2 protocol in the Ethereum blockchain ecosystem. Polygon blockchain network has attained this feat by focusing on achieving scalability and decentralization on Ethereum, the largest smart contract network. In this guide, we’ll be exploring what is Polygon crypto ecosystem and providing an overview on how Polygon works.
Polygon is a framework for blockchain interoperability and scaling — but when joined with Ethereum, the base blockchain on which it focuses, it becomes an invaluable and potent instrument for building an unmatched multi-chain ecosystem.
Polygon is on a mission to make Ethereum a full-fledged multi-chain ecosystem and is dubbed "Ethereum's IoB," IoB meaning Internet of Blockchains. It combines diverse features like ETH compatibility, scalability, security, sovereignty, interoperability, user experience, developer experience, and modularity.
Polygon believes that value can be exchanged globally without the need for central bodies or third parties, via an ecosystem without digital borders.
Who created Polygon?
Everything draws back to Ethereum having problems with the major pillars of a functional decentralised ecosystem. But, this time, the problem spurred veteran developers in South Asia, India, to get creative. Jaynti Kanani, Sandeep Nailwal, and Anurag Arjun were the initial co-founders responsible for creating Matic Network, now Polygon, back in 2017.
Who are the Founders of Polygon
Jaynti Kanani, Sandeep Nailwal, and Anurag Arjun make up the trio that started the Polygon project. Mihailo Bjelic later joined them as a co-founder during the project's rebranding from Matic Network to Polygon.
Jaynti Kanani features as a software engineer and data scientist with a Bachelor of Information Technology from his alma mater, the Dharmsinh Desai Institute of Technology. Sandeep Nailwal also displays an M.B.A. in Technology, Finance, and Supply Chain Management which he got from the National Institute of Industrial Engineering in Mumbai.
Anurag Arjun's credential features a Bachelor's in Engineering in Computer Engineering from the Nirma Institute Of Technology. The fourth wheel, Mihailo Bjelic, is an Information Systems Engineer and holds a degree from the University of Belgrade.
When was Matic Network rebranded to Polygon?
It's not uncommon to see projects start with one vision and then change or expand after getting into the market. For example, Matic Network started as a layer-2 side chain for Ethereum to help combat the ridiculous gas fees, slow transactions, and low throughput that tormented the network. However, things quickly changed when the co-founders of Matic Network picked a new vision to make Ethereum an unrivalled multi-chain system.
This new vision most likely came from the Matic Network team observing the exploits of similar projects like Polkadot and Cosmos on neighbouring smart contracts platforms. The team then decided to increase its use cases by expanding the architecture of its network to enable developers to build interconnected blockchains. The first step to this new vision was to rebrand to Polygon. Which happened in February 2021.
Instead of building a new blockchain from scratch like others, Polygon decided to utilize the security and already established community and ecosystem of the Ethereum blockchain as an edge to create more impact — making Ethereum the base blockchain for the Polygon framework.
Polygon had to rebrand because its previous vision and name could not match this new vision's lofty goals. This new Polygon comes with added layer-2 solutions that include zk-Rollups, zk-proof, Optimistic Rollups, and Validium, which presents multiple options for Ethereum to scale effectively and perform faster transactions with higher throughputs and lower gas fees. Let's also not forget the Polygon SDK that allows the building of Ethereum-compatible blockchains more accessible.
What is MATIC token?
The native currency of Polygon is called MATIC. Matic is an ERC-20 token and a core player in the entire ecosystem. The MATIC Token is intended to be a utility token that serves as the medium of exchange for payments and settlements among parties interacting within the Polygon Network ecosystem.
The Polygon ecosystem is maintained through participants' contributions and the issuance of MATIC tokens, which act as financial incentives. They also serve as rewards tokens since computational gadgets are employed to perform various activities on the Polygon network, such as publishing proofs and validating blocks.
MATIC holders also get the voting privilege to participate in governance activities by staking a portion of their MATIC. Matic has grown to a market capitalization of over $5 billion and has a max supply of 10 billion tokens.
How Does Polygon Ecosystem work?
Polygon offers a layer-2 blockchain that provides scalability and solutions to the current problems facing the Ethereum blockchain. It achieves this by utilizing a sidechain connected to the main Ethereum chain that offers unique scaling solutions for different developers' needs.
This separate chain takes off the work of processing crowded transactions on the main network and processing it with scaling solutions like plasma chains, zk-Rollups, Validium, and Optimistic Rollups that can process as high as 65,000 transactions per second as opposed to Ethereum's 17 per second.
How Polygon works is also tied to its four-layer architecture that is function specific, a combination of a PoS and Plasma bridge, among other features, we will look at shortly.
Polygon has a robust combination of layer-2 solutions to help it achieve its goal of a multi-chain Ethereum system.
The first two are Proof of Stake chains and Plasma chains or bridges. The former functions as the main chain for Polygon but appears as a sidechain for Ethereum. It provides an extra layer of security using the Proof of Stake consensus for any blockchain hosted on Polygon. While the latter makes use of the Plasma technology to transfer assets from the main Ethereum chain to the Polygon side chain through Plasma bridges.
zk-Rollups and Optimistic Rollups, are new additions to Polygon's gallery of layer-2 solutions. "Zk" is short for zero knowledge and is a scaling solution that enables large transactions to migrate off-chain for processing and then send back final transactions to the Ethereum mainnet for confirmation using zero-knowledge proofs. Optimistic Rollups, on the other hand, use "fraud proofs" to enable swift transactions on the Ethereum blockchain.
Lastly, we have Validum chains, stand-alone chains, and secured chains. Validum chain is similar to zk-Rollups but takes data off-chain for storage rather than transactions to keep funds secure. Stand-alone chains are also known as sovereign sidechains that protect their networks through their validators but remain connected to the Ethereum main chain. Secured chains or shared security chains use the "security as a service" option, which means their validation is done directly on Ethereum or a dedicated set of validators.
Proof of Stake (PoS)
Proof of Stake is one of the other validation mechanisms over Proof of Work that creates room for scalability and adopts a different approach to block validation. The Proof of Work consensus required "miners" to solve cryptographic puzzles at the fastest time possible to generate new blocks; this used much computational power and consumed a lot of electrical energy causing hazardous CO2 emissions.
Despite PoW's unbreakable security, this environmental disadvantage and high operation cost make Proof of Stake one of the go-to mechanisms. All that is required is for validators to stake a portion of their token as insurance and investment to validate blocks. For example, Polygon uses validators on its sidechain to verify blocks.
The Polygon Bridge
Polygon is a sidechain, meaning for other blockchains to interact with it, they must transfer their assets to Polygon. To achieve this, there has to be an easy passage from one chain to Polygon and vice versa. This is where the Polygon bridge comes to play.
Polygon bridge serves as a cross-chain channel between Ethereum and Polygon. It enables ERC-20 and ERC-721 tokens to cross over to the Polygon sidechain without hassle.
There are two Polygon Bridges, the PoS Bridge and the Plasma Bridge. The first can accept ETH and some ERC-20 tokens, while the second can accept ERC-721(NFTs) tokens in addition to ETH and ERC-20 tokens.
The Polygon Protocol
Polygon Protocol allows for arbitrary message passing between any two participating Polygon chains, including Polygon and Ethereum. It also creates a "security as a service" option -- a non-mandatory, modular security service provided by Ethereum or a set of validators based on the Polygon chain.
What makes Polygon Different From Other Blockchains?
One of Polygon's edge over other scaling solutions resides in its full compatibility with the Ethereum virtual machine(EVM), making it the only scaling solution to exist on that lane. EVM is the software embedded in the Ethereum blockchain that allows creators to develop decentralized applications(dApps).
Ethereum is the largest smart contract platform and remains the default destination for projects to build dApps using the Solidity programming language.
This provides a comparative advantage for Polygon as it leverages the existing community of developers and users on the Ethereum blockchain.
Another feature that stands Polygon out is its optional security. This means that independent blockchains can remain independent and enjoy interaction with the Ethereum blockchain on the Polygon network without interference from Polygon's security model.
What’s the Polygon Software Development Kit (SDK)?
Polygon SDK has been deployed as the software leading the charge into actualizing a multi-chain system for Ethereum. It is a flexible framework that will empower developers to create Ethereum-compatible infrastructures and aid the scaling and development of the Ethereum ecosystem.
Polygon SDK has two major scaling solutions to support and help developers build dApps: secured chains(layer-2 solutions) and stand-alone chains.
Secured chains (Layer 2 solution)
Polygon offers secured chain services that use "security as a service" instead of creating their validator pool. The service can be provided by Ethereum directly (through fraud or validity proofs) or by a dedicated set of professional validators.
Secured chains offer a higher level of security with the mild risk of sacrificing a little independence and flexibility. This solution is best for startups and security-focused projects.
Stand-alone chains provide a solution for fully independent Ethereum-compatible blockchains in charge of their network security. Polygon SDK plans to support solutions for networks under this umbrella fully.
This solution is best for enterprise networks and established projects with solid communities.
Polygon's architecture consists of four layers:
- The Ethereum Layer functions as a set of Ethereum smart contracts to handle functions like checkpointing, conflict resolution, staking, and messaging between the Ethereum and Polygon blockchain;
- The Security Layer is a dedicated, optional layer providing "validator as a service" — a set of validators that can help validate any Polygon chain at a fee. Responsible for functions like validator management and Polygon chains validation;
- The Polygon Network's Layer is a layer where independent blockchains on Polygon converge and handle functions like transaction collation, local consensus, and block production.
- The Execution Layer executes all transactions validated in the Polygon network's blockchains. It has two sublayers: The execution environment(a pluggable virtual machine) and execution logic(Ethereum smart contracts).
The first two are optional, while the last two are mandatory.
Which DApps are built on Polygon?
There are over 19,000 decentralized applications currently using Polygon to scale. From DeFi applications like Polysafe; a SAFEMOON fork which aims to bring adoption to Polygon layer 2, to WePiggy, an open-source, non-custodial crypto asset lending market protocol.
It also houses several non-fungible (NFTs) projects and has become a popular option for creators looking to bypass high gas fees on the Ethereum blockchain.
Is Polygon (MATIC) a good investment?
Polygon's entry into the market and current gameplay of targeted positioning and monopoly look very good on paper. Furthermore, Polygon has been able to translate it to market dominance and sits at the top Layer-2 solutions for the Ethereum ecosystem.
However, Polygon current dominance could be threatened in the future by the launch of Eth 2.0 and strong competitors in the market like Arbitrum. It should be noted that the cryptocurrency market is very volatile and due diligence is required before choosing Polygon as a safe investment.
What is Polygon (MATIC) used for?
Polygon is a layer-2 protocol that fosters scalability and blockchain development on the Ethereum blockchain. It provides a highly scalable and cheap way to interact with Ethereum products and assets.
Does Polygon (MATIC) have potential?
The lineup of layer-2 solutions presents on Polygon, such as -- Polygon Bridges, Polygon SDK, and other features, show the potential Polygon has to take off and become the primary scalability solution for Ethereum.
Is Polygon the same as Ethereum blockchain?
No, it isn't. Ethereum is the main blockchain, while Polygon is a sidechain that helps it scale and become an ecosystem of interconnected blockchains.