What Is Polygon (MATIC)?
Polygon, formerly known as MATIC network, is a layer-2 scaling solution created in 2019 to address several limitations in the Ethereum blockchain, such as transaction speed, throughput, and gas fees.
It was originally designed as a scaling solution, but it rapidly evolved into a multi-purpose ecosystem that’s been receiving a lot of attention. MATIC, its native token, debuted on the Binance Launchpad in 2019 amid the Initial Exchange Offerings (IEO) boom.
But first thing’s first, let’s see what layer-2 solutions are if we want to have a better knowledge of Polygon.
What Are Layer-2 Solutions and Why Do We Need Them?
A layer-2 solution is a blockchain that runs parallel to a mainnet — in Polygon’s case, Ethereum — but processes transactions outside of the mainnet, resulting in an increased throughput (transaction speed) and lower gas fees.
In other words, what layer-2s do is that they build a communication channel between the two blockchains and send the information package (the transaction data) from the mainnet to the parallel blockchain to execute the transaction for a fraction of its cost and at a much higher speed, all without compromising the Ethereum mainnet.
As we know, Ethereum is the go-to ecosystem for most software developers looking to launch their dApps (decentralized applications) due to its vast and secure infrastructure and innovative tooling.
However, the high demand for dApps and the subsequent supply clogged the network, and its throughput has significantly downgraded — it’s not uncommon to see gas fees rising up to two or three digits in USD equivalent, which can be quite expensive depending on how much you interact with the network, leaving the Ethereum blockchain only for the ‘big players.’ You can use Etherscan’s gas tracker to check the current gas fees.
This is why Layer 2 solutions have become essential to the DeFi ecosystem as they enhance Ethereum’s scalability and throughput while still benefiting from its security properties.
How Does Polygon Work?
When researching Polygon, the first thing to understand is that Polygon is actually separate from the original MATIC blockchain that launched on Ethereum. Polygon’s new blockchain is built as a “commit chain” rather than a “side chain.” The main difference to note here is that sidechains typically rely on their own validators for security. In contrast, commit chains like Polygon can internalize Ethereum’s network security by using Ethereum validators. Commit chains allow developers to take advantage of the scaling benefits of a side chain while getting the security of Ethereum.
In the Polygon ecosystem, two different types of chains can be built; Stand-Alone Chains and Secured Chains. Stand-Alone chains can have their own consensus models and thus are less secure than networks that use the Ethereum consensus model but are more flexible. Secured chains can either be secured by Ethereum directly or by validators in the Polygon ecosystem, making them more secure but less flexible than Stand-Alone Chains. Polygon’s network architecture is unique in that it gives developers the ability to mix and match different scaling features rather than needing to select only one.
The Ethereum Layer- The Ethereum layer simply uses Ethereum as the base layer for the Polygon chain, high security but low flexibility. As a project on Polygon, you are not required to build on this layer.
Security Layer- The Security Layer is where Polygon provides the “validator as a service” function, allowing the Polygon validators to serve as the chains consensus mechanism. This is more flexible than using the Ethereum layer but slightly less secure. As a project on Polygon, you are also not required to build on this layer.
Polygon Networks Layer– The Polygon Networks Layer is made up of independent blockchain networks where each network can maintain central functions like block production and transaction collation. As a project on Polygon, you are required to build on this layer.
Execution Layer- The execution layer is responsible for executing the transactions that are issued in the Polygon ecosystem. As a project on Polygon, you are required to execute on this layer.
Polygon can overcome many barriers to Ethereum scaling due to its unique structure that includes both scalability and backward compatibility while preserving security and user experience.
What Can You Do on Polygon?
Polygon allows you to do pretty much everything you do on Ethereum, but without the high gas fees or the low throughput.
Polygon went from being a simple scaling solution to becoming a more broad and complex ecosystem where users and developers alike have a wide set of use cases, including launching Ethereum-compatible blockchains, use Ethereum-based decentralized applications (DApps), mint non-fungible tokens (NFTs), become node validators, delegators, stake MATIC, and much more.
There are numerous successful projects that work on Polygon, such as yield generating protocols like Aave or Curve Finance, decentralized exchanges such as SushiSwap, and the most popular decentralized NFT (Non-Fungible Token) marketplace, OpenSea.
You can use Polygon as the base blockchain on these protocols instead of Ethereum. For example, OpenSea allows you to choose Polygon instead of Ethereum as the main network and use it every time you trade NFTs — you just need to have a Polygon-compatible wallet like MetaMask or Coinbase Wallet and connect it to OpenSea.
It’s also worth noting, though, that not all protocols that are built on Ethereum have their Polygon iterations, and to this extent, there are certain limitations.
The MATIC Token
The MATIC token is an ERC-20 token that powers the entire Polygon ecosystem. It’s used to pay for gas fees, for staking, and for governance. As per CoinMarketCap, there’s a current circulating supply of 7.48 billion MATIC tokens, with a max supply of 10 billion.
After being rebranded to Polygon and implementing new features for developers and users on the ecosystem, the MATIC token saw explosive growth in price due to an increased use case. At the time of writing this, in February 2022, it’s the 16th largest cryptocurrency by means of total market capitalization.
The MATIC token supply distribution is as follows:
- Advisors: 4%
- Private Sale: 4%
- Network Operations: 12%
- Team: 16%
- Launchpad Sale: 19%
- Ecosystem: 23%
- Foundation: 22%
Popular DApps Using Polygon
- SushiSwap: an Ethereum-based decentralized exchange (DEX) that works as an Automated Market Maker (AMM).
- Curve Finance: an exchange liquidity pool on Ethereum that provides seamless stablecoin trading at a low risk.
- 1inch: a DEX aggregator that acts as a liquidity bridge between several DeFi protocols, providing users with the best liquidity on Ethereum, Binance Smart Chain (BSC), Polygon, and more.
- Aave: a yield aggregating protocol that allows users to borrow crypto to use it as collateral to take out flash loans.
- QuickSwap: a decentralized exchange running on the Polygon network that provides lightning-fast transactions at a cheap cost.
Ends
Polygon is one of the most exciting DeFi projects in existence, with a promising future for the DeFi community regarding scalability and blockchain interoperability.
And with its vast set of tools for developers, its innovative mechanism and modules, and full support for the Ethereum Virtual Machine (EVM), we could soon see an enormous inflow of projects thriving on the Polygon ecosystem.
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