Market Cap: $5,128,055,514

Fully Diluted: $6,439,531,282

Volume (24h): $506,553,017

Circulating Supply: 7,956,181,045 MATIC

Total Supply: 10,000,000,000 MATIC

 

 

Introduction

What is Polygon (MATIC)?

Polygon is a decentralized L2 blockchain on Ethereum designed to optimize transactions on the network while scaling with the growing processing demands of Ethereum. Polygon provides a scalable and secure environment for dApp development without compromising a seamless user experience.

Founded in October 2017 by Jaynti Kanani, Polygon became one of the front-running scaling and interoperability solutions between different blockchains, growing immensely in the industry since then. Today, Polygon Network handles 5 million transactions a day, compared to Ethereum’s 1.7 million transactions. At the time of writing, it ranks sixth in Total Value Locked (TVL) at a staggering $2.6B and 21st in market capitalization at $5,165,648,605. 

Polygon was able to achieve this level of success due in part to its consensus mechanism, the Plasma Framework, combined with a Proof-of-Stake validation model. Together, this consensus mechanism and validation model function to increase the much-needed transaction speeds without sacrificing the security of the network. 

 

What Problems does Polygon Solve?

Slow transactions

Transaction speed has been a lingering issue since the advent of blockchain technology. Blockchains that use Proof-of-Work (PoW) validations are limited by the hardware requirement required to generate blocks which results in slower block times. Proof-of-Stake (PoS) blockchains, like Polygon, attempt to fix this issue by utilizing staking requirements. This has led to higher efficiency and throughput but has also increased the costs of validation. Polygon attempts to solve this issue by implementing a separate layer where validators post periodic proof to approve batches of transactions, resulting in significantly faster processing. 

Scalability

Decentralized Apps (dApps) are continually being developed across multiple blockchain ecosystems. However, as more dApps begin to emerge, many blockchains are unable to scale and match the mass adoption of users within the space. To address the issue and provide better scaling, Polygon utilizes multiple side chains and boasts fast transaction speeds to execute a greater volume of transactions across its network. 

Transaction fees

As the blockchain ecosystem grows, specifically Ethereum, new assets are continuously created, transferred, or sold within the system. These transactions and services within the blockchain exist using a cost structure. In the case of Ethereum, gas fees are charged for every transaction. The problem with these fees is that there is a variation in the cost depending on the specific transaction pool. This is due to the limited block size within the blockchain network. Polygon seeks to reduce the cost by processing transactions off-chain before finalizing them back to the Ethereum mainchain. 

User Experience

As dApps continue to grow and develop, blockchains face the issue of ever-increasing transaction fees, as Proof of Stake (PoS) networks, by nature, prioritize the validation of transactions made by the most financially able participants. In other words, as the network increases in activity, average users will face slower transactions as validators will prioritize the transactions of those who can pay greater gas fees. Polygon strives to level the playing field by expanding its zero gas model, which allows users to transact on the network for much cheaper than they can on the Ethereum mainnet. Additionally, Polygon has developed various web and mobile integrations to augment a smoother user experience. 

 

 

MATIC Technology

Polygon PoS Network 

Polygon is a Layer 2 sidechain that is constructed of three distinct layers: Bor, Heimdall, and Ethereum. Bor is Polygon’s block producer, responsible for allocating transactions on the Polygon network into blocks. Heimdall is the subsequent layer of processing, where all blocks formulated by Bor are aggregated into what are known as Merkle trees, which are collections of block hashes. In simpler terms, Heimdall groups together blocks of transactions in order to reduce the processing requirements of block creation. Here, all blocks are validated, aggregated, and posted onto the sidechain. 

This sidechain is where all transactions made in the Polygon network are posted. The use of Merkle trees allows for a greater quantity of information to be processed and transferred in batches that are more quickly and easily processed. Once the information has been processed on the sidechain, Polygon communicates with Ethereum across two different bridges: the PoS Bridge and the Plasma Bridge. The PoS Bridge utilizes Heimdall as the validation method for blocks going into Ethereum. It is extremely fast but compromises its speed for security. The Plasma Bridge replaces the Heimdall validation layer with its own Plasma Checkpoint Nodes. In contrast to the PoS Bridge, the Plasma Bridge is more secure but processes at a much slower speed. 

Validations made in this Proof of Stake (PoS) architecture are then posted onto the Plasma-enabled chain to produce high and secure transaction speeds. Using Polygon Plasma, the blockchain is able to process transactions faster by removing confirmation signatures. It serves as a checkpoint layer for the side chain into the mainnet. Snapshots of the Bor chain will need to be validated by more than ⅔ of the validators. People who stake MATIC tokens on staking contracts in the Ethereum mainnet will join the system as validators. The Plasma checkpoints also serve as withdrawal security as it contains the Proof-of-Burn. This allows users to verify the remaining tokens on the root contract. 

• Validated transactions handled by the Heimdall and Bor block-producing scaling solutions are then posted on the PoS Chain.

This dual consensus mechanism, comprised of both PoS and Plasma, allows Polygon to achieve unimaginable transaction speeds. On the PoS Bridge, Polygon can achieve transaction speeds of up to 65,000 tx/s compared to Ethereum’s 15tx/s. MATIC’s system also serves to reduce the cost of the transactions to create a more seamless experience for their user. Compared to Ethereum, MATIC’s transactions are approximately 10,000 times cheaper per transaction. 

These prices, along with Polygon’s non-custodial design, place power and control into the user’s hand. By using stakers as a form of validation, Polygon incentivizes community engagement whilst creating an environment for scalability as more users adopt the system. 

Stakers are also divided into delegators and watchers. Delegators distribute rewards through validator tokens that are tradable for MATIC. Validator tokens are issued after a user delegates to a validator. Watchers are in charge of reporting fraud and ensuring the security and safety of network transactions. 

Polygon PoS is also Ethereum Virtual Machine (EVM) compatible, and it generates an EVM code that allows developers to migrate smart contracts to and from EVM-compatible chains. This enables fluid transitions between platforms without having to rewrite the code from scratch. In addition, dApp creation becomes more flexible because all dApps on Polygon can be developed for Ethereum, whose dApps are written in Solidity. 

Architecture 

The Polygon Network consists of four abstract layers. These layers serve as the building blocks to the Polygon system and operate in tangent with one another to enable its operations. The four layers consist of the Ethereum layer, Security layer, Polygon Networks layer, and Execution layer.

Ethereum Layer (optional) - The Ethereum layer is Polygon’s way of leveraging the Ethereum network as a base layer for its functional structure. In doing so, Polygon can utilize the high security of Ethereum by implementing a set of smart contracts on its network. These smart contracts are used on Polygon for finality/checkpointing, staking, and Ethereum to Polygon messaging. This is the first layer of the architecture and is considered optional as Polygon-based chains are not obligated to use this layer. 

Security Layer (optional) - The Security layer is another non-mandatory layer of the Polygon architecture. The Security layer serves as a form of validator management. It accomplishes this by permitting sets of validators to choose which chains in the Polygon network they want to validate for a fee. Validator management includes rewards, shuffling, and registration/deregistration. The Security layer is also abstract, allowing for multiple implementations, each with its characteristics. Most importantly, the layer can be directly implemented onto Ethereum, enabling Ethereum miners to become part of the validation process on Polygon blockchains. 

Polygon Networks Layer (mandatory) - This layer is the first mandatory layer within the Polygon framework. The Polygon Network Layer consists of a collection of sovereign blockchain networks. Each blockchain network has its own characteristics and unique communities but all take part in essential validation activity in addition to transaction collation, local consensus, and block production. 

Execution Layer (mandatory) - The execution layer is the final layer within the architecture of the Polygon network. It is a mandatory layer that is responsible for interpreting and executing smart contracts on the Polygon Network. Within this layer are two unique features: execution environment and execution logic. The execution environment is where Pocanuggable Ethereum Virtual Machine (EVM) implementation exists whilst execution logic specializes in addressing transition functions on the Polygon Network. 

The architectural building block of the Polygon Network is built deliberately to ensure an abstract and generic layout. This is done to allow other applications to choose different layers of focus based on their specific need. Having only two layers being mandatory, applications can select points of focus to ensure the maximum benefit for their specific goal. If security is a priority, developers can choose to incorporate the Ethereum layer at the cost of sovereignty. With such a flexible layout built with the needs of application creation in mind, new and innovative technology can be discovered on the backs of the Polygon architecture. 

 

 

Zero-Knowledge Rollups

Polygon uses a zero-knowledge rollup structure to improve Ethereum’s limited scaling capacity through Polygon Zero. Polygon Zero serves as a Layer 2 solution that aims to generate zero-knowledge proofs faster than other existing ZK solutions. Polygon achieves this by utilizing Plonky2, a new technology designed for the proof system. Plonky2 is a Zero-Knowledge Succinct Non-Interactive Argument of Knowledge (zk-SNARK) proof system that acts as a cryptographic proof to prove information possession without revealing the information itself.

The unique features of Plonky2 can be leveraged to implement horizontal scaling within the blockchain network. Currently, the throughput of every blockchain, including every scaling solution, is limited by the weakest node. This is due to every node’s responsibility for processing transactions. By using horizontal scaling, the throughput becomes proportional to the total computing power available within the network. This allows for an improved scaling property, as throughput increases with every increase in nodes added to the blockchain. 

Rollups fall into one of two categories: zero-knowledge (ZK) and optimistic. ZK rollups rely on cryptographic proofs to verify the adjustments made on the network before it is bundled into the Ethereum Network. Since it mainly focuses on using proof as a method of validation, it is considered a “validity proof”. The main functionality behind ZK Rollups is grouping transactions together through a third-party operator. This differs from the individual verification that usually occurs for transactions. Thus the term “Rollup” was coined due to its batching nature. By implementing ZK Rollups, networks can increase their processing capacity by verifying more transactions at once. State changes within a blockchain are submitted in the form of ZK Proofs which verifiers operating on the mainnet can check. 

ZK Proof has become a revolutionary technology due to its recursion proofs. Succinct Non-Interactive Argument of Knowledge (SNARK) allows for the recursive verification of arbitrary computation, meaning SNARKs can verify other SNARKs. This becomes increasingly important considering generating one proof to verify many transactions would take too much time and finance to complete. Instead, the number of machines would match the number of transactions to generate proofs in parallel. In doing so, a recursive proof layer can be generated, which allows for a proof to refer to itself. Each proof can verify two transactions proof until there is only one proof left that verifies all the transactions. 

In 2019, recursive proof took 120 seconds to generate. By 2020, Ethereum could generate a recursive proof in 60 seconds. With Polygon Zero, the time it takes to generate the proofs is dramatically reduced to 0.17 seconds. Unlike other alternatives, Plonky2 helps improve handling processed by 100 times whilst being native to the Ethereum blockchain. It achieves this by utilizing new modules that enable efficient field arithmetic, custom gates can be written with more wires, allowing for circuits optimized for an effective recursion process.

 

Optimistic Rollup

To address further scaling solutions, Polygon has also implemented a hybrid solution using Optimistic and ZK Rollup technology. The issue currently plaguing the adoption of blockchains within enterprise structures is the use of private and public blockchains. As crypto continues to develop, organizations will use blockchain technology to exchange goods and services, process payments, and share data. The problem with this is that many enterprises are choosing to use permissioned blockchains, meaning data usage is varied through permission access. This structure relies on pre-existing trust amongst parties, but due to its nature, reduces the data transparency as well as trust within the data line. By implementing a permissioned blockchain, the idea of decentralization becomes blurred by privately controlled information. 

On the other hand, enterprises also don’t want to use public blockchain networks as a system to manage their data. Within the public blockchain structure, anyone can access and review the information present within the blockchain, which poses a risk to the organization. This will allow competitors to read sensitive sales information that the organization might not want to disclose. While this option provides transparency and improves trust, the lack of privacy means that enterprises are unlikely to adopt the approach. 

Polygon Nightfall seeks to resolve the issue between private and public blockchains by implementing privacy needs whilst reducing the cost of transactions on Ethereum. Within the Polygon Nightfall structure, every cell is hashed and protected by a key. When information is added, the data and name are hidden. The transaction information is verifiable without revealing the sensitive content of the transaction, allowing for data transparency whilst retaining user privacy.

Due to Polygon Nightfall’s hybrid Optimistic-ZK rollup, the problems separating private and public blockchains can be resolved. Using ZK technology, enterprises can benefit from the anonymity of transactions whilst still participating within a public network structure. Optimistic rollups allow the organization to effectively perform those transactions by improving the costs of the network (12k gas per tx). By implementing this technology, Nightfall is able to maintain the credibility of its information amongst its users. Third parties feel comfortable that the data is untampered using verification and businesses are given the space to collaborate freely. Along with the ability to conduct transactions and process data with trust, confidentiality is maintained to ensure that users feel safe with their data. Enterprises can hide resources from competitors and untrusted sources all while safely storing the information on-chain. This is also incorporated into an efficient network that allows for predictable prices and reduces operation costs, enabling effective management of the blockchain. In addition, liquidity pools are available for users to liquidate their transactions immediately without having to wait for the seven-day settlement. 

Nightfall technology can also be used in Supply Chain Orchestration, where multiple groups within a supply chain can communicate using a decentralized payment network. Once tokenization has occurred, production batches and assets can be exchanged and tracked within the Ethereum network, backed by security and privacy powered using Optimistic-ZK rollups. In order to power the next wave of industry-leading technology, Nightfall will become an integral part of corporate collaboration and organization. 

 

Hermez 2.0

Hermez 2.0 is a decentralized Ethereum L2 scaling solution that uses zero-knowledge technology to validate and provide fast finality for off-chain transactions. Hermez 2.0 serves as a zero-knowledge Ethereum Virtual Machine (zkEVM). It works to finalize Ethereum transactions whilst maintaining transparency for smart contracts and validation. 

The main functionality that Hermez 2.0 was built for is to provide support for smart contracts. In the previous version, Hermez 1.0, a Proof of Donation (PoD) consensus mechanism was employed. Through this model, a decentralized auction would be conducted automatically in which participants bid tokens to get the chance to create the next batch. The issue with this system was that it was vulnerable to attacks and unfair towards less competitive bidders. This created a discrepancy between the number of batches that users got to create. 

Hermez 2.0 changes the consensus mechanism by implementing a Proof of Efficiency (PoE) model that leverages the previous Proof of Donation mechanism. This model supports the permissionless participation of several coordinators to produce batches on L2. The PoE mechanism is a much simpler design than PoD, which allows for an efficient flow within the batch creation process. Within the mechanism, greater security is employed as well as an acceptable degree of decentralization. 

The underlying protocol in Hermez 2.0 makes sure that state transitions are confirmed by using validity proof. In order to certify that the rules set for transitioning states are met, smart contracts are deployed. The purpose of smart contracts is to verify the validity of proofs and check that the transitions are done accordingly. Hermez 2.0 uses two types of participants to carry out these processes: Sequencers and Aggregators. Sequencers propose transactions made by users to the network and add them to the PoE smart contract. Aggregators are responsible for checking the validity of the transaction batches. These two participants work in tangent with the smart contract to ensure that transactions are processed correctly and in a timely manner. Sequencers and Aggregators are incentivized to help process transactions by receiving MATIC tokens and user-submitted fees as rewards. This allows for members of the community to participate in keeping Hermez 2.0 running. In addition, by removing the auction feature, sequencers and aggregators can be rewarded accordingly for their contributions. This allows for a 133 times increase in throughput as well as securing all transactions within the network. 

By implementing Hermez 2.0 within Polygon’s L2 scaling solution, token transactions are more efficiently processed, with over 2,000 transactions processed within a single batch. Once the transactions are processed on the Hermez layer, one validity proof is sent to the layer-1 block on Ethereum. In doing so, a faster, cheaper, and more efficient chain of information processing is created. 

 

Polygon Edge

Polygon Edge is a modular framework designed to help build Ethereum-compatible blockchain networks and scaling solutions. It serves to help bootstrap a new blockchain whilst supporting full compatibility with Ethereum smart contracts and transactions. Polygon Edge utilizes an Istanbul Byzantine Fault Tolerant (IBFT) consensus mechanism which supports both Proof of Authority (PoA) and Proof of Stake (PoS). 

The IBFT PoA is the default consensus mechanism run by Polygon Edge. Within the PoA structure, validators are responsible for creating and adding blocks into the blockchain series. These validators are authorized within a dynamic validator set. Using a voting mechanism, validators can vote in/out from the set of validators. If a majority (51%) of validator nodes agree on a change, the validator would be added or dropped from the set. This allows for malicious actors to be removed and ensure trusted validators are placed into the system. Once part of the validating set, validators take turns in a round-robin format to propose the next block production. Once proposed, a super majority (over ⅔) is required for the block to be approved. 

The IBFT PoS is an implementation made to give an alternative choice for PoA. This allows node operators to choose between the two when starting a chain. Within the IBFT PoS mechanism, epochs are introduced as time intervals in which a set of validators can produce a block. The length of the interval is also modifiable, allowing node operators to adjust the length of the epoch. At the end of the epoch, epoch blocks are generated. These epoch blocks don’t contain any transactions but instead perform additional logic that doesn’t occur during block production. 

 

Edge Architecture 

Polygon Edge is made up of several layers, the first being networking. At its foundation, Edge uses the libp2p framework. Libp2p also allows for modularity, which gives greater flexibility and helps Polygon Edge become more swappable. It has significant speed performance, as well as extensibility for other features within the system. On top of libp2p, Polygon edge also utilizes the GRPC Protocol. The GRPC layer helps handle request/reply protocol and streamlines protocols that help Polygon Edge function. Along with that, GRPC also helps node operators grasp a better overview of the system activities by saving time on log searches. 

The Consensus module follows the network layer and serves as an interface for the consensus mechanism. Polygon Edge wants to maintain the modularity as well as pluggability of the network so they abstract the core consensus protocol to allow for new ones to build on that layer. This allows for ease of use as different consensus interfaces can be integrated easily into the chain network. 

The TxPool module in the Polygon Edge architecture serves as a transaction pool, where transactions from different parts of the system are added and compiled. TxPool works closely with the remaining modules to finalize pending transactions from multiple entry points. The transactions are received and put in a queue that sorts a list of account transactions. Once the data is sorted, it is placed in a list of promoted transactions, categorized by gas price. Node operators can also set a gas limit for transactions, which applies to newly created blocks in the transaction pool. 

Included within Polygon Edge’s structure is the JSON RPC module which uses the JSON RPC API layer that helps dApp developers interact with the blockchain. The JSON RPC layer also uses a Filter Manager which runs alongside the server. The filter manager serves as a support for the blockchain to sift through blocks within its network. Additionally, it also serves as a filter for logs as well as blocks within the chain.

The main modules that bridge the modules together and sit at the heart of Polygon Edge are the Blockchain and State. The Blockchain serves as the powerhouse that focuses on the reorganization of blocks. All logistics related to new blocks are managed by this layer. The State function within the Blockchain deals with the state transitions when new blocks are added. Among other things, the State handles the execution of both transactions and the Ethereum Virtual Machine (EVM). 

 

 

MATIC Ecosystem 

Decentralized Applications (dAPPs)

Since its launch, Polygon has quickly grown to become one of the prominent blockchains for Decentralized Finance (DeFi) and dApps development. While there is a multitude of chains that developers can choose to produce their applications, Polygon is one of the few blockchains whose speed, affordability, and security provide a suitable environment for app adoption. 

Over 19,000 dApps have been developed and run within the Polygon network. This marks a new milestone for Polygon as it hits a sixfold increase from the 3,000 dApps it had in October of 2021. Currently, there are also 8,000 active teams that are building decentralized applications on Polygon. This saw an increase from 6,000 in January of 2022. According to Alchemy,  among the 8,000 teams, 65% choose to build exclusively on Polygon, compared to 35% on Ethereum. 

Due to its accessibility and developer-oriented framework, Polygon has become home to some of the biggest web3 DeFi protocols like Aave, Uniswap V3, and OpenSea. Polygon’s vibrant and diverse ecosystem is also the reason why global enterprises like Adobe and Dolce & Gabanna chose this platform as their entry point into Web3. As of now, Polygon has processed over 3.4 billion total transactions and has 135 million unique addresses, all whilst securing $5 billion in assets. 

Market Performance

Polygon is a chain that offers a wide range of fast, affordable, and energy-friendly scaling solutions native to Ethereum. Due to their low fees and ease of integration, Polygon saw an adoption boom in 2021 that slowed down in Q1 of 2022 with the impending market turndown. 

Throughout 2021 and Q1 of 2022, Polygon has seen a steady pace in the number of daily active addresses. In June 2021, Polygon saw an upward trend in active addresses, which peaked by the last quarter of 2021. While this value has fallen since then, the active addresses continue to vary going into Q1 and Q2 of 2022. In terms of absolute value, Polygon averages 369,000 users on a 1-day interval, 992,000 on a 1-week interval, and 2.24 million during a 30-day cycle. 

Starting May 2021, Polygon’s total transactions started to outpace that of Ethereum. Since it serves as a side chain to the Ethereum network and maintains lower gas fees, Polygon saw its total transactions increase substantially. At its peak in June 2021, Polygon’s transactions were 700% more than that of Ethereum. Since then, starting from September 2021 through the present, the transactions have leveled out around 200-300% more than Ethereum. As Polygon has begun to mature, the transaction count has stabled out relative to that of Ethereum. 

 

DeFi Comparison

Compared to other chains that offer DeFi services, Polygon holds a spot as one of the leading chains. Currently, Polygon is ranked 6th on DefiLlama in terms of total value locked (TVL). Currently sitting at $1.64 billion, Polygon is only beaten by Solana ($2.57B), Avalanche ($2.62B), Tron ($4.06B), BSC ($5.88B), and Ethereum ($45.58B). 

Since DeFi continues to gain traction within the crypto industry, Polygon’s stride within the decentralized finance space will serve to accelerate growth over time. As more protocols and applications find themselves on Polygon, investors will become increasingly willing to enter Polygon’s DeFi ecosystem. 

Developer Community

Since Polygon is an L2 scaling solution for Ethereum, the demand for developers has become an increasing problem for the chain, as most community developers typically prefer to work within the Ethereum mainnet. However, as Polygon continues to gain traction and mature, it manages to retain a steady stream of incoming active developers. 

Between December 2020 and December 2021, Polygon (MATIC) saw a doubling in the number of monthly active developers. According to Electric Capital, Polygon has at least 250 developers working on its chain every month. In addition, Polygon functions as a side chain for Ethereum, which currently dominates the pool of developers working on blockchain projects. Because of that, Polygon becomes an increasingly attractive option for developers to work with and integrate with Ethereum. Additionally, according to Alchemy, the number of users of Polygon has doubled every two months. At the pace that Polygon is developing, more developers will be willing to create on Polygon. This will spark future innovations as well as improve overall chain maintenance. 

 

Sustainability

Polygon is also a chain that focuses heavily on the sustainability factors of its transactional functions. Since its launch, Polygon has begun expanding its influence by pledging to go carbon-negative in 2022. As the world continues to advance, climate change continues to be at the forefront of global concern. In order to help negate the impending rise of carbon waste, Polygon is working towards offsetting the environmental impact of all its transactions. 

Compared to other large corporations, Polygon’s carbon footprint in 2021 was 90,645 T/CO2e. This value is dramatically lower when pitted against Microsoft’s 10,900,000 T/CO2e and Ethereum’s 6,970,000 T/CO2e. Since its shift towards sustainability, Polygon has pledged $20 million to help contribute to the fight for a greener future. This fund is used as an initiative for partners to do the same, as well as a resource for ecosystem members who are looking to enact change. Along with that, the fund will be used as a donation towards NGOs who are looking to fight climate change. 

Polygon understands both the importance of technology within the modernizing society, as well as its imminent impacts on the planet. In doing so, Polygon strives to be the first climate-positive blockchain within the crypto industry. 

 

Tokenomics

The Polygon Network uses $MATIC as the native utility token for its ecosystem operation. $MATIC tokens are issued as ERC-20 standard-compliant tokens on the Ethereum blockchain. 

$MATIC serves as a token for network utility, allowing participants to use it as a function of payment within the Matic Network. Unlike other native tokens, which provide shareholders and participants with governing power, $MATIC only serves as an economic incentive to maintain the ecosystem. Those who own the Matic token are not entitled to any explicit rights other than for the uses given by the network or others than use the token. 

In order to maintain the Polygon Network, computational resources are needed to perform functions like validations or publishing proofs. In order to encourage users to complete these services, Matic tokens are awarded as compensation for providing the resources to the network (i.e. mining). This makes the Matic token an indispensable part of the Polygon Network as, without it, users would not be enticed to contribute to the network's greater benefit. 

$MATIC’s other essential purpose is to be staked on the Polygon network to provide liquidity for the ecosystem and reward key contributors like validators and miners. By staking the token, users are able to earn annual yield through locked contracts. Additionally, stakers are chosen to validate block transactions, which earn them extra rewards in the form of Matic tokens. $Matic has a fixed supply of 10 billion. A significant portion of this supply is allocated for the purpose of staking. 

 

Funding and Distribution

In April 2019, MATIC concluded its seed funding round, raising roughly $165,000. These investments came from institutionally backed investors like Coinbase Ventures or ZBS Capital. During this round, MATIC was selling for $0.00079 per token. Seed investors received 209 million MATIC tokens through their investments. 

After the seed round, early investors were given the opportunity to invest in MATIC, with the price of the token now three times that of the seed round, at $0.00263 per token. These investments helped raised an additional $450,000 for Polygon. Around 171 million MATIC tokens were allocated during this round. The total funding and token allocation from seed investors and early supporters made up 4.0% of the private sale in MATIC’s initial token supply. 

Following the investments from private sales, MATIC opened itself up for public sale on Binance Launchpad. Through the Initial Exchange Offering (IEO), MATIC was able to raise $5 Million at the same price of $0.00263 per token. A total of 1.9 Billion tokens were distributed during the Launchpad sale. This equivalated to 19% of MATIC’s initial token distribution. 

The remaining funds, which totaled over 75% of MATIC token, are dedicated to the team, advisors, network operations, foundation, and ecosystem. These tokens are distributed over time, with the full amount estimated to be delivered by Q4 of 2022. As for the private sale and Launchpad round, seed investors and early supporters were to receive half of their tokens immediately, with the remaining amount released in October 2019. Investors during the Launchpad sale did not have their tokens locked in a lengthed-based contract but received their tokens immediately on purchase. 

 

Vesting Schedule

Polygon (MATIC) follows a fixed supply when it comes to token distribution and vesting schedule. Since the token supply is capped at 10 billion tokens, part of the token distribution is fixed, especially in regard to IEO investors and private sales. Since these investments came during a fixed interval within MATIC’s token release, much of the pre-release sales follow a fixed growth. 

As for tokens released to teams, advisors, and foundations, these followed a more linear change as tokens were expected to release gradually over time. Thus, the token distribution and vesting schedule for the highlighted groups are distributed intermittently. 

As for ecosystem and staking rewards, this follows exponential growth since many of the tokens used within the Polygon network are staked or circulated to maintain the system. Users tend to stake their tokens to become validators and receive rewards in the form of MATIC tokens. Since a large portion of tokens serves as an incentive for community participation, it is expected that staking rewards and the ecosystem receive the largest allocation of distributed tokens. 

 

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Room for Improvement

Transaction Blockage and Downtime

With the recent update to the Heimdall network feature, Polygon has struggled with several downtimes and transaction blockage within the system. Even though the recent update caused several glitches within the system, the Polygon team has worked to identify a definitive problem, which seems to have originated from an earlier update to the system network. When these downtimes occur, deposits and withdrawals are temporarily halted on the Binance platform, causing several issues for users.

Since Polygon serves as an L2 solution, primarily focusing on transaction speed, system errors that delay or halt transaction operation should not occur. More importantly, many of these issues are identified as being associated with early upgrades, which can create long-term scaling problems if not addressed. Polygon attempt to fix these issues through minor hot-fixes but no long-term solution has been proposed to stabilize the network. 

Parent Chain Problem

Polygon was built as an L2 solution to Ethereum. Whilst Ethereum is currently the most integrated solution in regards to dApp development and Decentralized Autonomous Organizations (DAOs), it is not guaranteed to exist forever. Since Ethereum is a second-generation blockchain, newer chains have been able to develop and address the failures of Ethereum. In doing so, more chains are creating possibilities to overtake Ethereum in terms of usability and integrations. 

However, Polygon is built primarily as a scaling solution for Ethereum. The rise in new layer-1 chains would mean that Ethereum may continue to lose its market share and dominance over the crypto space. This will undoubtedly reduce the usefulness of Polygon as it prospers under the growth of Ethereum. By allowing its value to be in tangent with another chain, Polygon has effectively limited its ability to adapt within market structures. Since Ethereum is an expensive and slow chain, many future investors will look towards better and cheaper alternatives. 

It is worth noting that Ethereum is expected to begin its “Merge”, by which Ethereum will convert from Proof of Work (PoW) to Proof of Stake (PoS). When this happens Ethereum may very well retake its market dominance and Polygon may benefit from this transition over the long term as well.

 

 

Team & Investors

Core Team

The core players within the Polygon network can be narrowed down to the original co-founders of Polygon, formerly known as Matic Network. Jaynti Kanani, Sandeep Nailwal, and Anurag Arjun were the three founders that started MATIC back in 2017. The Mumbai-based project was funded by family and friends before going through two rounds of funding and a Binance launchpad sale. 

Alongside the three original co-founders, Polygon is also run by seven other co-founders. Mihailo Bjelic is amongst those who helped start the company in 2017. David Shwartz, Jordi Baylina, and Antoni Martini are the co-founders responsible for Polygon ID as well as Polygon Hermez. Brenden Farmer and Daniel Lubarov are the co-founders who helped run Polygon Zero. Bobbin Threadbare is the last co-founder who is in charge of Polygon Miden. 

Polygon also has a group of mentors that support and guide the direction that the network is moving in. Amongst them is Mark Cuban, an entrepreneur and founder of Mark Cuban Companies. Hudson James who works in Ethereum Foundations as well as Pete Kim, head of engineering at Coinbase, also serves as members of the mentor group at Polygon. Additionally, Ryan Sean Adams, founder of Bankless, Anthony Sassano, co-founder of EthHub, and John Lilic, co-founder of Code to Inspire all serve as investors and product mentors for Polygon. These six members collectively work as both investors as well as advisors for the co-founders as well as operation members within the Polygon network structure. 

Backing

Polygon has raised $450.5 million from private and corporate investors, with the current public valuation at $20 billion. Having launched in 2017, Polygon has seen a wave of investors looking to capitalize on the technology that it has to offer. The key investors are:

Sequoia Capital India

Softbank 

Tiger Global

Galaxy Digital

Seven Seven Six

AU21 Capital

Mark Cuban Companies

Coinbase Ventures

Binance Labs

Republic Capital

Makers Fund

Alameda Research

Alan Howard

Dune Ventures

Steadview Capital

Elevation Capital

Animoca Brands

Spartan Fund

Dragonfly Capital

Variant Fund

Sino Global Capital

 

Roadmap

Polygon has grown since its launch in 2017 and continues to strive for ambitious steps moving into 2022. While no immediate roadmap can be found on the Polygon website, various sources collected from Youtube, individual project timelines, as well as third-party sources help compile what Polygon plans to do in the next quarter of 2022. 

From the research and interviews gathered online, a few key milestones can be concluded.

- Polygon plans to go carbon-negative in 2022 with the hopes of being climate positive in the near future
- Polygon Avail seeks to enable modular chain design by implementing data ordering and providing availability 
- Polygon will roll out zkEVM to revolutionize zero-knowledge technology
- Polygon plans to integrate network governance by allowing the community and validators to decide on changes to the Polygon PoS chain 
- Polygon raised funding for their new blockchain protocol: Supernet

 

 

References

Website

General Whitepaper

Governance Forum

Twitter

Polygon Sub-reddit