Polygon, formerly known as the MATIC network, is a layer 2 scaling solution created in 2019 to address various limitations on the Ethereum blockchain, such as transaction speed, throughput, and gas fees.
It was originally designed as a scalable solution, but quickly evolved into a multipurpose ecosystem that has received a lot of attention. MATIC, its native token, debuted on Binance Launchpad in 2019 amid Initial Exchange Offerings (OEI) boom.
But first things first, let’s see what Layer 2 solutions are if we want to have a better understanding of Polygon.
What are Layer 2 solutions and why do we need them?
TO 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 higher throughput (transaction speed) and lower gas fees .
In other words, what Layer 2 does is that they build a communication channel between the two blockchains and send the information packet (the transaction data) from the main network to the parallel blockchain to execute the transaction. for a fraction of its cost and at a reduced price. 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 extensive and secure infrastructure and innovative tools.
However, the high demand for dApps and subsequent supply clogged the network, and its performance has dropped significantly; It’s not uncommon to see gas rates go up to double or triple digits in USD equivalent, which can be quite expensive depending on how much you spend. interact with the network, leaving the Ethereum blockchain only for the ‘big players’. You can use Etherscan gasoline tracker to check current gas rates.
This is why Layer 2 solutions have become essential to the DeFi ecosystem, as they improve the scalability and performance of Ethereum while still benefiting from its security properties.
How does the polygon work?
Polygon works similarly to other Proof of Stake (PoS) protocols in terms of network nodes, governance, staking, and other functionality.
The platform leverages Proof-of-Stake consensus, which relies on a set of node validators to verify and validate transaction blocks on the network, instead of relying on classic Proof-of-Work (PoW), which consumes a huge amount of data. of processing power to create new blocks
The main difference is that instead of having to do the work (computation work in PoW algorithms), in PoS, the token holders validate and verify the transactions.
Polygon’s PoS ecosystem works by rewarding users with MATIC, the protocol’s native token. To earn MATIC, you can choose one of the following options:
Become a validator and commit to the network by running a full node to validate transactions on the blockchain. As a node validator, you receive reduced fees and a newly created MATIC. However, if you act maliciously, make a mistake, or even if your internet connection is slow, your MATIC rewards will be reduced as punishment.
Become a delegate, which is a type of public node. As a delegator, you receive MATIC from other people and use it to help the network perform PoS validation. The larger the delegated share, the greater the voting power of the delegator. This is easier than being a node validator, but it also has its challenges.
If you want to transfer funds from the Ethereum network to the Polygon network, you need to use the PoS bridge, which is a set of smart contracts that help transfer assets from the Ethereum mainnet to the Polygon sidechain.
The PoS bridge is the backbone for transferring assets from Ethereum to Polygon and then using these funds to interact with the applications and blockchains in the Polygon ecosystem. You will have to pay a transaction fee in ETH, of course, which can be expensive, but once you are on the Polygon network, transactions are very cheap: less than a dollar.
The Polygon Protocol connects all Polygon-based blockchains to each other and to the Ethereum network. It also allows chains to access Ethereum to inherit its security model.
Polygon Software Development Kit (SDK)
In May 2021, Polygon announced the Polygon Software Development Kit (SDK), a collection of plug-and-play software tools that enables developers to launch their own fully customizable blockchain and DeFi applications.
The main idea is to make Ethereum a full multi-chain system, which it already is, but the current limitations and lack of structure in the Ethereum ecosystem make it difficult for developers to work on their projects.
Polygon aims to power the ecosystem with the Polygon SDK, based on three main concepts: compatibility with Ethereum, modularity, and extensibility, making it a flexible framework for developers interested in working on Ethereum infrastructure and scale solutions. .
Polygon SDK is divided into two iterations. The first version supports independent chains compatible with Ethereum, which are sovereign blockchains in charge of their modules and security. These chains can use the Polygon bridge to communicate with Ethereum (for example, transfer assets or send arbitrary messages) while maintaining their independence.
In the second version, we will see support for other types of chains, such as Layer 2, with its own set of modules and tools to further empower developers.
Utility: What can you do in Polygon?
Polygon lets you do pretty much everything you do on Ethereum, but without the high gas fees or poor performance.
Polygon has grown from a simple scaling solution to a larger and more complex ecosystem where users and developers have a broad set of use cases, including launching Ethereum-compatible blockchains, using decentralized applications (DApps) ) based on Ethereum, mint non-fungible tokens (NFTs)become node validators, delegators, stake MATIC and much more.
There are numerous successful projects running on Polygon, such as yield generating protocols like Aave or Curve Finance, decentralized exchanges like SushiSwap, and the most popular decentralized NFT (non-fungible token) marketplace, OpenSea.
You can use Polygon as the base blockchain in these protocols instead of Ethereum. For example, OpenSea allows you to choose Polygon instead of Ethereum as the primary 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.
However, it is also worth noting that not all protocols built on Ethereum have their iterations of Polygon, and there are certain limitations in this regard.
The MATIC token
The MATIC token is an ERC-20 token that powers the entire Polygon ecosystem. It is used to pay gas fees, participation and governance. According to CoinMarketCap, there is a current circulating supply of 7.48 billion MATIC tokens, with a maximum supply of 10 billion.
After changing its name to Polygon and rolling out new features for developers and users in the ecosystem, the MATIC token saw explosive growth in price due to an increased use case. As of this writing, as of February 2022, it is the 16th largest cryptocurrency by total market capitalization.
The distribution of the supply of MATIC tokens is as follows:
- Advisors: 4%
- Private Sale: 4%
- Network Operations: 12%
- Team: 16%
- Launch pad sale: 19%
- Ecosystem: 23%
- Foundation: 22%
Meet the team behind Polygon
Polygon was created by four software engineers with strong software development backgrounds:
Popular DApps Using Polygon
- Sushi Exchange: an Ethereum-based decentralized exchange (DEX) that works as an automated market maker (AMM).
- Curve Finance: an exchange liquidity pool on Ethereum that provides continuous trading of stablecoins with low risk.
- 1 inch– A DEX aggregator that acts as a liquidity bridge between various DeFi protocols, providing users with the best liquidity on Ethereum, Binance Smart Chain (BSC), Polygon, and more.
- Aave: A yield aggregation protocol that allows users to borrow cryptocurrencies to use as collateral for quick loans.
- quick exchange: A decentralized exchange running on the Polygon network that provides ultra-fast transactions at a cheap cost.
Polygon is one of the most exciting DeFi projects out there, with a promising future for the DeFi community regarding blockchain scalability and interoperability.
And with its rich set of developer tools, innovative mechanism and modules, and full support for the Ethereum Virtual Machine (EVM), we could soon see a huge influx of projects thriving in the Polygon ecosystem.