What is Polygon Polygon Matic: Over the years, Ethereum has brought all kinds of advancements into the cryptocurrency space including smart contracts and high-interest paying decentralized applications.
3 Big Challenges in Ethereum
The Low Throughput issue. Which is a fancy way of saying Ethereum can only handle 30 transactions per second. For the number 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 does around 257 transactions per second
While Polkadot can do up to a 1000 And Solana all the up to 65000
The second big problem is that The Ethereum network isn’t really user-friendly Since you are effectively Bidding in an auction against everyone else who wants to be one of those 30 transactions, In short, this means it is expensive.
And I mean like 20 dollars just to send your friend 1 dollar expensive.
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. But, what if there was another blockchain that leveraged Ethereum’s technology While also offering higher throughput, Extremely low transaction fees, and better options.
In this article, we’re going to explain what Polygon is, How it works, as well as the specific Tokenomics of the Matic coin.
So in 2017, three Indian Developers sought to find a solution to Ethereum’s problems which resulted in the creation of Matic which is now rebranded to the Polygon network.
Now one thing to note here is that even though they rebranded to the Polygon network, the coin is still called the Matic coin.
What is Polygon Matic?
Polygon is a layer-two scaling platform that allows Ethereum based applications to tackle the problems that I mentioned in the above paragraph.
While also leveraging Ethereum’s security. its primary focus is the increase the usage of Defi tools and applications by basically connecting blockchains together.
The network currently hosts over 3000 decentralized applications, of which over 80 big names migrated
from the Ethereum main chain
Since Polygon is so similar to Ethereum many creators that develop useful tools will actually move them from Ethereum to other EVM blockchains like Polygon that way they can increase their reach and usage.
What is EVM Ethereum Virtual Machine ?
Now, if you’re wondering what EVM is, it stands for Ethereum Virtual Machine and it’s the actual code that is run by computers around the world to actually carry out the blockchain’s smart contracts.
Now I must say at this point in the article if you have no idea what hardly any of these words I mentioned are you can read some of our dedicated articles that explain some of these terms.
Anyways, Polygon actually has an EVM but so does the Binance Smart chain, phantom, and a few other big networks they all utilize the main Ethereum code. and since they run basically all the same code, It makes sense how developers can simply move their project over to a new network and it’ll work basically the same way without making many changes.
Proof of Stake
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 proof of stake consensus mechanism there are a few other changes to this side-chain, But what’s really important is that It’s way faster and can handle way more transactions per second also meaning it’s much more affordable to the end-user.
Well, 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 isn’t 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 like completely separate chains like Zk Rollup chains
Optimistic Rollup chains, or any other side chains that they desire.
By the way, you can check out our article on side chains and Rollups if you want to learn more about how those specifically work.
They’re really 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, I thought Polygon was pretty simple but when you look at its internals, there’s a lot more than regular users see for users like you and me, we can sum up Polygon in one sentence it’s basically Ethereum but with super-cheap gas fees.
Right now, to transfer your Ethereum from one account to another,
The fee is like $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 $150 over a token swap.
Personally, the Polygon and Binance Smart chain are the two Defi blockchains that I recommend to new users so take that for what it’s worth.
How Polygon Actually Works ?
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.
What is Commit Chain ?
It functions as a transaction network that operates close to the real chain therefore, in Polygon’s case it actually works alongside Ethereum.
Now before we continue a lot of the future stuff I’m going to be talking about is pretty technical but if you’re interested, Let’s dig in.
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 article 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 tons of data. this is why the Polygon
network can actually up to 65000 transactions per second.
Some experts predict that a time will come when developers will host 1000 chains that work hand in hand with Ethereum to increase throughput all the way up to millions of transactions per second now let’s get a little bit more technical.
Polygon’s architecture runs on a 4 layer system comprising of the Ethereum Layer, the Security Layer the Polygon networks Layer and finally the Execution Layer
Now I’m gonna be honest with you you don’t really need to know this stuff So, skip ahead if you want to get into the Tokenomics
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 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.
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 Blocks are produced.
Finally, we have the Execution Layer this is popularly known as Polygon’s Ethereum Virtual Machine 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.
What are Polygon’s Tokenomics ?
The Polygon network has a native token. It’s called Matic which has been trading for around 2 dollars with a market capitalization value of around 13 billion dollars.
Matic tokens are dispurged monthly and have a total supply of 10 billion tokens of which nearly 6.8 billion is already in circulation. the difference between these two numbers is that tokens that are held for staking rewards and tokens with a time-locked release schedule that we’ll talk about later.
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 their max supply.
If you’re wondering where the other tokens are, the development teams own 16% of the supply the advisors have 4 percent, staking rewards come to around 12% the ecosystem already has 23%, well 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 EIP1559
If you have no idea what that is what it basically means, is that base transaction fees will effectively be burned which Matic will eventually be a deflationary token.
Now if you’re anything like me you might be wondering how are they gonna reward the stakers when the funds run out?
Well, the Polygon team will hope by then the extra transaction fees that users add to prioritize their transactions above the base fee will be enough to incentivize staking validators to keep doing their thing.