- Polygon is predominantly an Indian project to scale up Ethereum.
- The blockchain scales up Ethereum through a network of sidechains that offer negligible transfer fees.
- Polygon is one of the most invested blockchain startups.
- It already hosts over 19,000 DApps.
It is no secret that Ethereum is a patchworked smart contract platform. Regardless if its transition from proof-of-work (PoW) to proof-of-stake (PoS) is successful, Ethereum will still have gas fee issues. First-mover advantage brings popularity, and popularity brings a lot of network traffic.
While other blockchain networks, such as Avalanche or Algorand, resolve traffic load within the main chain, Ethereum relies on external networks. Polygon (MATIC) is one of those scalability solutions. Find out how it works and how to take advantage of it.
Who Funded and Developed Polygon (MATIC)?
To every blockchain project, there is the development side and the financial side. The brains behind it have certainly attracted major venture capital (VC). The core co-founding development consists of three Indians and one software developer with a Serbian heritage:
- Jaynti Kanani: CEO, and Senior software engineer
- Sandeep Nailwal: Co-founder
- Anurag Arjun: Chief Product Officer (CPO)
- Mihailo Bjelic: Software engineer
When it comes to financing the project, Polygon (MATIC) has become an investment darling since it launched in 2017. Over 40 VC firms funded it, led by:
- Galaxy Digital,
- SoftBank Vision Fund 2,
- Galaxy interactive, and others…
In total, MATIC raised $451.5 million over seven funding rounds.
Shailesh Lakhani, managing Sequoia Capital India as one of the leading funding VC firms, stated the following reason for supporting the network.
“Polygon has become what we see as a platform of choice for folks who are trying to build and scale low-cost applications that we think could actually get adoption,”
Other funders liken Polygon to become the blockchain version of Amazon’s AWS (Amazon Web Services).
What Problem Is Polygon (MATIC) Trying To Solve?
As hinted at previously, all computer networks suffer from congestion, as there are limited computing, memory, and bandwidth resources to be deployed.
Decentralized networks like Ethereum are especially susceptible to this problem because each transaction running through a smart contract has to be verified across the network’s nodes.
This problem is commonly referred to as the blockchain trilemma. Simply put, between decentralization, security, and scalability, a blockchain network has to sacrifice one aspect to outperform another one.
Case in point, if there is greater centralization, there is greater scalability, as showcased by the Visa network.
As a layer 2 network that connects to a layer 1 network, Polygon’s job is to keep improving Ethereum’s decentralized network. While making it scalable so that more people can use it.
Otherwise, ETH gas fees become prohibitively expensive. Even amid the bear market with low traffic during the summer of 2022, the gas fee difference between Ethereum and Polygon is drastic.
During previous traffic peaks on Ethereum, it wasn’t uncommon for ETH gas fees to reach $100–$200 just to move money from wallet A to wallet B.
Polygon came out on top as the most likely way to get rid of these ridiculously high fees, making it an important part of Ethereum’s mainstream.
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How Does Polygon (MATIC) Work?
Polygon itself is a blockchain network that uses proof-of-stake (PoS) consensus to verify transactions across node validators. This already gives it an edge over Ethereum, which is yet to make the PoS transition with The Merge.
By that time, Ethereum should then use 99.98% less electricity as it supplants PoW miners with PoS validators.
Meaning, it has already achieved that efficiency. Anyone running a Polygon node as a validator to verify transactions is incentivized by the network’s native token — MATIC. However, there are two options in the blockchain’s incentive structure:
- Opt for a delegator – Delegators don’t run validation nodes themselves, but pick validators to do so as public nodes. With greater MATIC holdings, delegators have more voting power to do so.
- Opt for a validator – Just like in other PoS blockchains, Polygon validators run full nodes (entire blockchain copy) to update the network and verify transactions. They gain MATIC rewards for doing so. However, they could also be punished with MATIC slashing if they validate false transactions, or have technical difficulties in running a node.
When it comes to the network itself, it deploys a variety of sidechains to funnel Ethereum’s traffic with the use of Polygon software development kit (SDK).
Under this open-source framework, developers can build Ethereum-compatible DApps and host them on Polygon. This can be done with one of three scalability methods.
- Optimistic Rollups – compressing multiple transactions into single blocks. In other words, some transaction data is rolled up and processed outside of Ethereum’s main chain. This makes its layer 1 less crowded.
- Plasma Chains – perform the same thing as Optimistic Rollups, but they store all of the transaction data on separate parent-child blockchains that are connected to Ethereum’s main chain. Because of this, Plasma Chains can have their own smart contract to secure assets, in the event that other sidechains go down.
- ZK-Rollups – another data gathering scaling into a single transaction, but with zero-knowledge (ZK) cryptographic algorithms. This means that ZK-rollups use validity proofs to instantly verify if a transaction is valid. Optimistic Rollups, on the other hand, think that a translation is correct until proven otherwise, which is why they are called “optimistic.”
Each scaling methodology has its own advantages and disadvantages. So far, Polygon Zero, Polygon Miden, and Polygon Nightfall, all based on ZK-rollups, are still in development with the exception of Polygon Hermez, which is yet to receive substantial traffic.
When people say they use Polygon, they mainly refer to Polygon PoS, which can handle up to 7,000 tps. This is vastly faster than Ethereum’s 14–17 tps. Overall, the network has handled over 3.4 billion transactions with an average fee of $0.002.
For this reason, even the largest NFT marketplace, OpenSea, integrated it as a “gas-free” NFT minting and trading experience.
Lastly, not only does Polygon PoS host thousands of DApps fleeing Ethereum gas fees, but it also gives developers the Edge framework to build blockchains from scratch.
What Does the Polygon Ecosystem Look Like?
At its peak in June 2021, the blockchain had $10 billion total value locked (TVL) across its ecosystem of DApps. Presently, Polygon’s network of sidechains holds $6 billion worth of crypto assets, dominated by the AAVE lending protocol at ~20% market share.
As you can see from the top 10 DApps on Polygon, mostly are made of DeFi (lending or exchanges) with the exception of the metaverse platform The Sandbox (SAND).
As of April 2022, it noted a milestone of hosting 19,000 decentralized applications (DApps), which is a 6x increase from last October.
Outside of OpenSea integration, Polygon can also boast hosting the following NFT platforms:
- DraftKings: Public company specializing in fantasy sports gambling that launched an NFT marketplace via Polygon last year.
- Lazy.com: The NFT marketplace envisioned by billionaire Mark Cuban of Shark Tank fame.
- Decentral Games: Currently holding $21 million in its DAO treasury, Decentral Games offers a variety of play-to-earn games with staking options.
- Dododex: companion DApp for the popular survival game ARK: Survival Evolved on PC.
Needless to say, Polygon is experiencing an exponential growth of NFT-centric DApps, already hosting 257 play-to-earn games and 454 NFT marketplaces and collections.
For your convenience, it is best to use this nifty aggregator to sort its blockchain gaming offering by genre and device support.
What About MATIC Token Itself?
It is quite impressive when any token rises in the middle of a severe bear market. Polygon (MATIC) accomplished this by being the most institutionally sought-after scalability network.
Not only did Reddit — with its 1.5 billion monthly visits — integrate the blockchain for its NFT marketplace, but it has been selected for the 2022 Disney Accelerator program.
Seeing this large adoption among major players, (MATIC) went through the roof throughout June 18th. At +100% gains, it is soaring above both bitcoin and ethereum.
While it is generally not a good idea to buy high, it is also worth remembering that this rise is happening in an unprecedented bear market. This indicates that we are still in the early phase of Polygon’s adoption, with many more partnerships and integrations to come.
For NFT traders, in particular, they can look forward to a gasless experience, as all major NFT marketplaces and metaverse projects migrate to Polygon.
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