Exploring the Polygon 2.0 Ecosystem

Introduction

Scaling Ethereum is a massive task nearly as old as the blockchain itself. Greater demand continues to fuel more activity, which can make transacting on Ethereum prohibitively expensive. Other Layer-1 blockchains have surfaced to capitalize on this situation by siphoning some network traffic. However, Layer-2 solutions (protocols built on top of Ethereum) are likely the more promising long-term answer to the network's growing pains. Rather than relieving network congestion by making a completely new Layer-1 blockchain, Layer 2's take the burden off Ethereum by moving some of the work off-chain.

You can think of the Layer 1 blockchain and Layer 2 as a parent-child relationship. It's a fair analogy since Ethereum, as the Layer 1 blockchain, is self-sustaining and doesn't rely on Layer 2 functionality. At the same time, Layer-2 solutions still depend on the parent layer for its security capabilities and transaction data storage, even as they process and execute transactions. So, Layer 2 acts as the execution layer, while Ethereum provides Layer 2 with consensus. Consensus is the complex and expensive task of updating the balances of all accounts across the blockchain after verifying transaction data. And when reaching consensus, safety is more important than speed.

Scaling Ethereum with ZK-Proofs

So, while critics contend that Ethereum moves slowly, it's a more fair assessment to say that Ethereum moves securely. Slower speeds are a byproduct of its emphasis on safety. So, how will Layer 2s speed up Ethereum while retaining its core safety features?

ZK-Proofs are one solution. They perform verifiable computations off the Ethereum blockchain and are significantly smaller than the data batch they represent. Thus, ZK-Proofs are faster and reduce network congestion while lowering costs without compromising Ethereum's security. This article will explore how one such solution, the ever-evolving Polygon 2.0 ecosystem, plans to succeed in helping Ethereum overcome its scalability issues with ZK-Proofs. Learn more about ZK-Proofs in our article "ZK-Rollups Explained."

Understanding the Multifaceted Polygon 2.0 Ecosystem

There is more than a one-size-fits-all scaling solution for enhancing Layer-1 performance. Different platforms will have differing requirements. For example, a DEX needs security even if it means higher transaction costs. A gaming platform, however, wants the highest possible throughput with the lowest transaction costs.

Considering this diversity, Polygon Labs sees Polygon 2.0 as "the long-term vision for scaling every possible use-case, according to its needs." And ZK-tech is making it possible. Their live protocols include Polygon PoS, Polygon zkEVM, and Polygon CDK, with Polygon Miden coming soon. Since these solutions are separate entities, we'll break them down individually.

Polygon PoS

Polygon PoS, launched as Matic Network in June 2020, and some diehards who purchased tokens back then still refer to the project as Matic. However, Polygon PoS is its name now and operates as an EVM-compatible sidechain for Ethereum. Its features include low transaction costs and public checkpoint nodes that validate blocks, allowing for high throughput.

Public checkpoint nodes work as validators and play a crucial role as a bridge between the Ethereum network and the Polygon PoS chain. Once a user initiates a transaction, these nodes validate it against the current state of the Polygon chain. After validating a set of transactions, they create a "checkpoint," which is a Merkle root of the transaction hashes, and submit it to the core contracts on Ethereum.

Polygon's original chain remains wildly popular, processing over 2.5 million transactions daily from over 10,000 different dApps. Also, according to L2Beat, it maintains over $2 Billion in Total Value Locked (TVL) as of December 2023.

Polygon PoS Sidechain Upgrade

Because of its popularity, the goal is to upgrade its PoS chain to fit the Polygon 2.0 vision while maintaining its users and developers. dApps will still work seamlessly on it, and fees should stay as low as before. Neither will ZK-tech implementation require any smart-contract retooling for developers. The only changes should be to secure interoperability with the other chains in the Polygon 2.0 universe while attaining higher security.

Polygon 2.0 seeks to combine unlimited scalability with unified liquidity with ZK-tech powering all the chains in its ecosystem. But, in its present form, validators secure Polygon PoS, not ZK-Proofs. So, while Polygon 2.0 represents a giant leap forward, it isn't leaving Polygon PoS behind for the sake of progress—developers and users still like Polygon PoS. However, since it still operates as a sidechain, plans are being made to convert Polygon PoS into a validium.

What Is a Validium?

Validiums reduce costs by storing transaction data off-chain while maintaining the cryptographic security of ZK proofs. A validium operates like a rollup, but transaction data gets stored off-chain. Rollups publish transaction data to Ethereum, which limits throughput and is more expensive. Validiums have similar security guarantees to rollups, but transaction data is available off-chain. Thus, validiums have two core advantages over rollups:

1. Lower fees Since validiums don't consume the expensive gas needed for block space to store transaction data, they're less expensive.

2. Higher scalability There are boundaries to rollups' throughput based on how much transaction data can be published to Ethereum, while validiums don't have this issue.

The biggest challenge for the Polygon team is that validiums must ensure transaction data availability outside of Ethereum. So, to accomplish this task, Polygon PoS will rely on its set of over 100 validators with over 1 billion dollars staked. These validators already serve as a secure data availability guarantee, but after the upgrade, they will also be responsible for sequencing transactions in a block.

After accomplishing this task, Polygon PoS will become the first Layer-2 solution with a decentralized sequencer set, while transaction fees will continue flowing to staked validators. For validators, MATIC will remain the staked token for now. But it all depends on how the community feels. If they agree with the proposal, Polygon PoS will become a bonafide Layer-2 solution.

The MATIC Token

MATIC is the native token that covers transaction fees on the Polygon PoS sidechain and serves as its governance token. Users can stake their MATIC tokens on the PoS sidechain and earn rewards. The simplest way to stake MATIC tokens is on Luganodes. MATIC is also the governance token for Polygon zkEVM (see below). However, this staking option is not available on the zkEVM.

This past summer (July 2023), Polygon Labs proposed migrating MATIC tokens to the Polygon Ecosystem Token (POL). The POL token is MATIC's upgraded successor. The proposed POL token will function across all its protocols. Notably, this migration will enable validators to use this token to validate transactions across Polygon's multiple chains.

Moreover, POL's added utility will include a restaking feature. This feature will allow validators to earn additional rewards by restaking their POL to validate multiple Polygon 2.0 chains in the ecosystem with a single node. Restaking POL will improve security and scalability since validators can secure various chains.

Although it will gradually replace MATIC, it won't happen overnight. The transition to POL will take over four years as part of the Polygon 2.0 evolution. For now, you can still stake MATIC on Luganodes and earn rewards. Learn about the benefits of staking crypto here.

Polygon zkEVM

Besides its sidechain, Polygon employs a zero-knowledge rollup network known as Polygon zkEVM. Using Polygon zkEVM is like using Ethereum with transaction fees similar to optimistic rollups. After the Polygon 2.0 upgrade, both will complement each other, one as a zkEVM and the other as a validium. Furthermore, the combination of these two chains will create the third-largest Layer-2 network. The PoS chain will continue holding most of TVL, but zkEVM brings improved security guarantees and performance.

How Is Polygon zkEVM Different from Polygon PoS?

Polygon PoS and zkEVM offer two complementary Layer-2 scaling solutions with different capabilities. The upgraded version of Polygon PoS will bring high scalability with low fees. So, it will work better for dApps that must support high transaction volumes with low transaction fees, like Web3 gaming.

Polygon zkEVM brings the highest level of security but with limited throughput and slightly higher fees. So, it's best suited for DeFi dApps that process high-value transactions where security is the top priority. By knowing the differences, developers can make more informed decisions about the best long-term scaling solution for their projects.

Polygon Chain Development Kit (CDK)

Polygon CDK is a bundle of software components developers can use to launch ZK-powered Layer-2 appchains. "Appchains" describe chains deployed to fit a specific use case, and the CDK simplifies the process of building these ZK Layer 2s on Ethereum. So, developers can use the Polygon CDK to turn applications into appchains and alternative Layer 1s into Layer 2s with a trustless Ethereum bridge.

Soon, a LxLy bridge and interop layer will allow Polygon CDK-deployed chains to be interoperable within its ZK-powered ecosystem with atomic Layer 2-to-Layer 2 near-instant transactions. This unification is essential for Ethereum scalability because an infinitely scalable internet allows more demand to be met with more supply. Polygon CDK empowers this scaling for Ethereum because developers can launch a new blockchain for any application-specific purpose.

One of the challenges with appchain solutions is they tend to produce walled gardens with isolated liquidity. Or if they bring interoperability, they do so with significant latency and security concerns. These limitations are due to the technology and architecture behind them. Polygon CDK appchains, however, benefit from the liquidity existing across all networks while maintaining the highest levels of security and scalability with ZK-tech.

Polygon CDK is modular and open source, and its core value props are ZK security with complete sovereignty. Furthermore, its chains are customizable for cost and performance. Thus, developers can retain design control over their appchains. They can use any part of the CDK stack while discarding whatever they don't want.

The chain development kit is ready for developers to start building with. Presently, the two available configurations are rollup mode and validium mode.

1. Rollup Mode With the rollup mode, devs can count on quick and secure settlement. Transaction data gets posted to Ethereum, which means greater security. However, users can expect slightly higher fees than with a validium. Rollup mode is the choice for appchains that need the most robust security guarantees, like blue-chip DeFi protocols.

2. Validium Mode With validium mode, users can expect quick and inexpensive settlement. Transaction data gets stored off-chain, thus saving on the costs to post calldata to Ethereum. This mode is the choice for appchains looking for high-throughput activity.

Within the Polygon 2.0 long-term plan, the following features are expected sometime in 2024:

1. Interoperability Layer A LxLy bridge and a novel interop layer will unify all Polygon CDK chains. The interop layer resides atop the unified LxLy bridge to unify liquidity among all Polygon CDK chains, thus making it possible for near-instant, atomic Layer 2-to-Layer 2 transactions. The first step is a unified LxLy bridge for all Polygon CDK chains that want to opt in.

2. Staking Hub The staking hub is where network participants can help secure its protocols via staking Polygon's native token.

3. Shared Sequencing The tech stack for supporting third-party decentralized sequencing solutions is still in progress. Thus, its feature set and the possible project configurations will continue to grow with each release.

There are already many projects that are already being built or committed to building with Polygon CDK. These include Immutable, OKX, and Aavegotchi, to name a few.

Polygon Miden

Polygon Miden is a ZK rollup but has different design priorities than Polygon's other ZK solutions. Unlike Polygon zkEVM, which is EVM-equivalent, Polygon Miden strives to be a ZK-centric design. It emphasizes ZK-friendliness over EVM compatibility. This allows developers to extend the feature set of the EVM and create dApps that are difficult or impractical to build on Ethereum presently.

Polygon Miden's design offers two main benefits: enhanced privacy and high throughput. It is the zkRollup of choice for those building private applications with high throughput.

Polygon's documentation regarding Miden is still a work in progress, but they expect to launch a public testnet in the first quarter of 2024. The goal is to extend Ethereum, not just scale it. Polygon Miden is the place to innovate!

Polygon 2.0 Summary

The Polygon 2.0 ecosystem has something for everyone looking to scale with ZK-tech. Developers who like the original Matic sidechain will appreciate the new upgrades to Polygon PoS. Those looking for EVM compatibility can use Polygon zkEVM. While others looking to build their own customizable appchains will want Polygon CDK. Lastly, when Polygon Miden launches, developers can look forward to extending the EVM and creating innovative dApps not currently possible on Ethereum.

If you hold the MATIC token, you can enhance your portfolio by staking to earn rewards. Leverage Luganodes' institutional-grade infrastructure to stake your holdings and create a passive income. Staking with us ensures ease of use, support, and safety while you earn, and also contribute to the security of the Polygon chain.

Learn how to stake MATIC tokens using this guide. You can learn more about staking on our website, and feel free to contact us for any queries!

About Luganodes

Luganodes is a world-class, Swiss-operated, non-custodial blockchain infrastructure provider that has rapidly gained recognition in the industry for offering institutional-grade services. It was born out of the Lugano Plan B Program, an initiative driven by Tether and the City of Lugano. Luganodes maintains an exceptional 99.9% uptime with round-the-clock monitoring by SRE experts. With support for 40+ PoS networks, it ranks among the top validators on Polygon, Polkadot, Sui, and Tron. Luganodes prioritizes security and compliance, holding the distinction of being one of the first staking providers to adhere to all SOC 2 Type II, GDPR, and ISO 27001 standards as well as offering Chainproof insurance to institutional clients.