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An Overview: The Polygon Ecosystem
The Magic of MATIC and Navigating Fast, Affordable Crypto Transactions
Published on11 Oct, 2022
It was about time we did a piece on Polygon! No, not a plane figure with at least three straight sides and angles! We’re talking about the sidechain that introduced a revolutionary mechanism to alleviate the problems that plagued the Ethereum network. Today, in a market that boasts of transactions in over 10,000 cryptocurrencies, Polygon has thwarted its competition and has gained a spot in the top 15 list of cryptocurrencies by market capitalisation in a very short duration.
Learn what it means: Sidechain
A semi-independent blockchain that functions alongside an associated ‘main chain’-usually to improve its speed or capabilities.
In 2017, three visionaries from India, and Ethereum veterans — Jayanti Kanani, Sandeep Nailwal, and Anurag Arjun put forth their combined efforts and expertise to come up with a solution for Ethereum’s scalability concerns. The result was Matic, a layer-2 protocol (side chain) and a framework for building and connecting Ethereum-compatible blockchain networks. This was an attractive domain for Ethereum developers to run their DApps, since the transaction processing speeds were much faster (7000 transactions per second compared to Ethereum’s 15 transactions per second) and transaction costs drastically lower ($0.01-$0.30), which allowed for a better user experience and more engagement. Matic has since been rebranded as Polygon in 2021, with the addition of Mihailo Bjelic as another co-founder. This rebranding expanded the scope of the project beyond a digital asset and a scalability solution. Polygon provides infrastructure for developers to launch their own sovereign/enterprise blockchain and decentralized applications.
Ethereum’s versatility and multifaceted feature set are not news to anyone. It is home to a plethora of economic activity — hosting everything from Defi ecosystems, NFT markets, and Gamefi, all in the glory of its compatibility with smart contracts. But as more and more applications are housed by the network, the number of users interacting with the network also rises, raising the transaction fees and time commensurately. Consequently, these operational inefficiencies have rendered the network highly unusable. Polygon aims to help Ethereum expand in size, security, efficiency, and usefulness and seeks to spur developers to bring enticing products to market all the quicker. Polygon has retained the MATIC token, the digital coin used as a tender in the ecosystem after its rebranding. Polygon, at its heart, buttresses the Ethereum infrastructure and prepares it for mass adoption.
The way that Polygon’s flagship product, the Polygon (Matic) PoS chain, works is simple. Instead of staking their MATIC tokens on the Polygon PoS, the Polygon validators stake them on the Ethereum main net with the help of smart contracts, hence leveraging the security offered by Ethereum. Just like any other PoS chain, validators of Polygon also have to run full nodes and can provide staking services to delegators to increase their stake and, hence, their chance of earning rewards. Apart from staking, users can also engage in transactions through the PoS network via Ethereum-based assets. Essentially, instead of validating each transaction directly on the Ethereum network, these transactions are bundled and committed on the Ethereum mainnet, hence easing the congestion on the Ethereum network.
Interoperability takes a high place in Polygon’s manifesto. The team envisions a future where users can seamlessly move through decentralized products and services across the web3 space without being at the mercy of third-party intermediaries to facilitate their activities. They look to achieve this through their assorted suite of enterprise-grade scalability solutions, comprising of Polygon PoS chains, layer-2 solutions such as ZK-rollups and optimistic rollups, sidechains (plasma chains), standalone and enterprise chains, data availability solutions, and more. This will lead to the creation of a hub for different blockchains to participate in with minimal barriers to entry. With these features under its belt, Polygon rightfully dubs itself to be “Ethereum’s internet of blockchains." This makes it akin to other multi-chain systems like Polkadot, Cosmos, Avalanche, etc., alongside Ethereum’s ecosystem. To cement their commitment to creating a borderless and open web3 space, Polygon also recently entered into a partnership with Wanchain, a decentralized blockchain interoperability solution that connects the world’s isolated blockchain networks. You can read more about this partnership here.
Polygon raised around ~$5.5M across three initial coin offerings (ICOs) in 2019 and raised an additional ~$450M from notable crypto venture capitalists — Sequoia Capital India, Andreeson Horowitz, Tiger Global, Variant, Galaxy Digital, Spartan among others, in a token sale earlier this year. This makes Polygon one of the most funded crypto projects post ICO, which suggests that the project has long-term potential.
Polygon’s native token, MATIC, serves the purpose of paying the gas fees on all transactions on the network and as a stake on validator nodes to earn rewards. MATIC tokens are released every month. As of October 2022, MATIC has a circulating supply of 8,73,43,17,475 MATIC tokens and a maximum supply is capped at 10,000,000,00. At its initial private sale in 2017, 3.8 percent of MATIC’s max supply was issued. In the company’s April 2019 launchpad sale, an additional 19 percent of the total supply had been sold. With the price at $0.00263 per token, $5 million was generated. Polygon’s original release schedule is planned to release all tokens by December 2022. The remaining MATIC tokens are distributed among the advisors, team members, network operations, foundations, and the ecosystem, and quantitative analysis of the breakdown is illustrated in the figure below.
Polygon’s native MATIC token is expected to be fully minted and vested by April 2025. MATIC has appreciated considerably since its inception but has held on to its humble post just below the $3 mark. At the time of writing this article, MATIC trades at $0.83. MATIC hit an all-time high of $2.92 in December 2021 and has been as low as $0.003 in May 2019.
The rumors lingering on the streets of crypto town seem to suggest that the relevancy of Polygon hangs in balance post Merge. But from what the executives at Polygon and current trends have to show, Polygon is here to stay. The Ethereum transaction fee will remain unchanged since the Merge does not imply any additions to the network’s capacity. The Polygon network and another layer 2 scaling solutions will likely continue to spearhead the efforts in offering cost-effective services. These differences in transaction costs are best illustrated in the chart below. The differences in the average transaction fees are stark, with Polygon’s fee only being a fraction of the dollar, not even having surpassed the $0.4 mark in the last year.
Meanwhile, the transaction fees of Ethereum have averaged around $18 over the last year, peaking at a whopping $200. It is important to note that the data is skewed due to the comparatively lower price of MATIC when compared to Ether. Nonetheless, the speed and robustness of the Polygon PoS are good enough reasons for users to prefer it over Ethereum. Consequently, the number of daily transactions processed on Polygon has also seen a significant rise.
Polygon also hosts several NFT market platforms for notable brands like Instagram and Adidas. More recently, Polygon is also set to back the upcoming blockchain-based loyalty program of Starbucks. Disney has also struck a deal with Polygon for the launch of its accelerator program. The number of DApps on Polygon has shot up to a formidable 37,000, marking a 400% increase since the start of 2022. These activities ensure the relevancy of Polygon, and it will only grow as the market adapts to and accepts blockchain technology.
If you hold the MATIC token you can combine deflationary supply with staking to skyrocket your portfolio. 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 contribute to the security of the Polygon chain.
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 30+ 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.
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