Polygon, formerly known as Matic Network, is a layer-2 platform built to improve scalability and throughput on the Ethereum network. A layer-2 solution is essentially an off-chain solution that works by easing the computational workload of the main blockchain. It therefore seeks to address the biggest pain points facing the latter today, namely network congestion and high gas fees on the Ethereum network.
The protocol was initially named the Matic Network, but later rebranded to Polygon in February 2021 as the project’s objective grew from simply providing a layer-2 scaling solution to supporting a multi-chain system. So in addition to the Polygon protocol - a Proof-of-Stake, Ethereum-compatible sidechain - there is now also the Polygon framework.
The purpose of the Polygon framework is to create a platform that both supports the mass adoption of dApps and attracts more developers - it currently hosts over 350 dApps! This in turn will allow for a network of Ethereum-compatible blockchains that can freely exchange data while maintaining their own sovereignty.
The Polygon framework currently supports two types of chains: secured chains (aka L2s) and stand-alone chains. We’ll get into the distinction in a bit. The network aims to include other layer-2 scaling solutions in the future, as well as support cross-chain interoperability between other blockchains.
Let’s take a quick look at how Polygon is structured. Polygon consists of four composable, abstract layers: the Ethereum Layer, Security Layer, Polygon Networks Layer, and Execution Layer.
This layer is made up of smart contracts deployed on Ethereum. They are responsible for functions like staking, communication, and checkpointing.
The security layer manages a set of validators that provide additional security for a fee. It can operate parallel to the Ethereum blockchain (as a meta-blockchain), or directly on Ethereum with Ethereum miners taking over as validators.
Both the Ethereum Layer and Security Layer are optional since Polygon network security can be handled on the Polygon side, and the Ethereum layer can be skipped over entirely if the workload or scope does not require it.
Polygon Networks Layer
This is the ecosystem of sovereign blockchain networks, each managing its own community and responsible for block production and local consensus.
Last but not least, the execution layer is responsible for interpreting and executing transactions. It achieves this through its two sublayers, the execution environment (Ethereum Virtual Machine) and the execution logic (smart contracts).
How Polygon Works
Remember, there are two components of the Polygon ecosystem: the Polygon Framework (wider ecosystem of blockchains) and the Polygon Protocol (a PoS sidechain).
Let’s first look more closely at the two major types of Ethereum-compatible chains on offer: secured chains and stand-alone chains.
Secured chains refer to networks that leverage the security model of the infrastructure they belong to. This is either provided by the Ethereum protocol, or by a pool of professional validators. This chain type offers a high level of security, at the expense of some degree of flexibility. An example of this - Matic Plasma - is already live on Polygon.
Matic Plasma uses a technology known specifically as More Viable Plasma (MoreVP). Introduced by Vitalik Buterin and Joseph Poon, this scaling solution packages transactions to be verified off-chain before being returned to the main chain. Keep an eye out for future additions like zk Rollups, Optimistic Rollups, and Validium Chains!
Stand-alone chains, on the other hand, are independent and responsible for their own security mechanism. As a result, they offer higher levels of autonomy and flexibility. Currently, all stand-alone chains on Polygon are Matic PoS chains, with sidechains and enterprise chains to be introduced soon.
The Polygon Protocol - the structure inherited from the original Matic Network - is a PoS Commit Chain, secured by its own validator pool. There is a distinction made among the Ethereum community between scaling solutions and sidechains - the first being secured by the Ethereum network and the second employing its own consensus algorithm. The Polygon Commit Chain falls somewhere in the middle, as it uses its own PoS system while depending on the security of the Ethereum network nonetheless.
Polygon’s native token MATIC has several uses, including paying for transaction fees and participating in protocol governance. It also importantly allows holders to stake their tokens and help secure the network, as well as receive staking rewards. MATIC supply is capped at 10 billion tokens, with around 6 billion currently in circulation at the time of writing.
MATIC can be stored and staked using the Matic Web Wallet, designed by Polygon to provide secure and instant transacting and asset management. The Matic wallet allows users to connect with dApps, and supports Metamask, WalletConnect and Walletlink. It also allows users to carry other ERC-20 tokens.
DeFi On Polygon
Polygon is incredibly unique in that it simultaneously supports the Ethereum Virtual Machine (EVM) while also allowing chains to maintain their autonomy around their security mechanisms. As a result, projects do not have to sacrifice functionality to gain interoperability and inclusion on the Polygon network.
As it seeks to create a landscape of interoperable blockchains, Polygon has been hailed as the ‘internet of blockchains.’ And it aims to deliver on this promise with the additional promise of low fees and improved scalability and security.
Unsurprisingly, this has attracted a growing user base and wide range of partnerships. These include gaming platforms such as Aavegotchi, and Decentral Games, recently joined by C.R.E.A.M Finance, Alchemy, and BadgerDAO. Recent blockchain data has also shown that Polygon is attracting institutional investors and whales, possibly as a result of increased liquidity.
Meanwhile, Polygon is not the oldest nor is it the most established player in sidechains and scaling solutions. And yet, it is singularly poised to lead the field thanks to its ability to benefit from Ethereum’s dominance while providing crucial solutions to its weak points.
Aave’s April launch on Polygon was a milestone for Polygon and for DeFi, as it revealed the considerable migration starting to happen from Ethereum to L2s. SushiSwap, ParaSwap and 1inch are other notable examples of DeFi platforms that benefited greatly from multichain infrastructures.
This general trend is emerging across the DeFi sector of the industry, with an awareness that multichain architecture is at the forefront of DeFi. Another example is BSC DEX ApeSwap’s recent move to Polygon, along with 10 of its close partners.
Polygon’s multifaceted approach to the Ethereum scalability problem, as well as its rapidly growing user base and ambitious roadmap, makes it one of the most promising projects in the DeFi space right now.
While some have remarked that Eth 2.0’s launch could stifle Polygon’s current popularity, others believe that layer-2 solutions will continue to play an important part. Not to mention that migration to Polygon has helped lower Ethereum gas fees in the recent months. If DeFi is to reach its goal of mainstream accessibility and inclusivity, the coexistence (and interoperability) of leading blockchains is key.