WHAT IS POLYGON MATIC? REVIEW POLYGON. SHOULD I INVEST IN POLYGON MATIC

Tags: layer 2, polygon

Discover what Polygon MATIC is, how it works, and whether it’s a good investment. Read our comprehensive review to understand Polygon’s potential and future.

Polygon Matic is a Layer 2 solution using the Proof of Stake (POS) consensus mechanism developed to solve the problems of speed, transaction fees and scalability of Ethereum. Currently, Polygon is planning to develop the promising Polygon 2.0 when switching from POS mechanism to zkEVM Validium. Let’s learn about Polygon through the article below!

1. WHAT IS POLYGON MATIC?

Polygon Matic is a Layer 2 solution that uses the Proof of Stake (PoS) consensus mechanism, developed to address the scalability, transaction speed, and cost issues of Ethereum. Polygon was founded in 2017 in India by three co-founders with extensive experience in the tech industry: Jaynti Kanani, Sandeep Nailwal, and Anurag Arjun.

The project was originally called Matic Network and was the fourth project to launch its token on the Binance Launchpad in April 2019.

Currently, Polygon operates as a sidechain to Ethereum, compatible with the Ethereum Virtual Machine (EVM), and is referred to as Polygon PoS. However, Polygon plans to upgrade to Polygon 2.0, transitioning from PoS to zkEVM Validium, and is focusing on expanding its ecosystem with products such as Polygon zkEVM, Polygon Miden, Polygon CDK, and more.

2. HOW DOES POLYGON MATIC WORK?

Initially, Polygon used the Plasma chain, processing transactions on separate sidechains and then aggregating them back to the main Ethereum network. This approach helped improve performance and reduce transaction fees for users.

Polygon currently leverages ZK-rollups to aggregate multiple off-chain transactions into a single on-chain transaction. This mechanism enhances transaction privacy by increasing anonymity while ensuring user privacy.

In addition, Polygon employs the Heimdall architecture to select block producers (validators who create new blocks) in order to improve scalability and security. The block producers are randomly selected from among the validators in Polygon PoS, helping to strengthen both the security and scalability of the network.

3. POLYGON 2.0 UPGRADE PLAN

To unify its ecosystem, Polygon 2.0 has been proposed as an upgrade to the Polygon network, including changes to its mechanism, tokenomics, and governance structure. The upgrade will be implemented in phases as follows:

• Upgrade Polygon PoS to zkEVM Validium: Polygon Labs has proposed upgrading the Polygon PoS to zkEVM Validium L2, secured by Zero Knowledge Proofs. This change will improve security and enhance interoperability with EVM chains on the Polygon network. The zkEVM Validium implementation and testing will take place from November 2023 to January 2024.

Upgrade Plan from Polygon POS to Polygon zkEVM Validium – Source: Polygon

• Polygon 2.0 Protocol Structure: Once the zkEVM Validium L2 chain is complete, Polygon 2.0 will consist of four protocol layers: Staking Layer, Interop Layer, Execution Layer, and Proving Layer.
• Token Name and Tokenomics Change: The project proposes changing the token from MATIC to POL to operate the Staking Layer. Additionally, the tokenomics will be restructured for the Polygon 2.0 upgrade.
• Polygon 2.0 Governance Structure: Polygon 2.0 will grant the Polygon community full control over the ecosystem through governance mechanisms, including protocol governance, smart contract governance, and community treasury management.

New Layer Responsibilities:

• Staking Layer: The POS layer will use decentralized validators who can “Re-stake” POL and support various networks. This is similar to EigenLayer’s model on Ethereum.
• Interop Layer: This layer enables cross-chain messaging, allowing users to experience the benefits of interacting with multiple chains, such as transferring native Ethereum assets across chains.
• Execution Layer: This layer allows chains in the Polygon 2.0 ecosystem to process transaction batches sequentially.
• Proving Layer: This layer uses ZK proof protocols to generate transaction proofs, both for on-chain and cross-chain transactions, across all Polygon 2.0 chains.

Polygon 2.0 Structure – Source: Polygon

4. POLYGON ECOSYSTEM

4.1. Polygon zkEVM

Polygon zkEVM is a Layer 2 solution that uses Zero Knowledge Rollups, specifically the zkEVM (Zero Knowledge Ethereum Virtual Machine) type 2. According to Vitalik Buterin’s classification, Polygon zkEVM type 2 will be fully compatible with EVM but with minor modifications before it can execute transaction commands. Currently, Polygon zkEVM is at type 3 (EVM-compatible) and still requires some time for the network to upgrade to type 2 as planned.

4.2. Polygon Miden

Polygon Miden is a Layer 2 scaling solution based on zk-STARKs, designed to scale Ethereum and support EVM-compatible languages, allowing developers to easily build smart contracts and DApps. Polygon will also launch the Miden Virtual Machine (Miden VM), the first virtual machine based on STARK technology, which will automatically provide proof of transaction execution.

4.3. Polygon ID

Polygon ID is an identity infrastructure solution that helps developers verify identities, ensure regulatory compliance, control access, and tokenize various features. It can be used for KYC processes on CEX platforms, DeFi, and fiat on-ramp/off-ramp transactions.

4.4. Polygon CDK

Polygon CDK (Chain Development Kit) is a toolkit introduced by Polygon Labs that enables developers to build Layer-2 solutions on Ethereum with Zero Knowledge Proof mechanisms. It is an enhanced version of Supernet (a previous toolkit for building chains) and supports connections to the Shared ZK bridge for improved cross-chain compatibility.

4.5. Active Projects on Polygon

Polygon’s ecosystem is highly diverse, with many projects spanning different sectors:

• DeFi: QuickSwap, AuraSwap, Celer Network
• B2B: FIDA, Creol, Krowd Innovation
• Tools: LayerZero, L2 Beat, Envio
• NFT: Async Art, Autograph, NFT Yard
• Gaming: Soccer Arena, MetaName, Black Eye Galaxy

5. MATIC TOKEN

5.1. Key Metrics MATIC

Token Name: MATIC

Blockchain: Polygon, Ethereum, BNB Chain, Solana

Token Standard: ERC-20, BEP20, SPL

Contract Addresses:

• Polygon: 0x0000000000000000000000000000000000001010
• Ethereum: 0x7D1AfA7B718fb893dB30A3aBc0Cfc608AaCfeBB0
• BNB Chain: 0xcc42724c6683b7e57334c4e856f4c9965ed682bd
• Solana: C7NNPWuZCNjZBfW5p6JvGsR8pUdsRpEdP1ZAhnoDwj7h

Token Use Cases: Utility, Governance

Total Supply: 10,000,000,000 MATIC

Circulating Supply: 9,282,943,566 MATIC

5.2. MATIC Token Allocation

MATIC Token Allocation  – Source: Matic Network

With a total supply of 10 billion MATIC, the number of tokens will be allocated as follows:

• Launchpad (via Launchpad distribution): 19% — 1,900,000,000 MATIC
• Seed Round (Token sale in seed round): 2.09% — 209,000,000 MATIC
• Early Supporters (Initial supporters): 1.71% — 171,000,000 MATIC
• Team (Polygon team): 16% — 1,600,000,000 MATIC
• Advisors (Advisory board): 4% — 400,000,000 MATIC
• Foundation (Polygon Foundation): 21.86% — 2,186,000,000 MATIC
• Ecosystem (Polygon ecosystem): 23.34% — 2,334,000,000 MATIC
• Staking Rewards (Staking rewards): 12% — 1,200,000,000 MATIC

5.3. Token Release Schedule

MATIC Token Release Schedule  – Source: Matic Network

The total supply of 10 billion MATIC tokens was supposed to be fully distributed to the community by October 2022. As of March 2023, theoretically, all MATIC tokens should have been unlocked. However, there are still 920 million MATIC tokens that have not been unlocked yet.

5.4. Token Use Case

Currently, the MATIC token serves as the native token of the Polygon PoS network and has the following functions:

• Payment: MATIC can be used to pay for transactions and fees on the Polygon network.
• Staking: MATIC holders can stake their tokens to help secure the network and earn rewards.
• Governance: MATIC holders can participate in the governance of the Polygon network, voting on proposals and decisions related to the protocol.
• Liquidity Provision: MATIC can be used to provide liquidity on decentralized exchanges (DEX) like Quickswap and Sushiswap, allowing users to swap between different cryptocurrencies.
• Collateral & Lending: As a high-market-cap token, MATIC is accepted as collateral on lending platforms, enabling users to borrow other cryptocurrencies.
• Ecosystem Incentives: A portion of MATIC tokens has been allocated to incentivize developers and users to participate in the Polygon ecosystem, including building and using decentralized applications (dApps) on the network.

For other networks like Polygon zkEVM and Polygon Miden, the team has yet to announce whether they will use ETH as gas (like Optimism or Arbitrum) or continue using MATIC for gas fees. Therefore, this token use case focuses specifically on Polygon PoS.

6. WHY BUY POLYGON MATIC?

There are several reasons why someone might want to buy MATIC:

• Protocol Governance: MATIC is used to participate in the governance of the Polygon network, allowing holders to have a say in key decisions about the project’s development, ensuring a more democratic and inclusive approach to project management.
• Staking MATIC: By staking MATIC, holders can earn potential rewards by actively participating in transaction validation and securing the network.
• Transaction and Gas Fees: MATIC is used to pay transaction and gas fees on the Polygon network, compensating validators for their work in processing and verifying transactions.

7. ROADMAP

Here are some of Polygon’s notable milestones.

• 2017: Matic Network was founded in Mumbai.
• April 2019: Matic Network launched on Binance through an Initial Exchange Offering (IEO) at a price of $0.00263/MATIC.
• June 2020: Mainnet launched with POS Chain and Plasma Chain.
• February 2021: Matic Network rebranded to Polygon to expand its infrastructure and scaling solutions.
• June 2021: Polygon PoS reached an all-time high (ATH) of $9.8 billion in DeFi Total Value Locked (TVL).
• July 2021: Polygon launched Polygon Studios to tap into the growing trends of NFTs and gaming.
• August 2021: Polygon acquired Hermez for $250 million and rebranded it as Polygon zkEVM.
• December 2021: Polygon acquired Mir for $400 million.
• February 2022: Polygon raised $450 million in a new venture capital round.
• March 2022: Polygon launched Polygon ID, a new product for identity verification.
• April 2022: Polygon committed to a roadmap for carbon reduction.
• April 2022: Polygon shifted focus to zk technology, launching four key products: Polygon Hermez, Nightfall, Miden, and Zero.
• May 2022: Polygon launched Polygon Nightfall for enterprises in Mainnet Beta.
• January 2023: Polygon Labs was established as the company responsible for developing the Polygon project.
• January 2023: The Polygon Foundation was founded by Polygon’s co-founders to drive the project’s growth.
• March 2023: Polygon launched the Polygon Miden Virtual Machine as part of the ongoing restructuring.
• March 2023: Avail officially spun off from Polygon, with co-founder Anurag Arjun leading the development of the new project.
• March 2023: Polygon zkEVM Mainnet Beta was officially launched.

8. DEVELOPMENT TEAM

Current Team of Polygon Labs –  Source: Polygon

•  The Polygon Labs team consists of 10 key members, most of whom are founders of projects acquired by Polygon. Here are their roles and backgrounds:
• Jaynti Kanani (Co-Founder, Polygon Labs): Blockchain engineer and Web3 developer – Previously a data scientist at Housing.com – Developer for Web3, Plasma, and WalletConnect
• Sandeep Nailwal (Co-Founder, Polygon Labs): Programmer, former CEO of Scopeweaver and CTO of Welspun Group
• Mihailo Bjelic (Co-Founder, Polygon Labs): Former Ethereum developer
• Anurag Arjun (Co-Founder, Polygon Labs): Left Polygon in March 2023 after Avail spun off as a separate project.
• David Schwartz (Co-Founder, Polygon ID & Polygon Hermez): Focused on identity verification solutions and zk technologies.
• Jordi Baylina (Co-Founder, Polygon ID & Polygon Hermez): Contributed to Polygon’s zk technology and identity solutions.
• Antoni Martin (Co-Founder, Polygon ID & Polygon Hermez): Worked on Polygon’s identity and zk solutions.
• Brendan Farmer (Co-Founder, Polygon Zero): Co-founder of Polygon Zero, focusing on zk technology.
• Daniel Lubarov (Co-Founder, Polygon Zero): Co-founder of Polygon Zero, working on scaling and privacy solutions.
• Bobbin Threadbare (Co-Founder, Polygon Miden): Co-founder of Polygon Miden, focusing on zk-STARKs and privacy-oriented solutions.

9. INVESTORS

Investors of Polygon –  Source: Polygon

As of now, Polygon has raised over $456 million. While this is a significant amount in the crypto market, it is still relatively small compared to the scale Polygon has achieved. Polygon is one of the few companies able to secure funding from well-known traditional investment firms like Sequoia and SoftBank, as well as crypto-focused funds like Animoca Brands and Dragonfly.

In February 2022, Polygon’s valuation reached $20 billion, surpassing its all-time high Fully Diluted Valuation (FDV) of $19.5 billion in December 2021. This highlights the high expectations investors have for Polygon, and the investment interest extends beyond just the MATIC token.

10. MATIC PRICE PREDICTION

Many analysts believe MATIC could continue to face volatility in the short term due to broader market trends and ongoing developments in the cryptocurrency sector. However, some experts are optimistic about a potential rebound, particularly if bullish sentiment returns to the market. As Ethereum undergoes updates and improvements, Polygon is expected to benefit significantly. The enhanced scalability and reduced fees on Ethereum could drive more projects to integrate with Polygon, potentially increasing the demand for MATIC tokens.

Most industry experts agree that Polygon has strong long-term potential, making it a promising project for investors. However, as with any investment, it’s important to stay informed about market changes and developments. Be sure to follow Polygon media channels for the latest updates and news to keep track of Polygon’s progress and market trends.

11. FAQS

11.1. Where can investors trade MATIC tokens?

Currently, investors can trade MATIC tokens at:

• CEX exchanges: Binance, Coinbase, OKX, HTX,…
• DEX exchanges: Uniswap, PancakeSwap, QuickSwap,…

11.2. In which wallets can investors store MATIC tokens?

MATIC is a token with ERC-20, BEP20, SPL standards, so investors can store it on wallets such as MetaMask, Phantom Wallet, Trust Wallet, Coin98 Wallet, Backpack,… For convenience in trading, investors can also store SOL on the wallets of exchanges that list this token.

11.3. Is Polygon (MATIC) a Good Investment?

Polygon (MATIC) has the potential to be a strong investment, particularly for those interested in the long-term growth of blockchain scalability and Ethereum’s ecosystem. The platform’s technology solves key challenges such as high transaction fees and slow speeds, which makes it attractive to decentralized finance (DeFi) and NFT projects. However, as with any cryptocurrency, it’s important to factor in market volatility, potential regulatory changes, and your personal risk tolerance before deciding to invest.

In conclusion, Polygon (MATIC) presents a promising investment opportunity, particularly for those who believe in the future growth of Ethereum’s ecosystem and blockchain scalability. With its ongoing upgrades, such as the transition to Polygon 2.0 and the integration of advanced technologies like zkEVM and zk-STARKs, Polygon is well-positioned to address the scalability, transaction speed, and cost challenges that have long plagued blockchain networks. While the MATIC token offers utility through governance, staking, and transaction fees, potential investors should remain cautious of the volatility in the cryptocurrency market and carefully assess the associated risks.

The information provided in this article is for informational purposes only and should not be considered financial or investment advice. Always conduct your research and consult with professionals before making investment decisions.