Polygon (formerly known as Matic Network) is a Layer 2 scaling solution for Ethereum that aims to provide faster and cheaper transactions. Polygon is designed to help Ethereum scale by providing a framework for building and connecting Ethereum-compatible blockchain networks. Polygon’s architecture is modular, allowing developers to choose the components that best suit their needs, and it supports a variety of consensus algorithms.
In a nutshell, Polygon bills itself as a layer-2 network, meaning it acts as an add-on layer to Ethereum that does not seek to change the original blockchain layer. Like its geometric namesake, Polygon has many sides, shapes, uses and promises a simpler framework for building interconnected networks.
How does Polygon work?
Polygon is a multi-tiered platform designed to grow Ethereum through a multitude of sidechains, each of which tries to unclog the main platform in an efficient and cost-effective way. Sidechains are distinct blockchains that are connected to the main Ethereum blockchain and are capable of supporting several Decentralized Finance (DeFi) protocols present in Ethereum. Thus, Polygon is comparable to other networks such as Polkadot, Cosmos, and Avalanche.
At the heart of the network is the Polygon software development kit (SDK), which is used to create Ethereum-compatible sidechains and link them to the network’s main blockchain.
Sidechains may be constructed using one of the following scalable building techniques:
- Plasma Chains — Groups transactions into blocks, submitting them all at once to the Ethereum blockchain.
- Rollups — Enables the consolidation of several transactions into a single transaction.
- Optimistic Rollups — Comparable to Plasma Chains, but capable of scaling Ethereum smart contracts as well
Polygon Consensus Algorithm
Polygon’s main chain is a Proof of Stake (PoS) sidechain in which network participants can stake MATIC tokens to validate transactions and vote on network upgrades. The PoS algorithm is more energy-efficient and less computationally intensive than the Proof of Work (PoW) algorithm used by Bitcoin and other cryptocurrencies. In the PoS algorithm, validators (known as “stakers”) stake their tokens to participate in the network’s consensus mechanism. The probability of a staker being chosen to validate a block is proportional to the number of tokens they have staked. Staking has the following two roles:
Validators do the heavy lifting — they verify new transactions and add them to the blockchain. In exchange, they may receive a cut of fees and newly created MATIC. Becoming a validator is a commitment that requires running a full-time node (or computer) and staking your own MATIC.
Delegators stake their MATIC indirectly via a trusted validator. This is a much lower-commitment version of staking. But it still requires research — if the validator you pick acts maliciously or makes errors you could lose some or all of your staked MATIC.
Use Cases of MATIC
After launching as Matic Network in October 2017, developers rebranded it as Polygon early in 2021. Polygon retained its MATIC cryptocurrency – the digital coin underpinning the network. MATIC is used as the unit of payment and settlement between participants who interact within the network.
Polygon has its own native cryptocurrency called MATIC, which is used to pay transaction fees and provide staking rewards to validators. MATIC is also used as a governance token, allowing holders to vote on proposals for changes to the network.
One of the primary use cases for Polygon is to provide faster and cheaper transactions for decentralized applications (dApps) built on the Ethereum network. By using Polygon’s Layer 2 scaling solution, dApps can offload some of their transaction processing to Polygon, reducing the load on the Ethereum network and allowing for faster and cheaper transactions.
In addition to its use as a scaling solution for Ethereum, Polygon is also designed to be a multi-chain ecosystem. Polygon enables the creation of interconnected blockchain networks, allowing for cross-chain transactions and interoperability between different blockchain networks.
“One of the primary use cases for Polygon is to provide faster and cheaper transactions for decentralized applications (dApps) built on the Ethereum network.”
Polygon’s MATIC token is an ERC-20 standard utility token based on Ethereum. The token allows for low fees and instant transactions, just like the rest of the Polygon ecosystem. The maximum supply of MATIC is 10 billion coins, with new coins released into circulation on a monthly basis. With a maximum supply capped at 10 billion, this is making MATIC deflationary.
Benefits of Polygon
The benefits of Polygon include:
- Scalability: Polygon provides a Layer 2 scaling solution for Ethereum, allowing for faster and cheaper transactions.
- Interoperability: Polygon is designed to be a multi-chain ecosystem, enabling cross-chain transactions and interoperability between different blockchain networks.
- Customizability: Polygon’s modular architecture allows developers to choose the components that best suit their needs, enabling customizability and flexibility.
- Energy Efficiency: The PoS consensus algorithm used by Polygon is more energy-efficient and less computationally intensive than the PoW algorithm used by Bitcoin and other cryptocurrencies.
- Security: The PoS consensus algorithm used by Polygon is secure and resilient against attacks, and the network is constantly monitored and audited by security experts.
MATIC is a utility token that has multiple use cases. Users that are using the Polygon Network use MATIC to pay fees on the network, for validating transactions and for voting on changes. Since the core utilities of the token are permissible in and of themselves, the token can be purchased. However, users are responsible to ensure that they use the token in Sharia compliant operations and projects.