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What is Polygon?

Mar 23, 2023
10m
Conor Walsh Martin Neumann

Previously known as MATIC Network, Polygon is a cryptocurrency and blockchain network that allows developers to build and connect decentralized applications on Ethereum without using the main Ethereum blockchain. 

Polygon uses a network of sidechains built on Ethereum’s Proof of Stake (PoS) consensus to enable faster transactions, better scalability, and lower transaction fees while benefiting from Ethereum’s security, interoperability, and overall popularity.  

Polygon has grown rapidly and is now one of the most popular blockchains in the world. And as decentralized finance and games become more mainstream (alongside many crypto-innovations), Polygon is set to keep growing. Let’s take a deeper look and answer some common questions, like: 

  • What are sidechains?
  • How does Polygon work?
  • Is Polygon decentralized? 
  • What are the pros and cons of using Polygon? 

Quick Facts About Polygon

  1. Polygon is a layer 2 scaling solution for Ethereum, designed to address the Ethereum network’s high fees and slow transaction speeds.
  2. It was founded in 2017 by Sandeep Nailwa, Jaynti Kanani, Anurag Arjun, and Mihailo Bjelic, launched as Matic Network in 2019, and rebranded as Polygon in February 2021.
  3. From January to August 2021, Polygon’s active unique wallet addresses grew from 7,000 to 500,000. 
  4. Polygon's native token is called MATIC, which is used for transaction fees, staking, and governance on the network.
  5. MATIC has a maximum supply of 10 billion tokens, with approximately 6 billion currently in circulation.
  6. Polygon uses an open-source Proof of Stake (PoS) consensus mechanism. Users stake their Polygon tokens and earn rewards in exchange for verifying transactions on the network.
  7. Over 1,400 decentralized apps (dApps) have been developed on Polygon. 
  8. Polygon has partnerships with Binance, Chainlink, Aave, and several other major blockchain and cryptocurrency companies.

What Are Sidechains?

In blockchain technology, the term “sidechain” refers to secondary, separate blockchains that connect to – and complement – a main blockchain in a network. The main blockchain is usually called the parent blockchain, mainchain, or mainnet

A sidechain is used to offload some of the processing responsibilities from the mainchain, helping it run faster, making it more scalable, and reducing transaction costs. For example, a decentralized app (dApp) built on Ethereum may be moved to a sidechain that still uses Ethereum’s protocols, but semi-independently so it doesn’t drain resources from the main Ethereum blockchain. 

The concept of sidechains was introduced in a paper written in 2014 by Adam Back and others. They theorized that sidechains connected to a main blockchain would help solve scalability issues as blockchains gained more mainstream usage worldwide. By further decentralizing those blockchains – and sharing processing power between numerous sidechains in the same network – the blockchains could continue to grow without slowing down.

Benefits of Sidechains

Sidechains present numerous benefits to blockchain developers and users, including:  

  • Faster, cheaper transactions: By spreading transactions and storing data across numerous sidechains within a blockchain network, there are fewer bottlenecks and everything moves through the network faster. Transactions are also cheaper, as they use less processing power.  
  • Increased scalability: Sidechains reduce a lot of the friction that often slows down blockchains by spreading transactions and projects throughout a wider network.
  • Improved security: Sidechains can add extra layers of security to a blockchain network, making it much harder for hackers to access sensitive information stored within. 
  • Enhanced privacy: By spreading records, transactions, and users throughout a network of interconnected sidechains, developers can further protect the anonymity of users. 
  • Streamlined interoperability: Sidechains make it easier to securely connect different blockchains, allowing them to interact with each other with fewer bugs and glitches.

Risks of Sidechains

However, many of the purported benefits of sidechains can become risks if they’re poorly implemented and managed. It’s essential to do your own research (DYOR) before investing in any cryptocurrency project that uses sidechains.

The biggest risks related to sidechains include: 

  • Quality control: If the sidechain includes poorly written code or outdated smart contracts, it could create unexpected behavior or losses on the mainchain (and any projects dependent on it).
  • Network vulnerability: Sidechains, especially if poorly developed or not managed correctly, can open gaps in the mainchain’s security. This would increase its vulnerability to hacks and other attacks.
  • Interoperability: Poorly developed sidechains aren’t always easily compatible with their mainchains or other blockchains, leading to bugs and other issues. 
  • Privacy: Because sidechains are often public, there’s a risk of private data and transactions being exposed even if the mainchain is private. 
  • Unpredictable exchange rates: A cryptocurrency’s exchange rate between sidechains and mainchains can be volatile, making it difficult to determine the value of an asset held between the two.
  • Energy consumption: Sidechains are energy-intensive, even by crypto standards. Processing them on top of mainchains increases the cost of operations for miners and cryptocurrency's potentially negative environmental impact. 
  • Lack of adoption: Generally speaking, because sidechains depend on network effects to be truly effective, more people need to adopt blockchains to fulfill their potential. 
  • Scalability: Smaller sidechains can only process limited transactions. As a result, they often struggle as a blockchain’s usage grows, creating a ripple effect that also slows down the mainchain. 

How Does Polygon Work with Ethereum?

Polygon consists of a network of sidechains built on Ethereum. Instead of trying to reinvent and compete with Ethereum, Polygon builds on its Proof of Stake (PoS) protocols to boost efficiency, scalability, and a host of other features. 

It does this by providing tools and protocols that allow Ethereum-based projects to scale much faster. For context, Polygon can facilitate thousands of transactions per second (TPS), while Ethereum’s mainchain can only process 10 TPS. For Ethereum to gain mainstream adoption, 10 TPS will never be enough.  

Polygon also makes it easier for projects built on Ethereum to interact with other blockchain networks, allowing for cross-chain communication and interoperability while further boosting its scalability and mainstream adoption. 

Polygon has three main methods for boosting Ethereum’s scalability and interoperability: 

  • Plasma Chains: Transactions are bundled into blocks and submitted on the Ethereum blockchain as a single entity. 
  • zk-Rollups: Multiple data transfers on the blockchain are bundled into a single transaction. 
  • Optimistic RollupsSimilar to Plasma Chains, but also capable of handling smart contracts. 

Is Polygon EVM Compatible/Equivalent?

Polygon is compatible and equivalent with Ethereum Virtual Machine (EVM). Developers building dApps and other projects on Polygon can use the same EVM-based infrastructure to process transactions, build smart contracts, and manage other data as if they were developing directly on Ethereum. 

As a result, Polygon provides an easy way to scale Ethereum by enabling developers to move their applications off the blockchain while still using its underlying functionalities. 

Is Polygon Layer-1 or Layer-2?

For those unfamiliar with the terms: 

  • Layer-1 refers to a solution built on top of an existing blockchain
  • Layer-2 refers to a solution that runs parallel to an existing blockchain.

There is some debate about whether Polygon is a Layer-1 or Layer-2 blockchain, but it’s technically both.

Polygon started as a Layer-2 solution built on the Ethereum blockchain. However, it has since evolved into a full-fledged Layer-1 platform with its own mainnet and native token (MATIC). This gives Polygon a lot more flexibility and scalability than most cryptocurrencies.

Polygon has been used to build over 1,700+ dApps and other decentralized projects. To get a taste of its diverse uses, here’s a short sample of 10 popular projects: 

  • OpenSea: The popular NFT trading platform has incorporated Polygon to solve numerous issues that arose from relying solely on Ethereum’s blockchain. 
  • UniswapA decentralized exchange protocol that facilitates the trade of Ethereum tokens.
  • JellySwapA dApp that lets users swap cryptocurrencies between multiple blockchains. 
  • Opacity: A blockchain-based file storage platform (similar to Google Cloud or Dropbox).
  • AavegotchiA decentralized game where users collect and earn rewards by bonding with Aavegotchis (ie. blockchain creatures living in the Aavegotchi world) while playing games or trading them in open marketplaces. 
  • ChainGuardiansAn interactive blockchain game that combines elements of puzzle-solving and RPG into one expansive universe. Players can collect NFTs, fight monsters, complete quests, and much more.
  • AragonA platform for creating, managing, and governing DOAs efficiently and securely. 
  • SX BetA decentralized sports betting platform. 
  • Easyfi: A decentralized lending platform that provides uncollateralized loans based on a DeFi credit rating system. 
  • ZED RUNA play-to-earn game where players breed racehorses that can be entered into virtual races to win prize money (in the form of tokens). 

Who Started Polygon? 

Polygon was started in 2017 by four Mumbai-based former Ethereum developers: Sandeep Nailwa, Jaynti Kanani, Anurag Arjun, and Mihailo Bjelic. 

The team originally launched the project under the name MATIC network (which is how Polygon’s native coin got its name). They performed an initial coin offering (ICO) in April 2019, raising the equivalent of $5.9 million in ETH by selling 1.9 billion MATIC tokens in just 20 days. 

The MATIC network went live in 2020. In February 2021, MATIC rebranded as Polygon. 

Is Polygon Decentralized?

Polygon claims to be decentralized and has taken various steps to make those claims a reality. However, it has faced plenty of criticism and concerns from users who are worried that it’s too centralized (compared to similar blockchains). 

In August 2021, Polygon announced it was creating a DAO to manage DeFi development on the blockchain. It hoped to attract up to 100 million members. In January 2022, it introduced the Polygon Governance Team to further boost decentralization and further separate its governance from the founding team. 

Polygon has also suspended or scrapped certain measures that would have made it vulnerable to influence or manipulation from large validators buying up tokens and leveraging them in decision-making. 

As Polygon grows and attracts partnerships with huge brands (like Disney and Instagram), the conflict between decentralization and centralization could intensify. However, good governance and a commitment to transparency will hopefully steer it in the right direction. 

What Is Polygon’s Coin? 

Polygon's native coin is called MATIC. It’s an Ethereum-based ERC-20 token designed for use as Polygon's sole currency, allowing users to pay transaction fees, access services, and much more.

The maximum supply of MATIC tokens is 10 billion. As of January 2023, over 8 billion have been issued. 

Where to Buy MATIC

You can buy MATIC on every major centralized crypto exchange, including: 

  • Binance
  • Coinbase
  • Crypto.com 
  • Kraken
  • KuCoin
  • Huobi Global 
  • OKEx
  • Gate.io
  • Bitfinex 
  • HotBit
  • CoinDCX
  • Bittrex International
  • Uphold
  • WazirX

It's also available on decentralized exchanges, such as:  

  • Uniswap
  • SushiSwap
  • 1Inch

Pros of Using Polygon for Crypto

  1. Low transaction fees: Polygon's scaling solutions allow for significantly lower Ethereum transaction costs (up to 100 times lower than Ethereum’s mainchain).
  2. Accessibility: By providing a full stack of infrastructure tools, SDKs, and APIs, Polygon makes it easy for developers and users to start building on the Ethereum blockchain.
  3. Security: Polygon is powered by a set of secure smart contracts that claim to ensure the safety of users’ funds and transactions throughout the network. 
  4. Scalability: Polygon’s innovations drastically improve the scalability of the Ethereum blockchain, making mainstream adoption easier, cheaper, and (hopefully) much faster. 

Cons of Using Polygon for Crypto

  1. Slower Transactions: Although Polygon is considerably faster than the Ethereum network, it's still much slower than major blockchains like Bitcoin Cash and Litecoin.  
  2. Unclear Regulations: Polygon is a major player in the DeFi space but some regulatory issues still need to be addressed before it is fully embraced by the crypto community (and broader society). 
  3. Security Concerns: As with any cryptocurrency, there are potential security risks associated with Polygon’s decentralized nature and vulnerability to outside attacks. The network also lacks independent security audits to confirm that it’s protecting users. 
  4. Reduced liquidity: Compared to other cryptocurrency exchanges, due to low trading volume, Polygon is considered less liquid. In other words: It's more difficult to access or withdraw your tokens.
  5. Increasing competition: Polkadot, Solana, and Ethereum 2.0 could all eventually offer the same functionalities as Polygon, but with overall superior experiences.

The Future of Polygon

Polygon shows huge potential in supporting crypto’s growth and mainstream adoption. However, it also faces plenty of obstacles. 

We’ll continue monitoring the latest developments to keep you updated. In the meantime, keep learning more about cutting-edge cryptocurrencies at Sonar Academy. 

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