What is Polygon MATIC | How does Polygon Works?
In this article, we’re going to explain What is Polygon MATIC | How does Polygon Works?, and Tokenomics of Matic crypto.
Ethereum made many advancements in cryptocurrency including smart contracts and greater interest paying decentralized apps. However it faces three big challenges. The first, is the Low Throughput issue. Which means Ethereum can only handle 30 transactions per second. This processing speed for People who are actually using Ethereum is considerably low. Since many alternatives can process much more transactions in the same time-frame. For example, the Cardano blockchain does around 257 transactions per second, While Polkadot can do upto a 1000 and Solana upto 65000 transactions per second.
The second big problem is that Ethereum network isn’t really user-friendly due to large transections demand and low processing speed. In short, this means it is expensive and 20 dollars just to send your friend 1 dollar. Lastly, Ethereum Blockchain gives developers few options and all Ethereum projects build on same network and have a similar throughput. This implies that they all share an Ethereum’s problems with no exceptions. But, what if there was another alternative blockchain that offers higher throughput, low transaction fees and better options.
Polygon’s paper has direct comparisons to other layer 1 blockchains such as Polkadot, cosmos and avalanche. In contrast to these projects polygon focuses on the Ethereum ecosystem with the Ethereum chain being the main hub that connects everything. Polygon offers features like strong community of users and developers a well-known programming language, solidity and the most popular virtual machine in the cryptocurrency space.
What is Polygon (MATIC) ?
So in 2016, three Indian Developers sought to find a solution to Ethereum’s problems resulted in the creation of Matic, which is now rebranded to the Polygon network but the token name is still MATIC. Polygon is a layer-two (L2) scaling platform that allows Ethereum based applications to tackle the problems mentioned earlier, while also leveraging Ethereum’s security. Polygon helps with scaling Ethereum and claims to be Ethereum’s internet of blockchains.
Polygon aims at creating an ecosystem that makes it easy to connect multiple different scaling solutions. Many scaling options are available in the whole polygon ecosystem. Polygon also provides a framework that makes it easy for new projects to quickly build their own highly customizable scaling solutions.
Its main aim is the Increase the usage of DeFi tools and apps by connecting blockchains together. Nearly 3 thousand decentralized apps are build on Polygon Network currently, and 80 of which is migrated from the Ethereum Network. As Polygon is identical to Ethereum many developers will move to EVM (Ethereum Virtual Machine) blockchains like Polygon to increase their usage and reach. EVM is the actual code that is ran by computers around the world to actually carry out the blockchain’s smart contracts.
Polygon actually has an EVM but so does the Binance Smart chain, Fantom and a few other big networks. They all uses the fundamental Ethereum code and run the same code. The developers can easily move their project to an alternative network and will work the same way without making much changes. Polygon proof of stake chain is a side chain to Ethereum Utilizing a proof of stake consensus technique. There’s a few other changes to this side-chain, but what’s really important is that its way faster and can handle way more transactions per second and much more affordable to the end user. PoS requires a high number of reliable validators this kind of model is usually suitable for enterprise blockchains and already established projects with strong communities.
What is Polygon MATIC Technically ? If you don’t want to go deep inside the project then you should skip this part. Technically the Polygon network is lot more than just a side chain. One of the main purpose behind Polygon is to provide developers user friendly and flexible tools. In simpler words Polygon is a series of blockchains that can help scale Ethereum developers to easily create diverse scaling solutions.
In Simple word Polygon is basically Ethereum but with super cheap gas fees. Ethereum Network charge 20$ for each trasections. However the netowk fee of polygon reasonable less then a penny. This means, users are free to try out new apps and test things out without the fear of losing a 150 dollars over a token swap. The Polygon and Binance Smart chain are the two DeFi blockchains that is recommended to new users.
Polygon is based on proof of stake protocol and layer-2 Scaling Solution serving as a commit chain to the main Ethereum chain. A commit chain functions as a transaction network that operates close to the real chain.
How Polygon Started?
Before the rebranding to polygon, the project was known as MATIC network started in 2017 by three founders and active participants in the cryptocurrency community in India. They decided to tackle Ethereum’s scaling problems. The team worked on two main solutions plasma chains and layer 2 scaling solution. Which is based on MATIC implementation of plasma and proof-of-stake (POS) Ethereum side chain.
The token behind MATIC network, MATIC was distributed through the Binance launchpad’s initial exchange offering in April 2019 and the team was able to raise 5.6 million dollars. After 2 and half years of work the MATIC network mainnet went live in mid-2020 and quickly started attracting more and more attention because of low fee as compare with Ethereum. At the beginning of 2021 the MATIC team decided to expand the scope of their project and rebranded themselves to polygon.
How Polygon works?
The Polygon commit chain groups up clusters of transaction and processes them altogether before sending the data back to the main Ethereum chain. For example you want to send a video, instead of sending complete video, Polygon will take a single snapshot every now and then, so that the Ethereum chain can still know what is happening but without processing much data.
This is the reason behind 6500 transections per second by polygon network. Some experts predict that a time will come when developers will host thousands of chains with Ethereum to increase throughput upto millions of transactions per second.
Polygon’s architecture runs on a 4 layer system comprising of the Ethereum Layer, the Security Layer, the Polygon networks Layer and the Execution Layer. The Ethereum Layer is consists of different Ethereum based smart contracts. These contracts are in charge of staking, Transaction approval, and interaction between the Ethereum blockchain and Numerous Polygon chains. This layer is actually check in with Ethereum from time to time. The Security Layer works alongside Ethereum to provide validator services giving chains an additional Layer of security. These 2 layers ( security layer and the Ethereum Layer) are not required for polygon to work.
Layer 3 is the Polygon Networks Layer, and it’s the ecosystem of projects build on Polygon blockchain networks . Basically, every project that exists within this ecosystem has its own community. Where local consensus is reached and Blocks are produced. Finally we have the Execution Layer known as Polygon’s Ethereum Virtual Machine and its main function is to execute smart contracts on the actual Polygon Blockchain. The compatibility with the EVM like smoothens the user experience for developers and programmers using the Ethereum chain.
Ethereum has a long history of serving as a reliable base chain that handles trillions of dollars in economic activities. Something that took time to develop and it’s hard to be replicated by a completely new blockchain. The power of familiarity with the Ethereum stack cannot be overlooked.
Polygon MATIC Tokenomics
The native token of Polygon network is called Matic. Which has been trading for around $1.61 (1-March-2022) with a market capitalization value of around $12,168,781,355. Matic tokens are disparaged monthly, and have a maximum supply of 10 billion tokens. Nearly 7.56 billion (76%) of which is already in circulation.
Initially, the developers sold around 3.8% of Matic’s total supply in their Initial private launch in 2017. Then later, they had an initial exchange offering, where they sold another 19% of their max supply. If you’re wondering where the other tokens are, the development teams own 16% of the supply. The advisors have 4 percent, Staking rewards come to around 12%, the ecosystem already has 23%, and well around 22% went to the Polygon Foundation. Since Matic tokens are technically being printed to reward stakers. Right now, it is technically inflationary, however Matic does have a limited supply and soon they will be implementing their version of EIP1559, It is base transaction fees will effectively be burned, which Matic will eventually be a deflationary token.
How are they going to reward the stakers when the funds run out? Well, the Polygon team will then charge extra transaction fees that users add to priorities their transactions above the base fee will be enough to incentivize staking validator’s to keep doing their thing.
How to invest In Polygon MATIC?
There are many centralized exchanges that offers to trade, buy and sell the Matic token. So you have to register an account an exchange/broker to invest in Polygon. Make sure to choose the top and trusted platfrom.