Polygon (formerly Matic Network) is a Layer 2 Ethereum scaling solution that allows developers to create interoperable, scalable blockchain applications and smart contracts with lower gas fees and faster speeds. Polygon strives to address scalability issues faced by blockchain networks in the crypto market, with the aim of promoting the widespread use of cryptocurrencies.
Ethereum is the blockchain of choice for building decentralized applications (dApps) and self-executing smart contracts. However, as more applications are deployed on Ethereum, network congestion causes issues such as slow transactions, low transaction throughput, higher transaction fees, and poor user experience. Polygon solves these issues by providing a Plasma-based framework for building decentralized applications.
How does Polygon work?
The Polygon network uses Plasma technology to process transactions off-chain before finalizing them on the Ethereum network, which helps achieve a high transaction throughput. Theoretically, with the Plasma framework, Polygon can process 65,536 transactions per second on a single sidechain at near-zero fees while maintaining the security and integrity of the main Polygon chain.
Polygon's Plasma framework is built on the Proof of Stake (PoS) consensus mechanism and relies on a set of PoS validators to ensure the accuracy and security of the transactions processed off-chain. These validators are randomly chosen based on the number of tokens they staked on the network.
Polygon's sidechains are designed to support a variety of decentralized finance (DeFi) protocols available in the Ethereum ecosystem.
Although Polygon uses Ethereum as its parent blockchain, it is blockchain-agnostic, meaning it is interoperable with other blockchains. As such, developers can deploy preset Ethereum-compatible blockchains in one click. Polygon also provides modules like a pluggable consensus, staking, and governance, allowing developers to build customized blockchains.
Some of Polygon's use cases include DeFi applications, blockchain-based games, and non-fungible token (NFT) marketplaces.
Native token MATIC can be used to participate in the network's governance, pay transaction fees on the platform, distribute staking rewards, and stake collateral to become a validator.
Significant projects like Aavegotchi, Decentral Games, Easyfi, Neon District, Polymarket, and SushiSwap, among others, use Polygon's architecture.
MATIC price and tokenomics
MATIC tokens have a max supply of 10 billion. Polygon distributed MATIC tokens via a private sale and a launchpad sale. In the private sale, 3.80 percent of the total supply was sold to seed investors (2.09 percent) and early supporters (1.71%). During the launchpad sale, 19 percent of the MATIC supply was sold, raising $5 million.
Additionally, 16 percent of the total supply was allocated to the founders, 4 percent to advisors, and 12 percent to run network operations smoothly. Lastly, 21.86 percent and 23.33 percent of all MATIC tokens were reserved as foundation and ecosystem incentive tokens, respectively.
MATIC tokens are released into circulation every month. As per Polygon's release schedule, all MATIC tokens will be released by December 2022. This limited supply should have an impact on the price of MATIC. The demand for Polygon's infrastructure drives the market demand for MATIC and, consequently, price changes in MATIC.
About the founders
Polygon was co-founded in 2017 by Jaynti Kanani, Sandeep Nailwal, and Anurag Arjun. Before creating Polygon, the Polygon team was a significant contributor to the Ethereum ecosystem. Their contributions include Plasma MVP, the WalletConnect protocol, and the popular Dagger event notification engine on the Ethereum blockchain.
Kanani, currently the CEO of Polygon, worked as a data scientist at Housing.com before co-founding Polygon. Nailwal served as the CEO of Scopeweaver and the CTO of Welspun group. Arjun worked as a product manager at IRIS Business, SNL Financial, Dexter Consultancy, and Cognizant Technologies.
What is Polygon's EIP-1559 upgrade or London hard fork?
The Ethereum Improvement Proposal (EIP) 1559 upgrade, also known as the London hard fork, was launched on the Polygon mainnet in January 2022. This upgrade increases the stability of transaction fees and allows users to estimate costs better and avoid more than expected.
EIP-1559 alters the fee calculation mechanism by replacing the first-price auction with a base fee that is burned instead of being given to miners. Note that this change does not reduce transaction fees, as gas prices are ultimately determined by supply and demand.
Is Polygon environmentally friendly?
As part of Polygon's Green Manifesto, Polygon has announced its commitment to becoming carbon negative by the end of 2022 through a $20 million pledge. This move aims to address the increasing environmental concerns surrounding cryptocurrency mining and blockchain technology. By going carbon-negative, Polygon plans to offset more carbon emissions than it produces, resulting in a net reduction in carbon dioxide in the atmosphere.
To achieve its carbon-negative goal, Polygon partnered with KlimaDAO to support the network's emission management and mitigation strategy. KlimaDAO is a decentralized collective of environmentalists, entrepreneurs, and developers looking to modernize the carbon market through on-chain technology.
This initiative is a significant step towards creating a more sustainable blockchain ecosystem and promoting environmentally-friendly practices within the crypto industry.
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