Matic, now known as Polygon, is a cryptocurrency project that focuses on Ethereum layer 2 scaling solutions. The project has experienced significant growth in a short period of time, with its ecosystem expanding rapidly. Polygon aims to become the “internet of blockchains” for Ethereum, offering multiple layer 2 blockchains for scalability. It plans to leverage the security and network effects of the Ethereum blockchain, making it different from competitors like Cosmos and Polkadot. The Matic token powers the entire Polygon ecosystem, which consists of four layers: Ethereum layer, security layer, networks layer, and execution layer. Despite being in its early stages, Polygon has already gained notable partnerships and developments.
Spotting the Crypto Gems: Matic’s Success Story
Every now and then, I somehow managed to spot a cryptocurrency gem long before it really takes off. Matic is one example of such a gem. In less than two months, it has gone up more than 10x. Why? Well, not to brag, but I predicted back in January that Matic would take center stage as Ethereum layer 2 scaling solutions were explored, and that prediction seems to have come true.
What I didn’t predict, however, was that the project would rebrand to Polygon to reflect its new direction of development. I also didn’t anticipate just how quickly Polygon’s ecosystem would grow in just a few short weeks. Hey, nobody’s perfect, right? Now, I’ll have you know that it’s quite rare for me to cover the same altcoin twice within two months, so this should give you an idea of just how much potential I think Polygon and Matic tokens still have. Today, I’m going to explain what Polygon is and what it could mean for Matic token.
Introducing Polygon: Ethereum’s Internet of Blockchains
Before we continue, there’s a disclaimer I need to give you. I am not a financial advisor. This video is for educational purposes only. If you’re new here, you might be feeling a little bit lost right about now. My name is Guy, and I am your Crypto Yoda here at the Coin Bureau. I pass on the knowledge you need to become a crypto Jedi. Cryptocurrencies, exchanges, DeFi protocols, NFTs, and market analyses are just a few of the topics I tackle on the daily.
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The Background: Matic Network and its Plasma Chain
If you missed my previous video about Matic, here’s the TL;DR. Matic Network was founded in 2017 by Jayanti Kanani, Sandeep Nailwal, and Anurag Arjun. All three are seasoned software developers, and Jayanti is one of the architects of More Viable Plasma, an improved version of the Plasma scaling solution for Ethereum originally proposed by Ethereum founder Vitalik Buterin in 2017.
Without getting into the weeds, More Viable Plasma works by creating copies of the Ethereum blockchain called child chains, which periodically submit snapshots of their states to the parent chain. This parent chain is, of course, Ethereum. But Matic Network was designed to be blockchain agnostic, meaning any other blockchain can serve as the parent chain. In addition, Matic Network incorporates a second blockchain in its architecture, which submits snapshots of the Matic’s Plasma chain to the Ethereum blockchain. This second blockchain is called Heimdall, and it uses a delegated proof-of-stake consensus mechanism.
Naturally, staking is done using Matic token, and staking rewards range between 4% to 420% per year, depending on how much of Matic’s total supply is being staked. Matic token is also used to pay for transaction fees on the Plasma chain, which is called Bor. The Matic Network mainnet launched in May last year, not long after India lifted its first cryptocurrency ban. On that note, you should know that Matic co-founder Sandeep Nailwal thinks that all this FUD around a second cryptocurrency ban in India is straight up BS. This is because India has a constitution that is not all that different from the US Constitution, and passing such a law would be deemed unconstitutional. Moreover, Indian officials see Bitcoin in a different light, now that companies like Tesla have begun holding BTC as a hedge against the relentless money printing by governments around the world.
You could say that Bitcoin is at a tipping point, and this happens to be the focus of my recent video about Bitcoin, which you can watch by using that link just up at the top right.
The Shift: From Matic to Polygon Ecosystem
Just two weeks after I covered Matic Network, they rebranded to Polygon. This rebranding signaled Matic’s shift in focus from providing a single scaling solution to becoming “Ethereum’s Internet of Blockchains.” In other words, Polygon wants to become the one-stop-shop for everything Ethereum. In addition to their existing Plasma chain, Polygon is developing other Layer 2 blockchains for Ethereum, which leverage zk-rollups and optimistic rollups.
The Polygon SDK will make it possible to deploy these blockchains with a single click. You’ll also be able to create standalone blockchains using the Polygon SDK, and all these blockchains will be interoperable. Now, if this project sounds awfully similar to what projects like Cosmos and Polkadot are trying to do, well, you’d be correct. The difference is that Polygon chains will be able to leverage the security, robustness, and network effects of the Ethereum blockchain.
In the same way, the original Matic Network has. This also means that Polygon is not a competitor to Ethereum like those other smart contract cryptos. To clarify, the Matic Network is still alive and well. It’s just become the first of many blockchain networks that will make up the Polygon ecosystem. More importantly, the Matic token will continue to be the token which powers not just the Matic Network, but the entire Polygon ecosystem.
Polygon actually has an architecture of its own that’s divided into four layers. The first is the Ethereum layer, which all Polygon’s Layer 2 blockchains will rely on for security and consensus. The second layer is the security layer, which will handle Polygon’s security-as-a-service product. This service lets any Polygon blockchain tap Polygon’s core validators for security and consensus for a fee, if they don’t want to leverage the Ethereum blockchain. Security-as-a-service is also optional, meaning Polygon’s first two layers are not mandatory per se. The third layer is the Polygon networks layer, which handles interoperability between all blockchains created using the Polygon SDK. The fourth layer is the execution layer, which hosts on-chain and cross-chain smart contracts.
If this sounds complex, it’s because it is. The Polygon white paper is 70 pages long, and I promise you that there is no beating around the bush going on there. Thankfully, there is an image from that white paper which explains how Polygon works much better than their website. As you can see, Polygon’s architecture is quite similar to Polkadot’s. Again, the difference is that Polygon chains have the option of leaning on the Ethereum blockchain for security and consensus. This is important because Layer 2 blockchains, which use Plasma and rollups, make it possible to reclaim user funds if anything goes wrong on these chains. This can be done by referencing the last snapshot or rolled-up transaction left on Ethereum by that Layer 2 blockchain. If something goes wrong on a parachain on Polkadot, something tells me you’re going to be out of luck if anything happens to your tokens.
That said, Polygon is still very much in its infancy, and there don’t seem to be any other solutions available besides Matic Network at the time of shooting. This is probably why Polygon has been enlisting heavy-hitting Ethereum developers as advisors since it revealed its master plan. Given all the developments and partnerships that have taken place since the rebrand, Polygon seems to be right on track to be Ethereum’s Swiss Army knife.
In mid-February, The Graph added support for Polygon, making it possible for developers to index data from the dApps built on Polygon’s various blockchains. One week later, Polygon partnered with Chainlink to introduce verifiable randomness to the Polygon ecosystem. This is significant because it will introduce new use cases…