By
Dimitar Bogdanov
October 25, 2021
4 Min Read
The Polygon blockchain project is an Ethereum scaling solution and a framework for creating and connecting Ethereum-compatible blockchain networks. Polygon is a layer (Layer 2) that operates alongside the main Ethereum blockchain to improve scalability and reduce costs. The protocol aims to address some of the most pressing issues that the Ethereum ecosystem is facing today, including low throughput and high transaction fees, by leveraging blockchain technology as the foundation for secure and scalable solutions. Polygon also benefits from the security and interoperability provided by the Ethereum blockchain and main Ethereum blockchain.
On these pages, we’ve talked about the scalability issues that are so prevalent in ‘first-generation’ blockchains such as Bitcoin and Ethereum. These issues are especially detrimental to Ethereum’s ambition to be the infrastructure layer for a thriving ecosystem of blockchain-powered decentralized apps. The polygon ecosystem has emerged as a network of interconnected projects and applications built around Polygon, further extending its reach and utility. This is why finding a solution to the scalability problem has long been one of the highest priorities within the Ethereum dev community.
We’ve already examined some of the solutions that are currently being developed for Ethereum. We examined the ambitious Eth2 project, which seeks to tackle Ethereum’s scalability problem at a foundational level. We also examined the current crop of Layer 2 solutions, including some of the most prominent projects in the roll-up category. The polygon network is a scalable infrastructure built on the Ethereum blockchain, enabling low-cost, high-speed transactions for decentralized applications. Polygon, formerly Matic Network, is recognized as an easy to use platform for both developers and users. Now it’s time to take a look at Polygon, which has quickly become arguably the leading scaling solution for Ethereum.
The Polygon project started in 2017 under the name Matic Network. The three co-founders, who had been active participants in the Indian crypto community, intended for Matic to provide a solution to the Ethereum scaling problem and began exploring two different approaches for solving the issue—a Layer 2 solution based on an implementation of Plasma and a Proof-of-Stake sidechain solution dubbed the PoS Chain. The Matic Network was created specifically to address Ethereum's scaling issues by introducing these innovative solutions. The PoS Chain is often referred to as Polygon Matic, highlighting its role as a Layer 2 scaling solution and the native cryptocurrency used for transactions and staking. This is why Polygon is often described as a sidechain, but the reality is that the sidechain solution is just one component of the platform’s scaling proposition. But Polygon’s ambition goes well beyond that.
Following a mid-2020 mainnet launch, the Matic Network started gaining traction amid rising gas fees on Ethereum. As the network grew, new Matic tokens were generated through its proof-of-stake consensus mechanism, with validators and delegators staking MATIC to secure the network and earn rewards. This convinced the Matic team that they needed to expand the scope of their project in order to better serve the need for scaling solutions on Ethereum. In early 2021 the Matic Network was rebranded to Polygon to reflect the expanded vision for the project. Polygon Labs, the organization responsible for the development and strategic direction of the project, now leads these efforts. Rather than developing a scaling solution, the team now set out to create a protocol and a framework for building and connecting different scaling solutions.
Polygon is designed to support different types of scaling solutions, including both Layer 2 options and sidechains. The chains that are supported by the protocol can be divided into two distinct categories - stand-alone chains and secured chains. The former rely on their own consensus mechanisms, so they do not have to rely on Ethereum for security. That said, setting up a reliable consensus mechanism is not an easy task and is certain to be a tall order for many projects. For those a better option would be to run a secured chain. Polygon also supports the migration and integration of existing applications from Ethereum and other platforms, making it easier for developers to bring established projects into its ecosystem.
Secured chains leverage Polygon’s “Security-as-a-Service” model that is provided either directly by Ethereum or by a dedicated pool of validators. We’ll talk more on that topic in the next section. Polygon enables interoperability between multiple blockchains, facilitating a unified ecosystem.
In addition to providing a security mechanism for those that need one, the Polygon protocol also connects the various chains in its ecosystem, as it handles the passing of arbitrary messages between any two participating Polygon chains, as well as between any Polygon chain and Ethereum. Polygon supports a wide range of decentralized applications, including DeFi, gaming, and NFTs.
On top of all this, Polygon is also a development framework that allows for one-click deployment of preset Ethereum-compatible blockchains. Thanks to the platform’s modular design, developers can choose from a growing number of modules, including pluggable consensus, staking, governance EVM and others, to build a solution specifically tailored to their needs. The platform allows projects to scale efficiently and manage large volumes of data across different chains.
Source: Finematics
Now that we have a better understanding of what Polygon is striving to be, we can fully appreciate its ingenious design. As we already mentioned, Polygon seeks to support all kinds of scaling solutions and that aim has informed its architecture, which consists of four abstract and composable layers. Notably, a project is not required to use all four layers, which provides teams with the flexibility to build solutions that best serve their needs. These layers work together to establish consensus and achieve consensus efficiently, ensuring that blocks are validated and linked securely within the network.
Let’s examine the layers in more detail. Each layer involves network participants, such as validators and nodes, who process transactions, validate blocks, and help maintain the security and integrity of the Polygon network. Each layer contributes to the processing and validation of transactions and blocks, allowing network participants to validate transactions and support the overall consensus mechanism.
This layer allows Polygon chains to get access to all benefits of the world’s leading platform for dApp development, specifically the Ethereum platform, including its robust security and high level of programmability. Polygon chains interact with the Ethereum network to provide enhanced security and interoperability for users and developers. The layer is implemented via a set of smart contracts that handle functions like: finality, staking, message relaying and dispute solving. Polygon periodically commits data to Ethereum's mainnet to ensure transaction finality and security. The Ethereum layer is the first non-mandatory layer.
This layer is responsible for managing the pool of validators that facilitates one of Polygon’s Security-as-a-Service options. These validators operate as nodes within the Polygon network, playing a crucial role in transaction validation and network security. The layer is non-mandatory and can be implemented as a meta-blockchain that runs in parallel to Ethereum. Alternatively, it can be implemented directly on Ethereum, with Ethereum miners taking on the role of validators.
The validators perform periodic checks on the validity of any Polygon chain and receive fees for their efforts. This layer also handles validator management tasks such as registration/deregistration, shuffling and reward distribution. Running a validator requires maintaining a full time node with a reliable internet connection to ensure continuous participation in the proof-of-stake consensus process.
When registering as a validator, it is important to select a trusted validator to ensure network security and avoid potential loss of staked tokens.
This layer is a constellation of sovereign blockchain networks, with each network serving its respective community. Each network can manage functions like transaction collation, local consensus and block production. The networks can also utilize the Polygon protocol to connect with each other and exchange arbitrary messages. The Polygon network is designed to enable low cost transactions and minimal transaction costs, making it attractive for users and developers seeking affordable asset transfers and efficient blockchain operations.
This is the first mandatory layer in Polygon’s architecture.
Polygon’s second mandatory layer is responsible for interpreting and executing transactions that are agreed upon and included in Polygon networks blockchains. This execution layer processes blockchain transactions by verifying new transactions before they are added to the chain, ensuring accuracy and security. The layer consists of two sublayers - execution environment and execution logic.
Polygon’s ambitious design brings some considerable benefits, such as scalability gains, and this hasn’t gone unnoticed by the blockchain community. This has helped Polygon become arguably the most popular Ethereum scaling platform out there. According to the Polygon website, there is currently over $9.4 billion in total value locked on Polygon, while the total value of staked MATIC (Polygon’s token) is just over $1.85 billion. MATIC is the native token of the Polygon network, also referred to as Polygon's native token. The Matic token is primarily used to pay transaction fees, participate in governance, and for staking to help secure the network. Users can acquire MATIC on major exchanges to participate in the Polygon ecosystem.
Let’s look at some of the biggest advantages of the Polygon platform.
This is, without a doubt, the main goal of every Ethereum scaling solution and Polygon really shines in that area. Thanks to Polygon’s capacity for supporting dedicated blockchains and scalable consensus algorithms, by using the platform both projects and users can benefit from faster transaction times and lower gas fees. Polygon’s network operates like an express train with fewer stops, allowing for faster processing and greater scalability compared to the main Ethereum blockchain. This enables Polygon projects to scale efficiently, accommodating more users and handling a higher volume of transactions. According to the Polygon website, a typical ETH transfer on Ethereum costs around $11.47, as compared to a fee of approximately $0.00099 on Polygon. The stats shared on the website show that Polygon also outperforms Ethereum by a similar margin when it comes to NFT transfers, ETH-ERC20 swaps and other interactions.
Polygon’s compatibility with Ethereum is a major benefit, as it means that Ethereum aApps can be easily deployed on the platform. Existing applications and decentralized applications from Ethereum can be migrated or integrated seamlessly onto Polygon, taking advantage of its scalable infrastructure. Meanwhile, developers can benefit from the comprehensive standards and tools that have already been developed on Ethereum.
Speaking of development, Polygon’s modular design makes it easy for developers to build customized solutions or enhance their products with additional features. Developers can also build or integrate savings protocols and DeFi protocols, enabling a wide range of decentralized financial services such as lending, yield generation, and passive income opportunities within the Polygon ecosystem.
As mentioned above, Polygon comes with a built-in mechanism that can connect any two Polygon networks and relay messages between them. At the same time, Polygon also supports bridges to external networks. Polygon's interoperability features enable seamless communication and asset transfers across multiple blockchains, supporting the development of interconnected and unified blockchain ecosystems.
Polygon’s Layer 2 solution, Plasma Chains, is an implementation of Plasma, which allows for transactions to be offloaded from the main chains to ‘child chains’. Plasma Chains manage data storage and transaction execution on these child chains, which enhances scalability by reducing the load on the main blockchain. This increases transaction speeds and reduces fees. However, there are long waiting periods for users who want to withdraw their tokens from Layer 2. This is due to Plasma’s reliance on fraud proofs to arbitrate disputes. Another notable drawback is Plasma’s inability to support general computation smart contracts, meaning that it supports only certain types of transactions, such as simple token transfers and swaps.
There is a reason why Polygon is considered a sidechain and it’s because its PoS Chain is by far its most popular scaling solution. The PoS Chain is a Proof-of-Stake sidechain that runs parallel to Ethereum and is secured by validators staking MATIC tokens. Users can stake their MATIC either directly as validators or indirectly as delegators. There is also a much lower commitment version of staking, where users delegate their MATIC to a trusted validator. This lower commitment version allows users to participate in network security with less risk, often referred to as staking MATIC indirectly or having staked MATIC indirectly. The chain also relies on Ethereum security. Since it’s EVM-compatible, the PoS Chain can support general computation, which gives it much greater utility than Plasma Chains.
This summer saw Polygon gaining ZK roll-up capabilities through the merger with one of the most promising projects in that category of scaling solutions. A landmark deal for the DLT industry, the merger was valued at $250 million, based on MATIC prices at the time of announcement. We discuss the deal and Hermez in more detail in our piece on roll-up technology.
With moves like the Hermez merger and the continued development of its products, it’s clear that Polygon aims to position itself as the leading scaling solution for Ethereum. Validators and delegators can earn money by securing the network and are rewarded with newly created MATIC tokens for their participation. The platform has had a breakout year in 2021 and with DeFi and NFT trading not showing signs of slowing down, its future seems bright.
