|1||1 Uniswap||DEX||Ethereum Arbitrum Polygon +1 Optimism||13.74K||62.78K||$58.61M||$178.08M|
|3||3 Stargate Finance||Liquidity +1 Utilities||BNB Ethereum Fantom +5 Arbitrum Avalanche Polygon Optimism Metis Andromeda||6.62K||16.28K||$32.56M||$5.45M|
|4||4 1inch||DEX +1 Liquidity||BNB Ethereum Gnosis +6 Fantom Arbitrum Avalanche Polygon Optimism ZkSync||4.91K||14.43K||$25.72M|
|5||5 Adamant||Yield Farming||Arbitrum Polygon Cronos||6.04K||13.28K||$22.52M||$6.53M|
|6||6 Sushi||DEX||BNB Ethereum OKC +18 Gnosis Fantom Arbitrum Celo Avalanche Harmony Polygon Optimism Telos Fuse HECO Boba Metis Andromeda Moonbeam Moonriver Palm Polkadot Kusama||3.6K||11.72K||$6.90M||$2.69M|
|7||7 0x Protocol||DEX +3 Liquidity Derivatives Yield Farming||BNB Ethereum Celo +7 Avalanche Polygon Optimism Aurora Solana Near Polkadot||2.96K||5.52K||$4.52K||$3.26M|
|8||8 Paraswap||DEX||BNB Ethereum Fantom +2 Avalanche Polygon||3.21K||5.46K||$128.00||$15.82M|
|9||9 Aave||Liquidity||Ethereum Fantom Arbitrum +4 Avalanche Harmony Polygon Optimism||1.38K||4.22K||$15.86M||$31.08M|
|10||10 Dfyn||DEX||OKC Fantom Arbitrum +1 Polygon||698||1.66K||$2.94M||$499.95K|
Polygon, formerly known as Matic, is now a major newsmaker in the DeFi sector and beyond. The team from India was the first to implement the project that took care of the main sore points of Ethereum without going far away from it and attracted high-profile and prosperous projects to its ecosystem.
Before rebranding, Polygon was called Matic or Matic Network. It was launched in October 2017 and was supported by Binance and Coinbase Ventures. The team is quite big and international, but its core is located in Mumbai, India. Its co-founders, Jaynti Kanani, Sandeep Nailwal, and Anurag Arjun, are experienced developers in the DeFi space.
Polygon is a layer-two scaling protocol; however, it is important to understand the fundamental difference between Polygon and most of the other solutions. Matic was created as an L2 scaling technology utilizing sidechains for off-chain computations, Plasma technology, and a set of validators implementing the PoS consensus mechanism to ensure security. At the beginning of 2021, the project decided to expand its task spectrum in accordance with its new vision of Ethereum as a DeFi ecosystem, which is how Polygon was born.
Polygon is a layer-two solution, however, it is important to understand the fundamental difference between Polygon and most of the other solutions. Matic was created as an L2 scaling solution that used sidechains for the off-chain computations, the Plasma technology, and a set of validators with the PoS consensus mechanism to ensure security. At the beginning of 2021, the project decided to expand its task spectrum in accordance with its new vision of Ethereum as a DeFi ecosystem, which is how Polygon was born.
Unlike Matic, Polygon does not represent just one solution but is a universal key to all scaling solutions and a framework to build Ethereum-compatible blockchains with those solutions implemented. The Polygon team speaks of itself as a Swiss Army knife of Ethereum scaling and infrastructure development. Polygon-built networks become participants of Ethereum’s DeFi ecosystem that can be compared to Polkadot or Cosmos. Aside from providing any kind of scaling solutions, Polygon can also offer projects tools to create such solutions by themselves, if they decide to go this path. “With Polygon, we want to enable Ethereum to become a robust, highly-scalable multi-chain environment that acts as the backbone of the Web3 revolution," Jaynti Kanani, co-founder of Matic Network said in February 2021.
The core aim of Polygon is to enhance Ethereum's throughput and lower transaction fees while maintaining a high level of security and decentralization. It achieves this by utilizing a combination of technologies, including:
Building projects with Polygon is all about choices. It allows you to choose any kind of scaling solution, and combine them in a different way with the opportunity to switch them at any time, depending on the network's current tasks spectrum.
The first basic choice the developers have to make is to decide whether they want their project to take the maximum from the Ethereum advantages, or use only some of these features and be more independent and flexible instead. There is no right or wrong here, and the choice should only depend on the specific dApp and its purposes.
There are two types of Ethereum-compatible chain networks that Polygon offers: secured chains (aka layer 2 chains) and stand-alone chains (aka commit chains).
Secured chains (e.g. Plasma) do not possess their own validator pools, relying on the “security as a service” model - extra security insurance in exchange for extra fees. This service can be provided directly by Ethereum or by a pool of professional validators. Security insurance can extend to multiple projects, just like Polkadot’s parachains share the security of the Relay Chain. Thus, secured chains can enjoy the highest level of safety, but they need to sacrifice their autonomy instead. This option is usually preferred by startups as well as by projects, for which a high-security level is a primary priority - for instance, a dApp that operates by holding large funds in its smart contracts.
On the other hand, Polygon supports standalone chains (commit chain), having completely opposite benefits and drawbacks. They rely on their own consensus mechanisms, like PoS, DPoS, or PoA (Proof of Authority). However, unlike PoA, anyone can participate in the network and run a node (thanks to Heimdall, the Proof-of-Stake verifying layer).
Those consensus mechanisms are not as robust as Ethereum’s security, which they can use only partially (e.g. Matic POS Chain, utilizing Ethereum for validator staking/finality checkpoints). But at the same time independence and flexibility that this kind of chain can afford far exceed those provided by secured chains, as they are not closely interconnected with the mainnet parts of the system. This model is primarily suitable for established projects with strong communities and great ambitions.
Although Plasma chains and side chains are similar (for example, both use a consensus mechanism to create blocks), they should not be confused. The essential difference between them is their position towards Ethereum: Plasma chains use Ethereum’s security, while side chains rely on their own.
Polygon side chains and Plasma have a three-layer architecture: the staking for side chains or plasma smart contracts for plasma chains is done on Ethereum, the verifying is done through the Heimdall layer, “the all-seeing eye” of Polygon whose task above all is selecting the validators list, and the block producing is done through the Bor node.
Unlike sidechains, Plasma chains have their blocks’ state roots (data, used to prove the reliability of block content, e.g. of a transaction) published on the parent chain, as each Plasma chain sends snapshots of its current state to the parent chain - Ethereum. A specific layer, designed to submit those snapshots (rolled up transactions), is called Heimdall and is built using the modified version of the Tendermint consensus protocol. Heimdall plays an important role here, as it allows to restore users’ funds using those snapshots in case anything goes wrong. This is the reason why “secured chains” like Plasma are actually secured.
Thus, Plasma makes the Polygon space robust and attractive for new DeFi projects that want to focus primarily on security. Besides, Plasma allows the integration of an unlimited number of dApps in its infrastructure. For dApps migrating from Ethereum (or any EVM-based chain), as per the developers, the underlying architecture is not that important, as long as it is compatible with EVM.
Polygon software development kits offer products that can bring other chains bridged to Polygon and aim at Ethereum’s multi-chain future. Other L2 solutions like zk-rollups, optimistic rollups, and validum chains are also coming. A zk-rollup dubbed Polygon Hermez or STARK-based, EVM-compatible rollup called Miden can serve as an example.
In July 2022, Polygon announced the launch of its zkEVM (zero knowledge Ethereum Virtual Machine) said to be the first Ethereum-compatible scaling solution to use zero-knowledge proofs. zkEVM is designed to be compatible with all existing smart contracts, developer tools, and wallets. The feature is said to be capable of reaching approximately 2,000 transactions per second, while significantly reducing L1 Ethereum network costs - by roughly 90%.
To start using Polygon, wallet must be connected. The list of wallets Polygon supports includes Metamask, AlphaWallet, Blocto, Pillar, and others. Once the wallet is set and configured to the Matic network, one must transfer their assets to layer 2. Polygon, like other scaling solutions, uses bridges to move tokens from Ethereum to Polygon. Polygon PoS Bridge and Plasma Bridge are used for this purpose. The official recommended bridge to use is Polygon PoS Bridge. It is faster but considered less secure than Plasma Bridge. To transfer tokens from the Ethereum mainnet to Polygon using the PoS Bridge, a user must deposit tokens into a dedicated smart contract on Ethereum, where they will effectively be locked for as long as tokens of the same value are used on Polygon. Once the tokens are deposited on the smart contract, the same amount of tokens are minted on Polygon. When the user wants to withdraw these tokens from Polygon, they are burned in the Polygon network, and the smart contract on Ethereum unlocks the tokens and returns them to the user.
Polygon PoS Bridge is protected by a set of external validators that lock bonds and are penalized by slashing those bonds if they behave dishonestly. Depositing tokens to the PoS Bridge takes a few minutes and withdrawing them can take up to three hours.
Polygon Plasma bridge differs from the PoS Bridge in the process of withdrawing tokens back to Ethereum. The exit process with Plasma Bridge takes longer, and as soon as a user sends a withdrawal request, they are minted an ERC-721 NFT of equivalent value as a ticket to get their locked funds on Ethereum afterward (a mechanism similar to LP tokens).
The Plasma Bridge relies on Ethereum for security, as Optimistic rollups do, but unlike the latter, the Plasma Bridge validates less data on Ethereum, as only a hash value of the transaction data is stored on layer 1. It takes about a week to withdraw funds through the Plasma Bridge. Also, the Plasma Bridge has limitations on transferable token standards, it only supports ETH, ERC-20, and ERC-721, whereas the PoS Bridge supports more standards.
Polygon provides the means to deploy custom blockchains, or Edge chains, "with a couple of lines of code". Polygon has introduced the modular and customizable blockchain stack Polygon Edge. With this tool, it is possible to deploy a network to suit one's needs, the team promises for Edge-powered blockchains higher performance and predictable throughput.
And in April 2022, Polygon Supernets - Edge-powered and Matic-layer-secured blockchains were launched. The scheme, somewhat reminiscent of Polkadot, involves a pool of Matic-layer validators to process blocks of Supernets built with Edge. Supernets, like Polkadot parachains, can be customized and built specifically based on certain project needs. Supernets are managed by Edge Certified Partners, a "group of certified dev shops and teams".
Staking on the Polygon network is done on Ethereum, Polygon's Layer 1. To participate in staking or become a delegator (if you don't want to run a node but just want to support someone from an existing list of nodes), you need to have funds on Ethereum, connect your Metamask wallet to Ethereum, and apply to Polygon's staking dashboard.
Polygon gives away 12% of all MATIC tokens on staking rewards, and the distribution will be for five years from the launch of the project. Following that, validator nodes will be rewarded from the transaction fees Polygon network charges for executing transactions. There is no minimum MATIC amount required for staking, but it is worth bearing in mind that validators can set the commission and minimum threshold for delegates on their own. As with many other PoS systems, delegator fees are also subject to slashing in the event of dishonest behavior by the validator in support of which the contribution was made.
Polygon uses the MATIC token for staking, validating, network transactions, and voting on Polygon Improvement Proposals (PIPs). MATIC is a token of the ERC-20 standard, so it can be stored on any Ethereum wallet. The token can be used as a settlement fee Polygon uses on its network.
MATIC tokens were introduced in 2019 via Initial Exchange Offering through Binance Launchpad (19% for $5M) and private sales (3.80% for $0.61M in total). The initial token breakdown allocated 41.9% of the total MATIC supply to the founders and team.
The max supply of MATIC tokens is 10,000,000,000.
The development of the Matic wallet is based on the MoreVP Polygon technology which provides ease and security in asset management for MATIC token holders. The wallet may appeal to the fact that it has a high speed, as well as is integrated with WalletConnect which is necessary to ensure the safety of users' personal keys, in addition to the access to other Polygon functions. The wallet also interacts with various dApps, users get the opportunity to stake their MATIC tokens and hold other ERC-20 tokens with it.
Polygon (MATIC) has been an instrumental native token since the inception of the Polygon network in 2020. However, to further enhance the infrastructure and achieve the vision of Polygon as the Value Layer of the Internet, a new and improved token architecture called POL has been proposed.
POL represents the next generation of native protocol tokens, designed to be hyperproductive and align the interests of validators and participants within the Polygon ecosystem. With this upgrade, POL introduces several significant benefits for the ecosystem:
POL's utility revolves around validators, enabling them to stake POL to join the validator set and subscribe to validate any Polygon chain. In return, validators can access various incentive streams, including protocol rewards, transaction fees, and additional rewards offered by Polygon chains. Additionally, the concept of validation in Polygon is broader, allowing validators to perform multiple roles on a single chain, further enhancing the value proposition.
To ensure the long-term sustainability of the Polygon ecosystem, continuous POL emission is proposed to fund the Community Treasury, a self-sustaining ecosystem fund governed by the Polygon community. This treasury will support important activities such as protocol development, research, grants, and adoption incentives.
The migration from MATIC to POL is designed to be seamless, requiring token holders to send MATIC to an upgrade smart contract, which will automatically return an equivalent amount of POL. Token holders will have ample time to upgrade, with the migration potentially starting within months if community consensus is reached.
The Polygon core team consists of four co-founders - Jaynti Kanani, Sandeep Nailwal, Anurag Arjun, and Mihailo Bjelic. The board of advisors includes notorious DeFi experts such as Ryan Sean Adams, Ethereum Foundation’s Hudson Jameson, Anthony Sassano, Coinbase’s Pete Kim, and John Lilic, who has previously worked at Consensys as the managing director for Global Business Technology Development, Strategy, and Operations.
The MATIC Network company is registered in Singapore.
Polygon's commit chain has been criticized for its lack of decentralization more than once. For example, in early 2021, Nansen AI found that 55% of all staked MATICs, which should secure the network, were staked by two actors - the Binance and Polygon teams.
In early December 2021, two whitehat hackers discovered a bug in the network's proof-of-stake Genesis contract. A critical code vulnerability discovered using the Immunefi protocol allowed a malicious hacker to steal 801,601 MATICs, which was equal to $2.04M at the time. The team's decisive actions to deploy the Emergency Bor Upgrade on December 5, within 24 hours of the bug discovery, allowed them to save over 9.27 billion MATICs, which at the time of the events was $23.6B and represents nearly the entire max supply of the coin. The problem discovered on December 3 and 4 was not disclosed until December 30, the Polygon team resorted to closed-door solutions, adhering to the "silent patches" policy introduced by the Go Ethereum team in November 2020.
On March 11, 2022, Polygon faced a nearly 12-hour downtime during an attempt by the project’s developers to fix a congestion issue faced by the network.
After deploying an upgrade that apparently affected the network’s consensus mechanism in a negative manner, the team started to suspect there had been a bug in the code that affected consensus and caused different Heimdall validators to be on a different version of the chain, although the update was not supposed to alter this part of the code but was targeted to adjust the state sync mechanism. Due to this, the system couldn’t reach 2/3 consensus. However, since the different layers of the Polygon chain depend on each other, the Bor chain relies on Heimdall regarding the block proposer committee selection, more precisely the span creation. This means that once the last span that Heimdall affects passes, the Bor chain halts. Nevertheless, the developer team made sure to ease users and claimed there are no security or safety issues and all user funds are safe. The team deployed a temporary hotfix to unclog the Bor chain and resume producing blocks. The temporary solution terminated the Polygon Bridge for the time until the final solution was deployed.
The Polygon ecosystem is vast and very lively, as the number of applications deployed on Polygon has been growing exponentially.
The deployment of the lending giant Aave on Polygon can be called a turning point in the network’s adoption. The number of locked assets on Polygon began to grow dramatically since Aave joined it, namely in April 2021. During the week before Aave appeared, Ethereum's Swiss Army knife showed between $547.4M and $910.95M TVL, and after April 20, that number surged past a billion and began adding almost a billion a week.
The largest native DEX on Polygon is QuickSwap, a permissionless decentralized exchange. QuickSwap has received a $1-million grant from Polygon to further develop the exchange and incentivize its users.
With its upcoming updates and the vision for Polygon 2.0, along with a new token with a ticker – POL, the project is set to revolutionize the way we interact with value and information on the internet.
One of the key developments driving Polygon’s growth is to be the introduction of Polygon 2.0 in June 2023, a visionary upgrade that aims to establish Polygon as the Value Layer of the Internet. This upgrade would make every Polygon chain a ZK L2, powered by zero-knowledge (ZK) proofs, allowing for unlimited scalability and unified liquidity. With Polygon PoS transitioning to a zkEVM validium, the ecosystem will benefit from heightened security and seamless interoperability with other chains in the Polygon 2.0 vision.
The importance of this upgrade cannot be overstated. Polygon PoS, with its robust ecosystem, network effects, and incredibly low fees, has already gained significant traction. By integrating ZK proofs, Polygon PoS becomes part of the Polygon 2.0 ecosystem, ensuring its continued relevance and contribution to the overall growth of Polygon.
With Polygon 2.0's zkEVM validium, users and developers will experience minimal disruption, as the upgrade maintains the low-cost nature of Polygon PoS transactions and requires no changes to existing smart contracts. Validators will continue to operate using $MATIC as the staked token, preserving the chain economics and validator rewards.
The introduction of zkEVM validium also offers several advantages over traditional rollups. By making transaction data available off-chain, validiums significantly reduce fees, as they don't consume expensive Ethereum gas. Moreover, they boast superior scalability, as their throughput is not bound by on-chain data publishing limitations. Polygon Labs' ZK teams have already made remarkable progress in reducing the cost of generating proofs, making this upgrade highly viable.
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