Chain dissection. Polygon

Combining sidechain and zk-rollup

In June, Polygon introduced a series of upgrades (Polygon 2.0) that aim to unify all Polygon protocols and blockchains using ZK-technology into a single ecosystem. That led to significant updates within protocol architecture and tokenomics, including $MATIC rebranding into $POL. Let’s dive in.

– Structure and specifics

– $POL tokenomics

– Chain performance

– Projects launching chains on Polygon

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Structure and specifics

The new architecture can be divided into four protocol layers:

• Staking Layer is the PoS-based protocol implemented on Ethereum that uses a $POL ($MATIC) to enable decentralization of existing chains in the ecosystem via staking;
• Interop Layer facilitates the secure exchange of messages between chains within the ecosystem;
• Execution Layer enables any Polygon chain to produce blocks. It includes several components common to most blockchains like consensus, mempool, database, synchronization, etc;
• Proving Layer generates proofs for all transactions and provides developers with a framework to build custom VMs that are compatible with Polygon.

The Polygon team has also introduced the Polygon Chain Development Kit (CDK) to allow launching ZK-powered L2s on Ethereum, and eventually build the Polygon Superchain, consisting of:

• Polygon zkEVM Validium is the original Polygon PoS sidechain that would become the cheapest and most scalable zkEVM option for developers;
• Polygon zkEVM is a zk-rollup for Ethereum, launched on March, 2023. This rollup fully inherits the security of Ethereum, unlike Polygon zkEVM Validium;
• Polygon Miden is an upcoming ZK L2 rollup utilizing the Rust-based Miden Virtual Machine (MVM) instead of the EVM, that aims for high-throughput, private applications using ZK-proofs;
• Custom zkEVMs built with Polygon SDK.

$MATIC tokenomics

• Standard: a native coin
• Purpose: payments, gas, governance, staking;
• Circulating supply: ~ 9.555 billion
• Maximum supply: 10 billion MATIC
• Current Market Cap: ~ $7.5 billion
• Current price: ~ $0.8
• All-time low: $0.003012 (May 09, 2019)
• All-time high: $2.92 (Dec 27, 2021)

Migration to $POL: The initial supply of POL will be 10 billion, like MATIC, but unlike MATIC with fixed total supply, POL will become inflationary, with a 2% fixed annual inflation rate for the first 10 years. During the migration process, MATIC is being exchanged for POL at a 1:1 ratio.

Chain performance:

According to on-chain metrics, Polygon is still not out of a bear market like Solana and Avalanche or Optimism and Arbitrum.

TVL is practically hitting the lows, and the number of active addresses is stagnating. Nevertheless, the network is still one of the largest.

The performance of zkEVM, meanwhile, is worse than all rollups-competitorы. Users prefer networks where they will get tokens airdropped; obviously, zkEVM won’t have its own token.

There are unlikely to be major marketing campaigns to attract users and TVL until the main phase of the transformation is complete. Polygon’s time has simply not come yet.

What projects are building on Polygon?

A key factor in the success of the ecosystem will be how many and which teams build their products using Polygon CDK. So far, the following projects have announced the launch of their zkEVMs: Immutable, OKX, Astar, Manta, Canto, Palm Network, IDEX, Nubank, Gnosis Pay, Wirex, Capx, Nexon and Aavegotchi.

Output

Polygon is taking the risky step of essentially completely remodeling the entire ecosystem. This requires a long and labor-intensive development process that hinders user engagement. That’s why Polygon’s on-chain metrics aren’t growing and are starting to underperform other chains. But when the transformation process is complete, things could change dramatically.