Polygon/MATIC, a layer 2 solution that addresses Ethereum's scalability problems such as soaring gas fees and slower processing, is drawing attention. This article explains the features of Polygon/MATIC that go beyond being a layer 2 solution, along with examples of how it is actually being used.
What is Polygon/MATIC?
Ethereum continues to grow as a platform for developing and building applications, but a rapid rise in users beyond its original capacity has caused transaction processing delays and soaring gas fees (transaction fees), making its scalability problem serious.
Polygon is a project developed to solve these problems facing Ethereum.
Polygon is a layer 2 solution for Ethereum, as well as a framework for building and connecting Ethereum-compatible blockchain networks.
Layer 2 solution
Blockchain technology is developed in multiple layers, and Polygon is one of the layer 2 solutions built on Ethereum's layer 2 (second layer). To improve the performance of Ethereum, the main chain, some Ethereum transactions are executed on Polygon on the second layer, reducing the load on Ethereum. This makes it possible to increase processing speed and lower fees. In actual figures, Ethereum handles 10–15 transactions per second, while Polygon can process as many as 6,000–7,000 per second. At the same time, the average transaction fee is kept very low at $0.00002.
Besides reducing the load on the main chain, the second layer has other uses. Changes to the system on the main chain affect the second layer, but changes made on the second layer do not affect the main chain unless the main chain allows them. So if you want to try out system changes, you can experiment on the second layer without affecting the main chain.
A framework for Ethereum-compatible blockchain networks
Although Polygon is a second layer of Ethereum, it has its own consensus algorithm (PoS, proof of stake) and issues its own token, MATIC, so it also functions as a framework for building Ethereum-compatible blockchain networks.
History of Polygon/MATIC
Polygon started in 2017 as a project to solve Ethereum's scalability problem, and was called Matic at the time of development. Matic's founding team consisted of three people active in India's blockchain community: Jaynti Kanani, Sandeep Nailwal and Anurag Arjun. Mihailo Bjelic of Serbia later joined the management team.
Matic was developed by a decentralized team centered on these four people, with collaborators around the world. In April 2019 it successfully raised funds through an IEO (Initial Exchange Offering*) on Binance, the largest crypto-asset exchange, and in June 2020 it launched on mainnet.
(*IEO: Like an ICO (Initial Coin Offering), it is a mechanism in which new tokens are created and traded to raise funds for a new project. Unlike an ICO, however, the exchange reviews the project and only selected tokens are approved for trading, which offers advantages such as higher credibility and easier participation.)
Matic began development as a project to solve Ethereum's scalability problem, but to go beyond being an Ethereum scaling solution and aim to be a network of Ethereum-compatible blockchains, the project was renamed from Matic to Polygon and rebranded in February 2021. In March 2021, it was listed on Coinbase Pro (a trading platform for advanced users) of Coinbase, the largest crypto-asset exchange in the US.
Examples of projects using Polygon/MATIC
Thanks to its fast, low-cost transactions, DeFi (decentralized finance), games and NFT-related dApps (decentralized applications) that had struggled with Ethereum's scalability problem are one after another starting to use Polygon. Here are some representative examples.
SushiSwap
The most popular DEX (decentralized exchange) in the Ethereum ecosystem. To avoid the scalability problem, it announced a partnership with Polygon in May 2021, making it usable on Polygon as well while remaining compatible with Ethereum.
Aave
A platform offering decentralized lending services. Rather than matching lenders and borrowers directly, it matches them through an intermediary pool where funds are held. 1% of MATIC's total supply ($40 million) has been allocated to Aave's Polygon market.
Curve Finance
A DEX designed for efficient trading of stablecoins. Stablecoin is a general term for crypto-assets pegged to another class of asset, such as a fiat currency or gold, to reduce price fluctuations and keep prices stable; examples include USDC and DAI. In June 2021, Curve Finance announced it would add a Bitcoin pool on Polygon.
Polygon/MATIC and NFTs
NFT marketplaces and NFT games, where trading has been booming around the world in recent years, are also moving to support Polygon for its fast processing and low cost. Here are some examples.
HEXA
HEXA is a new service that lets influencers deepen their connection with fans by turning their works and posts into NFTs and selling them to fans. When the service launched, NFTs could only be issued on Ethereum, but a feature for issuing NFTs on the Polygon blockchain was later released.
nanakusa
SmartApp, which runs the Japan-born NFT marketplace nanakusa, began a partnership with Polygon in February 2021.
OpenSea
OpenSea, the world's largest marketplace, began supporting multiple blockchains, including Polygon, to solve the problem of soaring Ethereum gas fees, which had been weighing on the NFT boom.
CryptoSpells
CryptoSpells, one of Japan's largest NFT games, also began supporting Polygon as a solution to soaring Ethereum gas fees. It is the first blockchain game in Japan to support multiple chains.
Perfume's NFT artworks
NFT artworks by the Japanese technopop group Perfume were sold in June and August 2021 on NFT-Experiment, an NFT marketplace built on Polygon.
Others
Metaverses that combine NFTs with virtual reality (VR), such as Decentraland and The Sandbox, are also moving to support Polygon.
In response to growing demand for games and NFTs on Polygon, in July 2021 Polygon launched Polygon Studios, which specializes in blockchain games and NFTs. Polygon Studios aims to be a bridge between Web 2.0 and Web3 (Web3 is a decentralized internet that differs from the conventional internet — the next-generation internet built on blockchain technology).