Polygon started out as Matic , out of India in 2017. Matic is basically a layer 2 solution whose aim is to allow basechain(layer 1) scalability. Apart from better speed and scalability for Decentralized Finance Apps , gaming and NFTs market is also a target for Matic Network. Matic Network rebranded itself at the start of this year with special focus on Ethereum anchored ecosystem , transforming ETH into a multi-chain system like Polkadot , Cosmos or Avalanche.But Polygon claims to be better than all of these solutions because it has security and network effect of Ethereum , while providing speed and scalability of its own. Launch of AAVE on Polygon has allowed the blockchain to capture significant market share in terms of TVL locked on Dapps.
Polygon allows one to transform Ethereum into a full fledged multichain system , but Ethereum is not the only basechain it might support in the future, it has basically presented a template for any single chain facing scalability issues.Currently close to 400 dApps are supported on Matic network.
Polygon’s Network Architecture has the following 4 layers:
1. The Ethereum Layer : Set of Ethereum smart contracts that provide dispute resolution, staking and completeness
2. The Security Layer : This layer manages the validators responsible for security and verification of blockchains.
3. The Polygon Networks Layer : This layer is responsible for providing interoperability between different
blockchains and consensus between networks.
4. The Execution Layer : This layer is responsible for actual coordination and execution of transactions.
Tokenomics and More:
Polygon has kept the fee ultra low to attract the DeFi audience which has found that high gas fees on Ethereum has made certain strategies unviable. For example, Gas price on ETH network is 25 Gwei while on Matic it is 5.5 Gwei as of 13th July.These fees can be very volatile and vary a lot , within a day. But having high gas price has its own merits , the biggest being incentivizing miners to keep pushing transactions through the network. Matic’s has currently reserved 12% of the max supply of 10 billion tokens for staking rewards, we can expect these rewards to be used at the initial stages of network growth tilltransaction volumes increase enough to generate a sustainable transaction fees structure . These 1.2 billion tokens are expected to be given out by the end of the first 5 years.
While the growth of network is expected to be maximum in the next couple of years , till ETH 2.0 comes out with full throttle ,during this time tokenomics is expected to be inflationary , as the deflationary component in terms of burning a small portion of the transaction is expected to be negligible during this time.