Polygon officially released the white paper on the economic model of Polygon 2.0’s native new token POL. POL is not a new token, but an upgrade from the original MATIC token. The new POL token will run in all Polygon ecological networks, including Polygon PoS, Polygon zkEVM, Polygon Supernets, etc. At that time, MATIC token holders will exchange it for POL at a ratio of 1:1.

The price of MATIC rose against the sound, with a 24-hour increase of 18%, and the current quotation is $0.86.

However, in the white paper, the initial total amount of POL is 10 billion, and it will be issued at an annual rate of 2% in the next 10 years, which means that the total amount of POL tokens has exceeded the total amount of 10 billion MATIC tokens. This has caused dissatisfaction among MATIC holders, who believe that this has diluted the original value of MATIC.

According to CoinGecko data, at present, the total circulation of MATIC is 9.319 billion pieces, and the current market value is 8 billion US dollars, ranking 11th among encrypted assets.

How is the POL token different from the original MATIC? What role does POL play in Polygon2.0? What are the upgrades of Polygon2.0?

POL token is an important part of the Polygon2.0 roadmap, and it is also the most concerned thing for community users, because once MATIC’s plan to upgrade POL is officially implemented, it will mean that the narrative logic (such as utility and value) of MATIC tokens will be changed. will change. But the hidden POL issuance in its white paper has caused controversy.

In the white paper, the supply model of POL will consist of two parts: initial supply and continued issuance. Among them, the total initial issuance is 10 billion pieces, all of which are used for upgrading and exchanging MATIC tokens. In addition, POL will also increase issuance at a constant rate of 2% every year, and the increase rate will remain unchanged for at least 10 years. As for the adjustment of the increase rate after 10 years, it will be determined according to the specific situation. Additional issuance may be suspended.

There are two main purposes for the additional issuance, including validator rewards and ecosystem fund development. The former distributes 1% of the supply of POL’s annual increase rate as a basic protocol reward to verifiers to encourage verifiers to join. The latter is also a 1% ecosystem fund that will be issued annually to continue to support the further development and growth of the Polygon ecosystem. In the first 10 years, the issuance rate cannot be changed. After 10 years, the community can decide to reduce the issuance rate value in any way through the governance framework, but it will not exceed 1%.

This means that in the past 10 years, POL will issue 200 million additional tokens each year, plus the initial supply of 10 billion tokens, and the total amount of POL tokens has exceeded the upper limit of MATIC.

This makes MATIC holders quite dissatisfied, thinking that the additional issuance of POL will dilute the original value of MATIC, why not choose to directly make MATIC tokens more valuable, unnecessary.

Some users said that it should be that Polygon has no money officially and wants to send money to itself through the new token POL. Because 93% of MATIC is currently in circulation in the secondary market, the Polygon team does not have enough Tokens to stimulate user growth and application adoption of Polygon ZkEVM, and now they can only issue new coins.

The official explanation for this is that the principle of POL’s issuance and issuance rate setting is because the Polygon ecosystem and Web3 development need time to mature and achieve mainstream adoption. Based on historical adoption cycles of the Internet and computing platforms, the maturity phase may take around 10-15 years. During this period, the ecosystem needs continuous economic support.

When the Polygon ecosystem and Web 3 reach a mature stage, when the transaction fees and other incentives obtained by verifying the various chains of the Polygon ecosystem can have sufficient returns, the community can decide to reduce or completely stop the issuance of additional rewards for verifiers. Similarly, once The ecosystem no longer needs additional economic support, and the community can also decide to reduce or stop additional issuance to the community treasury.

Obviously, the adoption cycle of Web3 may be slightly different or completely different from the history of the Internet. If it turns out that reaching mainstream adoption takes longer, and the ecosystem still needs support 10 years from now, the community can choose not to intervene at that time, or it can choose to adjust the issuance rate as needed.

This seems to coincide with the user’s guess that “the Polygon team does not have enough Tokens to motivate the user growth and application adoption of Polygon ZkEVM, and now it can only issue new coins”.

Since the announcement of the Polygon 2.0 plan, Polygon’s strategy has transformed from a single block network to an L2 multi-chain network ecosystem driven by ZK Rollup, including Polygon PoS, Polygon zkEVM and various sub-networks based on Polygon Supernets. POL tokens will run in its entire network ecology.

In the white paper, the official said that POL is the third-generation Token after BTC and ETH. Polygon explains this:

Although BTC is the first generation of native tokens, it is mainly used to pay gas fees and miner rewards on the chain, but for holders, it cannot be used as a productive asset (such as pledge as a verification node), nor does it have any governance power .

ETH is a productive asset. Ethereum’s PoS mechanism supports ETH holders to pledge it, participate in the protection of network security, and thus get incentives, but its supply cannot be predicted. In addition, it is allocated to the management foundation. The supply of tokens will be depleted, and support for the ecosystem will cease.

Like ATOM, as the native token of the Cosmos Hub central chain, it is also a productive asset that can be pledged to participate in the protection of the Cosmos Hub and get incentives. But the token is only useful within the Cosmos Hub central chain; it is not used to run and secure other chains in the Cosmos multi-chain ecosystem. The economic support it facilitates cannot continue indefinitely, and the funds of the community treasury will also be depleted do.

Polygon hopes to solve the above problems. It can continue to support its ecological development by issuing 1% of the total supply to the community treasury every year.

In addition, Polygon also becomes POL as hyperproductive tokens, and POL token holders can pledge as verifiers to verify all Polygon2.0 ecological networks; on different chains, the role of POL holders is also different, such as on the zkEVM chain, POL holders can act as certifiers to generate and submit zero-knowledge proofs; on the PoS chain, POL holders can act as verifiers to submit transactions and generate blocks.

The concept of Staking Layer introduced by Polygon2.0 is the place where verifiers pledge POL tokens. Here, users pledge POL tokens to enter the verifier pool, and can participate in the verification of the Polygon chain to obtain verifier rewards, which is 1 per year % additional POL issued.

This is similar to the cloud platform of Web2, users do not need to care which cloud the App data is stored on? As a verifier, you don’t need to pay attention to which chain you choose to verify to maximize the reward income.

From this point of view, POL will be the basic asset in the Polygon ecosystem, similar to the relationship between AVAX and Avalanche and its subnets. Users pledge AVAX to become validators, which can verify the Avalanche mainnet and its subnets within the ecosystem. But in Polygon, verifiers can verify multiple chains, and each chain can provide verifiers with multiple roles and corresponding rewards, which can not only be used to verify transactions in each network, but also can be used to generate zero-knowledge proofs to submit to Ethereum mainnet, etc.

Which token will the Polygon ecological chain use to pay for GAS? The official stated that the Polygon PoS chain will use POL as the payment method for GAS fees, and other chains can choose POL or issue their own native tokens.

The vision of Polygon2.0 is to become the value layer of the network, simply understood as the platform layer of Web3 (such as Cosmos, Polkadot), allowing developers to build their own block network based on this, providing a more flexible and powerful platform for DApp . Its function is similar to Web2’s cloud service platform.

Currently, Polygon2.0 is an L2 layer multi-chain network driven by ZK technology, and introduces a set of modules, including consensus and synchronization mechanism, fraud proof, etc., developers can use these modules to build their own blockchain network , has infinite scalability and unified liquidity, and can also interact across chains. For users, using the entire network is like using a chain.

Among them, Polygon PoS will be upgraded to zkEVM Validium to make it compatible with ZK technology. At that time, zkEVM, PoS and Supernets sub-networks will realize information and value interoperability.

In general, Polygon2.0 will be a collection of L2 expansion networks of the ZK series.

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Filed under: Bitcoin - @ July 18, 2023 5:23 am