Polygon: The De Facto Layer 2 Blockchain Solution, Built on Ethereum
Polygon at a Glance
Smart contract blockchains ran into several bottlenecks as the network activity on Ethereum has increased. Ethereum has seen massive network growth since its creation back in 2014. Being it is the first smart contract blockchain platform, most of the blockchain infrastructure tooling exists on Ethereum. As demand grew, Ethereum struggled to keep up with the increase of usage. High transaction fees, delayed transaction speed, and many other issues began to arise during events of high network activity. This lack of efficiency sparked a rise in the development of secondary scaling solutions built on top of the Ethereum blockchain, to help relieve some of the network stress. These scaling solutions are commonly referred to as Layer 2 blockchains and serve as an aid to a main blockchains capabilities.
Polygon is a Layer 2 blockchain scaling solution with support for all existing Ethereum infrastructure and tooling. Developed in India in 2017, several experienced Ethereum developers joined forces to help bring this idea of a scaling solution for Ethereum to fruition. Because Polygon is an Ethereum Layer 2 solution, this means applications built on Ethereum can easily deploy onto Polygon and take advantage on reduced transaction fees and increased transaction speed. By having this native adaptability with Ethereum applications, Polygon makes the onboarding process for developers and users relatively seamless from what is experienced on Ethereum.
The inner workings of Polygon are broken up into 3 main components. The first component of this system, Plasma, is where the deployment of staking management smart contracts on the Ethereum main network take place. This allows any individual to stake MATIC tokens and join a validator system for the Polygon network. The second component is where validation takes place. This layer is referred to as Heimdall and handles the validation of blocks for the network. The final component is known as Bor, Polygon’s sidechain block producer. Sidechains are essentially sister chains that run and execute parallel to a main blockchain, in this instance Ethereum.
Polygon’s Native Token, MATIC
MATIC is the main network token within the Polygon ecosystem. When sending transactions or performing trades on Polygon, MATIC is required to pay for the small transaction fees known as gas fees. Gas can be thought of as the fuel that powers transactions to travel across the network. Polygon saw massive growth during the early summer of 2021, increasing from about $150 million to $7 Billion Total Value Locked (TVL) on the entire network and its applications. Currently, Polygon resides in the Top 10 of Blockchain TVL and over 200 applications deployed onto its network.
An Intro to Ethereum & Smart Contracts
As digital assets become mainstream, the second largest cryptocurrency (by market capitalization), Ethereum, has generated major discussions at wealth management offices across the United States. Historically, Bitcoin has attracted most of the attention in the digital assets’ ecosystem, however, investors are starting to increase their knowledge and participation in Ethereum as the number of decentralized applications (“DApps”) built on the Ethereum blockchain continues to rise. This resource includes: