What Is Polygon (POL)?

Cryptocurrencies
What Is Polygon (POL)?

What Is Polygon (POL)

Polygon (POL) is a Layer 2 scaling solution and framework that aims to address the scalability and usability issues of Ethereum blockchain. It provides developers with a set of tools, technologies, and networks that allow them to create and deploy decentralized applications (DApps) with improved performance and lower transaction costs.

Polygon can handle up to 65,000 transactions per second (TPS) with a block confirmation time of less than two seconds. For comparison, Bitcoin completes 7 TPS and one block is created every ten minutes.

Layer 2 is a secondary protocol built on top of an existing blockchain network, also known as Layer 1. As an additional layer, Layer 2s helps offload transactions from Layer 1s. By processing transactions off-chain or using more efficient consensus mechanisms, Layer 2s typically provide faster and cheaper transactions. There are two main types of Layer 2 solutions: off-chain and sidechain solutions.

Transactions and computations are conducted outside the main blockchain for off-chain solutions, with the final result being settled on the Layer 1 chain. The Lightning Network for Bitcoin is an example of an off-chain solution.

Sidechains handle transactions and smart contracts separately but maintain interoperability with the Layer 1 blockchain. An example of a sidechain solution is the Polygon network for Ethereum.

How Does Polygon Work

The Polygon network works by leveraging the functionality and features of the Ethereum network but leaves a significant portion of the transaction and heavy lifting on the Polygon sidechain.

To understand the relationship between Polygon and Ethereum, think of Polygon as an express bus and Ethereum as a regular bus. Both lead to the same end destination but the express bus is faster because it makes fewer stops.

Polygon can achieve faster transaction speeds and lower fees due to the following:

  1. Proof of Stake Consensus Mechanism When Ethereum was using a Proof of Work consensus mechanism previously, validating transactions required miners to compete to solve complex mathematical problems. This process was computationally intensive and time-consuming, which caused slower transaction speeds. Polygon, which uses a Proof of Stake consensus mechanism, is more efficient as it selects validators based on the amount of staked POL tokens which eliminates the need for resource-intensive mining. This allows the Polygon network to achieve a higher number of transactions processed per second and faster overall transaction speed. (Ethereum switched to a Proof of Stake consensus mechanism in 2022)

  2. Layer 2 Scaling Polygon network operates as a sidechain that runs parallel to the Ethereum main chain. This allows Polygon to offload a significant portion of transaction processing to the Polygon sidechain which reduces congestion on the main Ethereum network. By moving transactions to a separate sidechain, transactions on the Polygon sidechain can be confirmed much faster as they do not have to contend with the limitations of the Ethereum network.

  3. Multi-Chain Scalability Solutions Polygon is designed with scalability in mind and through its Plasma bridge, zk-Rollups, and Optimistic Rollups, provides a range of scaling solutions for the Ethereum network. By leveraging the Polygon platform and its wide range of scaling solutions, developers can select the best-suited scaling solution for their decentralized application (DApps) that retains compatibility with the Ethereum network while enjoying the benefits of high scalability and low transaction costs on the Polygon sidechain.

POL Tokenomics

POL, the native token of Polygon, is an ERC-20 token that runs on the Ethereum blockchain. These are several of its use cases including, but not limited to:

Fees

Users have to pay transaction fees to conduct operations on the Polygon network. These fees are transacted in POL tokens to validators who validate the transactions.

POL also serves as collateral, liquidity, and reward distribution for various DeFi protocols and applications built on Polygon.

Staking

Users can stake their POL tokens to become a validator on the Polygon network or delegate their tokens to other validators. Validators earn POL tokens as rewards for staking their tokens while delegators earn a portion of the rewards for their delegated tokens.

POL tokens also act as a security measure for the network. The Polygon network requires validators to stake a certain amount of POL as collateral before they can participate in the validation process. If they behave maliciously against the network, the validators risk losing part or all of their staked POL.

Governance

POL holders can participate in Polygon’s governance decisions by voting on proposals and protocol upgrades. The more POL tokens a token holder has, the greater the say they have in network governance.

After achieving consensus, the proposed changes will be implemented and the upgrade will be completed on the Polygon network.

POL has a total supply of 10,000,000,000 POL tokens of which 9,319,469,069 is in circulation at the time of writing. The network employs a burning mechanism where a portion of the POL tokens are removed from circulation.

A portion of the POL tokens that are used to pay for gas fees are not returned to the Polygon network and validators but are permanently “burned” and sent to an address from which the tokens cannot be spent or recovered. This creates a deflationary effect on the POL token’s supply.

The planned breakdown of the distribution of POL tokens is as follows:

  • Ecosystem - 23.33%

  • Foundation - 21.86%

  • Launchpad - 19%

  • Team - 16%

  • Staking rewards - 12%

  • Advisors - 4%

  • Private sale (seed round + early supporters) - 3.8%

Who Created Polygon

Polygon was founded in 2017 by Jaynti Kanani, Sandeep Nailwal, and Anurag Arjun. Jaynti, co-founder and CEO of Polygon, was a data scientist with Housing.com before playing an integral role in implementing the Web3, Plasma, and the WalletConnect protocol on Ethereum.

Sandeep is the co-founder and COO of Polygon and served as the CEO of Scopeweaver and CTO of Welspun Group. Anuraj, the co-founder of Polygon, had previous experience as a product manager with IRIS Business, SNL Financial, Dexter Consultancy and Cognizant Technologies.

Polygon has managed to raise a total of $451.5 million in funding as of October 2023. Some notable investors in Polygon include Coinbase Ventures, Binance Labs, Sequoia Capital, Softbank Capital, Animoca Brands, Galaxy Digital, Kevin O’Leary and Alexis Ohanian.

How To Trade Polygon (POL)

  1. Sign up for an account on the Flipster website or by downloading the Flipster app (Android or Apple).

  2. Click the [Trade] tab.

  3. Search for POL, and click on it.

  4. Select the leverage (up to 25x).

  5. Select either a Trigger Order or Market Order.

  6. Input the amount of crypto you wish to trade, or select a percentage of your available funds to use.

  7. Once you have confirmed the details, click the [Long] or [Short] button to open a position.

POL Perpetual Swap Contract Specifications

Disclaimer: This material is for information purposes only and does not constitute financial advice. Flipster makes no recommendations or guarantees in respect of any digital asset, product, or service. Trading digital assets and digital asset derivatives comes with a significant risk of loss due to its high price volatility and is not suitable for all investors.