Overview of POL
POL (Polygon Ecosystem Token) is designed to gradually replace the current MATIC token over 4 years, as part of Polygon 2.0, where Polygon evolves into a Polygon zkEVM validium with its own network of interoperable application specific blockchains. POL will come with added utility including restaking, where validators can restake their POL tokens to secure other chains in the Polygon supernet and earn additional rewards.
Key Takeaways
-
According to the specifications of Polygon 2.0, Polygon is transforming its products to integrate zero knowledge technology and evolve into a full-suite scaling solution for the Ethereum blockchain.
-
This includes restructuring the Polygon PoS chain into a ZK validium Layer 2 network for the Ethereum blockchain and building a supernet architecture to power a hub of ZK L2 networks operating in a uniform ecosystem with an efficient interoperability design.
-
This upgrade will also see the MATIC token mature into the POL token with significantly improved utility to reflect the expanded ecosystem, such as restaking.
In a statement released on October 25, 2023, Polygon announced that it has deployed the contract for the POL token on the Ethereum blockchain.
The POL token upgrade is now live on Ethereum mainnet.
— Polygon (Labs) (@0xPolygonLabs) October 25, 2023
Polygon 2.0, released this summer, is a roadmap for scaling Ethereum to build the Value Layer of the Internet. POL unlocks that future.
POL is a next-generation token that can power a vast ecosystem of ZK-based L2 chains.… pic.twitter.com/gmrsu0ZqLz
This is a significant step towards a more extensive set of development as part of the Polygon 2.0 upgrade. The POL token is set to power the elaborate ecosystem being designed by the Polygon development team and its community, and will eventually replace MATIC.
What Is The Polygon Ecosystem Token (POL)?
The Polygon Ecosystem Token (POL) is the new native token of the Polygon ecosystem. By design, it is being integrated into the core operations of major Polygon products and applications in the ecosystem. POL is meant to eventually replace the MATIC token, taking up its roles around governance and gas, in addition to other utilities that will accompany the expanding Polygon ecosystem.
Polygon claims that POL is a technical and economic upgrade to the MATIC and is adjusted to be future-proof, where the POL token is adjusted (on the technical end) to be capable of scaling alongside the whole ecosystem as it evolves. POL will improve ecosystem security and scalability as validators can secure multiple chains, offering the Polygon ecosystem support as the industry grows.
Based on the POL whitepaper, the initial supply of POL will be 10 billion tokens, which is dedicated for the migration of MATIC to POL. In the future, POL will be emitted as validator rewards at a predefined, deterministic rate that cannot be increased beyond 1%; however, it can be decreased after 10 years through governance once the Polygon ecosystem reaches maturity. Once the Polygon ecosystem matures, the team believes that transaction fees and other incentives secured by validating Polygon chains will generate returns for Polygon validators, hence the proposal to eventually reduce the emission rate.
Now, let’s look at how POL will play a part in this expanding ecosystem.
Utility of the POL Token
Polygon described the POL token as a ‘hyperproductive’ token to reflect the extended benefits it gives holders. The POL token will be the native token of the Polygon ecosystem, and it will be available to operate as the tax currency of the Polygon network or any other network in the ecosystem.
This means that for every network that chooses POL as its gas token, fees for transactions on the network will be paid in the POL token.
In addition, the POL token will help in nurturing the security, economy, and management of the polygon ecosystem through
Restaking
Restaking is a generally new concept in cryptocurrency, which was popularized by EigenLayer, where ETH can be restaked to secure other protocols, saving them the trouble of establishing their own validator sets.
On Polygon, POL stakers will secure the network and receive rewards for their efforts. After staking a specified threshold amount of POL token to run a validator node, the consensus algorithm gains an avenue to affirm the validator’s commitment to protecting the network and also a way to ‘punish’ defaulting validators. As an incentivization system, validators are rewarded with POL tokens for securing the network.
And here is where restaking comes in. As the native token for an extended ecosystem, the POL token will also power the security of other chains that will operate under the Polygon supernet structure. This means that validators on the Polygon network can also validate other chains. Validators will earn rewards from the transaction fees generated on the secondary networks they validate, and extra rewards may also be awarded to the validators as specified by the network they validate.
Polygon also expands the roles of validators. In addition to the normal transaction validation process, validators in the Polygon can also assume other roles like being a part of the Data Availability Committee (DACs) and generating zero knowledge validation proofs. Validators can perform these roles in a single chain or multiple chains in the supernet.
Governance
Polygon also announced that the POL token also accords governance rights to their holders. This means that every holder of the token will be able to decide on community proposals. While Polygon has yet to publish the full design of the governance system at the time of writing, the governance system is expected to operate in a pattern similar to most DAOs.
The POL token will be accepted in project voting portals and each holder will be able to cast a vote for or against a proposed development concerning the project; this could be in areas related to technology, administration, or finance. The community voting system also means that a majority vote confirms the choice of the community and becomes a standing decision. This will become clearer when the project releases the full design of the governance structure.
Polygon 2.0: Powered by ZK technology
On June 20, 2023, the Polygon Labs team published a proposal to transform the Polygon PoS chain into a full zkEVM validium network. The Polygon PoS chain has emerged as one of the most used EVM networks, with over 482 protocols and over $750 million in TVL according to DefiLlama.
The Polygon views upgrading the current Polygon PoS as a way to improve its security model, as by tapping into zkEVM technology, Polygon will be able to inherit the higher security of Ethereum. The proposal also claims that the move will draw the project closer to solving the current consensus issues and the fluctuation in the efficiency gas estimation model which leads to occasional spikes in transaction fees and enables it to pursue an overall improved user experience.
What Are zkEVM Validiums?
ZkEVM validiums are an alternative to rollups when it comes to implementing zk-powered Layer 2s. Zk-powered L2s submit validity proofs to the Layer 1 (Ethereum), providing security guarantees for all its transactions. However, unlike rollups, which submit compressed transaction data to Ethereum, validiums do not publish transaction data to Ethereum, instead guaranteeing the availability of this data in another way.
This enables zkEVM validiums to offer lower fees, as it doesn’t require blockspace on Ethereum to store transaction data, and also improved scalability, since a rollup’s throughput is limited by the amount of transaction data Ethereum can store.
As Polygon already has a decentralized validator set with $2 billion at stake with Polygon PoS, it can serve as a highly reliable transaction data availability layer.
The proposal also claims that the shift from PoS to a zkEVM validium is also a preparatory process for the Polygon 2.0 upgrade. As a zkEVM validium network, the Polygon PoS chain will become compatible with the supernet structure being developed, this will enable it to enjoy the benefits of being a part of the hub.
Polygon 2.0 Supernet Structure
Polygon claims to be putting every effort made towards the creation of an efficient value layer through decentralized technologies in the past decade together in the Polygon 2.0 upgrade. It hopes to reflect these developments in Polygon 2.0 which defines a new structure for the project.
With the Polygon 2.0 upgrade, Polygon will transform into a supernet of ZK networks operating in an effectively interoperable system and sharing valuable resources between them. It defines a uniform security system and a final settlement on the Ethereum blockchain using ZK provers to ascertain the validity of transactions and achieve near-instant finality.
Now, let's look at some of the features of Polygon 2.0.
Features of Polygon 2.0
The Supernet is a network of networks. Polygon hopes to build the ‘value layer of the internet’. The basis of the design is to achieve a foster system for multiple ZK Layer 2 networks and achieve near-instant finality on the Ethereum network. Here’s the underlying structure of Polygon 2.0.
Protocol Architecture
Polygon 2.0 is made up of four layers that operate in synergy to deliver a compact system of networks in mutual communication; the four layers are
-
The Staking layer
-
The Interop layer
-
The Execution layer
-
The Proving layer.
The Staking Layer
Polygon 2.0 adopts the proof of stake consensus algorithm. The staking layer is the core of the network’s security system. It handles the core aspects of the network’s validator staking and validator management. Polygon 2.0 validators are required to stake the network’s native token to run a validator node on the network. Polygon claims that the staking layer will be optimized for the normal staking and the restaking model as well. The staking layer is controlled by two smart contracts deployed on the Ethereum network; the Validator Manager and the Chain Manager.
The Validator Manager smart contract handles the ‘inventory’ aspect of the validators. It processes staking and unstaking requests, and keeps a count of validators on the network. The Validator Manager handles the restaking process, and also processes slashing events when they occur. Through this portal, validators can select a secondary network to validate.
The Chain Manager is an administrational smart contract; it defines the number of validators needed by a network for decentralization and delineates the conditions to run a node on the network and also defines punishments for defaulting validators.
The Interop Layer (Interoperability Layer)
This layer handles the intercommunication of networks in the supernet. Polygon claims to be developing a specialized communication system powered by a modified version of the Message Queue algorithm currently used by the Polygon zkEVM rollup. Using Message Queues and ZK proofs, the Polygon ZkEVM is able to send messages across networks seamlessly. Polygon claims that the interop layer upgrades this design massively through the Aggregator. The aggregator mediates between the Ethereum network and networks in the Polygon 2.0 supernet. It compiles zk Proofs from these chains and submits them to the Ethereum network.
By submitting the proofs to Ethereum, messages in the queue are transmitted as soon as the batch is verified on Ethereum. This way, the aggregator is able to establish an efficient communication pathway between the chains and the Ethereum network. Native assets on the Ethereum network can be transferred to the Polygon chains seamlessly. The validators in the staking layer also take up the duty of protecting the interoperability layer.
The Execution Layer
The execution layer is just like any other execution layer. It consists of a consensus system operated by the validators that screen transactions before adding them to the block. Validators obtain details of transactions from the mempool and reach an agreement over the validity of the transaction. Once a consensus is reached, the transaction’s data is stored and this layer also generates the witness data to be used by the ZK prover. Refer to this article on rollups to learn how the ZK validity proof uses a witness to prove transaction validity.
The Proving Layer
The proving layer generates proofs for transactions executed on the network. It is made up of the common prover, the state machine, and an optional state machine constructor. The state machine constructor is a framework for building state machines that allows networks on the supernet to design their own state machines tailored to their needs. It is a modular framework and therefore brings in some flexibility. Networks are able to select components of their proving machine as they wish. The state machine then handles the generation of transaction proofs for the network.
The common prover is designed to easily adjust to any state machine defined by the networks in the supernet. It uses a single-proof system to query the correctness of the transaction data before they are submitted to the main network. The common prover completes the system and makes a case for the existence of different forms of ZK networks in one supernet. Its ability to adjust to custom-made state machines and transaction types ensures that every network’s transaction data gets assayed properly.
Polygon CDK
Developing a zero knowledge Layer 2 network is certainly a complex and technical feat. To cut down on these complexities and ensure that developers launch ZK networks that align with the design of the Polygon supernet, Polygon will introduce the Polygon CDK (Chain Development Kit). The CDK is a codebase for launching ZK L2s on the Supernet. It is an open-source framework that can be adopted by developers who wish to launch networks on the supernet. Networks developed using the CDK are in fact Ethereum L2 networks with the principles of Polygon 2.0. Polygon claims that these networks inherit the security, and decentralization provisions of the Polygon 2.0 and automatically become a member of the supernet. They benefit from the interoperability of the system and share resources (including the liquidity layer) of the supernet.
The Polygon CDK is modular, which means that developers have a high level of freedom in the selection of their network’s components.
What Happens To The MATIC token?
In short, the POL token will be replacing the MATIC token. MATIC has served as the native token of the project since its inception and has gone through a couple of soft rebranding over these years. It has also seen extensive ownership thanks to the widespread adoption of Polygon and its projects. As shown on-chain, the MATIC token is held by over 600,000 cryptocurrency investors. However, the upgrade to the POL token is the biggest update the token has witnessed since it was launched. This upgrade will see the whole Polygon tokenomics moved to a different smart contract to allow the token to operate within its new scope as desired. Like MATIC, the total supply of the POL token is 10 billion. The initial circulating supply is expected to be the same as the circulating supply of the MATIC token by the time the phase-out process starts.
As part of the phasing-out process for the MATIC token, MATIC holders will need to run a swap transaction to transfer their old MATIC token to the upgrade smart contract. MATIC will be swapped to POL token in a 1:1 ratio. According to Polygon, the phase-out process will last for over 4 years, which will provide enough time for every holder to move their token to the new contract. When this is done the MATIC token will cease to exist. Therefore, as a MATIC holder, it is recommended that you stay up to date with new developments regarding this and complete your token swap within the specified timeline.
Final Thoughts
Polygon is going big into the ZK and Layer 2 technologies; it is quite understandable why they are taking the technology through this route. This is also in line with their original goal of scaling the Ethereum network. The Polygon PoS chain has served for a while and has seen quite a significant adoption during this time, becoming one of the most used POS EVM networks. This new development is one to look out for as it will probably change the landscape for decentralized applications and other smart contract projects in the Polygon ecosystem. Not just the technical side, the economic aspect of the project is also due for a change, especially with restaking. The new POL token will cover everything that is being built on the expanding ecosystem, beyond the utility of the original MATIC token.
Polygon leaning towards the ZK technology is also a significant one for the ZK paradigm and the development of the technology. Over time, we will see how this system develops and how it affects blockchain enthusiasts and investors. It is also important to note the technical volatility associated with new systems and apply caution where due. Also, note that this article is only for educational purposes and not be taken as financial advice. Always do your own research before investing in any tokens and protocols.
Joel is deeply interested in the technologies behind cryptocurrencies and blockchain networks. In his over 7 years of involvement in the space, he helps startups build a stronger internet presence through written content. Follow the author on Twitter @agboifesinachi
Or check it out in the app stores
