Earlier this month, I shared about the proposal by Polygon Lab's developers to revise the architecture of the Polygon network. It is referred to as Polygon 2.0 where they aim to build the Value Layer of the Internet which they say offer unlimited scalability and unified liquidity via ZK tech.
These were the previous proposals so far on the Polygon 2.0 blueprint or roadmap:
- Upgrade Polygon PoS to zk Layer 2 (19th of June 2023)
- Redesigning the Protocol Architecture or Tech Stack (29th June 2023)
Recently (13th July), they announced the third technical proposal which aims to upgrade the tokenomics of Polygon where MATIC, the network's native token will be upgraded to a new one called POL , "the next-generation protocol token that is designed to become the major tool for coordination and growth of the Polygon ecosystem and the main driver of the vision of the Value Layer for the Internet."¹
Why the Need for POL?
After looking at various blockchains like Bitcoin, Ethereum, Cosmos, Polkadot, and Aave - taking into consideration the pros and cons of their native tokens, their use cases, the POL proponents came up with what they call the "Design Goals" where they identified and enumerated how POL would benefit the Polygon ecosystem, and I quote, re:
- Ecosystem security. POL should help establish a highly decentralized pool of validators that can run and secure any Polygon chain. Validators should be incentivized to join and stay in the validator pool and help secure as many chains as possible, and at the same time disincentivized to do anything malicious.²
- Ecosystem support. Being a global network in the making, Polygon will require ongoing economic support for further development and growth. POL should help establish a self-sustaining funding mechanism for those activities. This funding “vehicle” should be governed by the Polygon community.²
- No friction. Blockchain networks often require both users and developers to hold, stake or consume their native tokens in order to use the network. This causes friction and degrades user and developer experience. POL should be designed in a way that does not introduce any such friction.²
- Community ownership. Polygon is envisioned as a decentralized network governed by its community. Assigning governance rights to POL holders can enable creation of effective governance models in which decision makers are directly incentivized to support proposals that are in the best interest of the Polygon ecosystem.²
Source: POL Whitepaper
I simple terms, upgrading MATIC to POL will enhance the network's security, provide more utility, further decentralization, infinite scalability, "and at the same time offer practically unlimited opportunities to the the token holders."
POL introduces the third generation of native assets – hyperproductive tokens which allows its holders to become validators and receive rewards, but with two game-changing improvements, re:
- Validators can validate as many chains as they want.
- Every chain can offer multiple roles (and corresponding rewards) to validators.
Source
Proposed Utility for POL Tokens
Validator Staking - Polygon validators are required to stake POL before they join the validator pool and be able to subscribe to validate any Polygon chain. Accordingly, this adds to the security of the network "by preventing Sybil attacks, aligning validators with the success of the ecosystem and enabling slashing (punishment of malicious validators.)"³
Validator Rewards - Incentivizing validators through a pre-defined amount of protocol rewards which should be distributed to them in proportion to the amount of POL they stake. There will be a base validator rewards and additional incentives for those validating individual Polygon chains.
Community Ownership (Governance) - POL should be utilized and have governance rights.
Proposed Tokenomics for POL
Initial Supply of 10 billion POL
- These will solely be dedicated for migration or token swap from MATIC to POL.
Emission Rates
100 million POL per year for 10 years (1% of supply) purposedly for Validators Rewards.
100 million POL per year for 10 years (1% of the supply) for Ecosystem Support, re: Community Treasury, a community-governed fund which will be used to finance the ongoing developments of the ecosystem.
After 10 years, emission rates for both Validators Rewards and Community Treasury can be reduced via governance proposals. Emission rates can never go up beyond 1%.
Migration Process of MATIC to POL
They proposed the following for the upgrade process from MATIC to POL.
- 1 MATIC = 1 POL
- Simple process for users to send MATIC to the upgrade smart contract and it will automatically return the equivalent amount in POL to the same wallet.
- Migration period of 4 years or indefinitely to allow MATIC holders enough time to migrate or swap their assets.
- MATIC held in CEX and custodians will be automatically converted to POL.
Summary (TL;DR)
The third proposal for the Polygon 2.0 roadmap is a change (migration or upgrading) of Polygon's native token from MATIC to POL. According to the proposal, POL will offer more benefits to the Polygon ecosystem in terms of security, scalability and growth. The said upgrade will greatly benefit POL holders (anyone can become a validator and can have multifold earning incentives).
Initial supply of POL will follow that of MATIC (10 billion). Emission rates to be fixed for 10 years at 1% of supply or 100 million per year for Validator Rewards and another 100 million per year for Community Treasury to fund ongoing developments. After the 10-year period, the community can vote to reduce the emission rate through governance proposal. Emission rate should not go beyond 1%.
Migration or swapping from MATIC to POL is proposed to be simple and 1 MATIC = 1 POL. Upgrading period is proposed to be 4 years or longer.
Conclusion
Polygon's ambition to build the Value Layer of the Internet is allowing its developers to reimagine and redesign the current infrastructure of the Polygon network including its token. Perhaps the upgrade will be good. POL seems to go better with the name of the network than MATIC, yes? But then again, it's not just the name but more on the technical side of things.
Will this recent proposal be approved by the majority of the Polygon stakeholders? That will be interesting to see.
Info Sources: Polygon's Blog / Whitepaper / One Pager
For infotainment only.
Lead image edited on Canva. Logo/s from Polygon. No copyright infringement intended. 16072023/09:25ph