This series of posts has been produced in collaboration with the Aslan Academy’s research team, ART: Aslan Research Team, a blockchain research society. In light of the Luniverse NOVA’s support for the Polygon chain, this series has been prepared to facilitate an understanding of Polygon. The content has been structured to be easily comprehensible without complex knowledge of blockchain, allowing for an effortless reading experience.
1-0. What is Polygon ?
Polygon is a prominent Layer2 chain for Ethereum, initially launched in 2017 with the aim of addressing Ethereum’s scalability issues. Key features of Polygon include high compatibility with Ethereum, reduced gas fees through enhanced scalability, and a variety of sub-products. Leveraging these strengths, Polygon has become a leading public blockchain as of 2023, boasting the second-highest on-chain transaction volume with an average of approximately 90 million transactions per month.
Numerous DApp projects have been steadily migrating to Polygon to take advantage of its stability and scalability. In addition, major Web2 companies such as Starbucks, Coca-Cola, Reddit, Meta, and JP Morgan have also onboarded their Web3 projects through Polygon over the past year.
Mike McGlone, chief strategist at Bloomberg, has mentioned that Polygon serves as a beacon for blockchain developers, as it employs cutting-edge zero-knowledge technology to guarantee privacy and transaction processing speed. He stated, “There is no protocol that can compare with the network efficiency provided by Polygon (MATIC).”
In this series, we’ll analyze why Luniverse’s Polygon is gaining the trust of enterprises and investors in three posts.
- Luniverse NOVA X Polygon – 1. What is Polygon and Layer2?
- An overview of how polygons came to be.
- Luniverse NOVA X Polygon – 2. Polygon products
- Polygon’s products and technical details
- Luniverse NOVA X Polygon – 3. Polygon in Numbers
- Analysis of polygons through numbers
In this article (1. What is Polygon and Layer2?), we will introduce what polygons are, how they came into existence, and how they solve the problems of existing blockchains.
1-1. Ethereum
Before delving into the core topic of Luniverse NOVA and Polygon, we will first summarize the concept of Ethereum, which was the prominent public blockchain prior to Polygon, and address the challenges it encountered.
Ethereum OverviewEthereum is a blockchain platform for running DApps and smart contracts. Vitalik Buterin, who first proposed the concept of Ethereum, wanted to address the limitations of Bitcoin (launched in 2013), which only allowed for a limited scripting language, by introducing the concept of the Ethereum Virtual Machine (EVM), which could run code of arbitrary complexity, enabling general-purpose programming. Vitalik Buterin released the Ethereum whitepaper in December of that year, and on July 30, 2015, Ethereum’s first block was mined, officially launching Ethereum into the world.
Ethereum uses a relatively well-known cryptocurrency called ETH (ether) to process transactions; it uses a distributed ledger to process transactions, the same as Bitcoin; it supports the development of decentralized applications (DApps) and smart contracts using a language called Turing-complete Solidity; and it is a public chain with a decentralized network to ensure trust and transparency away from centralized systems.
Nevertheless, with the launch of successful projects like CryptoKitties and NFT Boom, Ethereum’s performance issues and the security of its assets have continued to raise concerns, and to address them, Ethereum has undergone several protocol changes through soft and hard forks.
So, what are the inherent Problems facing Ethereum?
Ethereum’s Problem: The Trilemma
The systemic Trilemma of blockchain means that Scalability, Decentralization, and Security have conflicting properties, making it difficult for a blockchain to solve them all at once.
Vitalik Buterin, the co-founder of Ethereum, wrote about “The Scalability Trilemma” in his blog, “[Why sharding is great: demystifying the technical properties (2021.04.07)]” A few days later, he wrote about the limits of blockchain systems in his own article, “[The Limits to Blockchain Scalability (2021.05.23)]”.
The Trilemma derived from The Scalability Trilemma, or what we call the Blockchain System Trilemma, best describes the problem with Ethereum that we’ll be addressing.
First, let’s start with the Problem of Ethereum’s Scalability. Ethereum’s scalability has been discussed as a major issue preventing the mass adoption of blockchains for the following reasons: does Ethereum, the leading public blockchain, actually have the performance to support commercial services?
3. Low Scalability – low information throughput (TPS).
Low information throughput simply means that the amount of transactions that can be processed in a second (Transactions per second, TPS) is very low. Ethereum averages (24.02 TPS), with a high of 56.88 TPS (block number 15377496). Compared to traditional Mastercard (5,000 TPS) and Visa (24,000 TPS), Ethereum (24.02 TPS) can be viewed as a significantly lower throughput of information per unit time to run applications.
2. High Transaction Fees – high demand compared to supply (gas fee inflation)
The low TPS of a blockchain creates a market where users have to compete to be selected by the block producers (miners) for transactions. For this reason, if there are more transactions to be processed (demand) than there are blocks to be created (supply) in Ethereum, the gas fee to be paid to those block producers (miners) will be higher. In other words, low scalability = low information throughput per unit time (small block size or low processing speed) leads to higher fees per unit transaction. (For more details, see this article).
This means that you could end up paying about 20,000 won in gas fees to send about 1,000 won to an acquaintance.😅 Below is a transaction created recently (23.04.19). The actual amount sent is $6.64 (about 8800 won), but the transaction fee is $4.35 (about 5800 won). That’s about 65% of the transaction amount in fees.
3. large number of Network Users (160 million addresses) – increasing demand.
With the above two problems of low scalability, these problems become more serious as the number of Ethereum users increases. Therefore, it is difficult to use Ethereum for dapps that require stable performance.
So, can’t these scalability issues simply be solved technically?
Here’s a great article from 2021 by Vitalik Buterin on the limits of blockchain scalability. It summarizes why the blockchain trilemma exists and what happens when you try to solve it simply technically.
For a blockchain to be decentralized, it’s crucially important for regular users to be able to run a node, and to have a culture where running nodes is a common activity. … the main bottleneck in Ethereum is storage size, and statelessness and state expiry can fix this and allow an increase of perhaps up to ~3x – but not more, as we want running a node to become easier than it is today. … Sharded blockchains can scale much further … those limits are high enough that we can probably process over a million transactions per second with the full security of a blockchain.
But it’s going to take work to do this without sacrificing the decentralization that makes blockchains so valuable.
Source: The Limits to Blockchain Scalability from Vitalik Buterin’s website
For decentralization, it’s not a good idea for blocks to get too large. This is because it increases capacity and makes it harder for ordinary users to run nodes. … The biggest cause of Ethereum’s bottleneck (low scalability) is storage size (block size). This can be solved technically, and security is not an issue, but decentralization may be sacrificed
If you raise the maximum size of a block to solve this scalability problem, you end up with a node that is only operated by a few people or organizations that can afford the capacity of that node, which can sacrifice decentralization.
Not only that, but it can also be a problem for the security of the blockchain. The number of transactions that can be included in a block depends on the computational complexity of the transactions, and if the maximum size of a block is increased indefinitely to solve scalability, it may improve scalability (TPS), but it has the disadvantage of increasing the computational complexity per block and creating more uncle blocks.
As such, it can be said that the trade-off between the three factors mentioned in the blockchain system trilemma – scalability, decentralization, and security – has been a limitation of existing Ethereum (or any public blockchain).
Solution: Polygon
Wouldn’t it be great if there was a perfect blockchain that solved Ethereum’s trilemma?
One of the solutions to Ethereum’s problems, which Vitalik Buterin has also been thinking about and proposed in 2021, is Layer2 blockchains. Polygon is the most prominent Layer2 blockchain.
1-2. Polygon
Polygon Overview
Originally, there was a scalability solution called Plasma that Ethereum itself was creating to solve the problem. Plasma is a layer 2 solution that connects a separate off-chain to the original parent chain. Polygon was a project created to implement Plasma technology at the time.
Fast forward to around 2017, when Indian developers Jaynti Kanani, Sandeep Nailwa, Anurag Arjun, and Mihailo Bjelic noticed these problems with Ethereum and created the Matic network to solve them. Matic was the name used before it was rebranded as Polygon, and as a nod to this, the original Matic coin is still used today as the native token of the Polygon network.
Polygon was started with the goal of “Blockchain Mass Adoption”. The main features of Polygon are high compatibility with Ethereum, low gas costs through high scalability, and various sub-products. We will cover the details of the last sub-products in the next article (2. Polygon products).
Before we start talking about Polygon Networks, there is a concept that needs to be clarified.
These are EVMs, Layer2, and gas costs.
📌 EVM (Ethereum Virtual Machine)
EVM stands for Ethereum Virtual Machine.
An EVM is a virtual machine for running smart contracts on Ethereum, which is responsible for executing smart contracts and updating their state. EVMs operate according to the rules provided by Ethereum and run in an isolated sandboxed environment to ensure security when it comes to executing smart contracts. Since the EVM is a decentralized global computer, it can be accessed by anyone, which allows you to create secure and immutable smart contracts.
With its EVM-based blockchain structure, Polygon provides a development environment that existing Ethereum developers are familiar with and is highly compatible with Ethereum. Because of this, Polygon can make it easier for projects that started on Ethereum to transition to the Polygon network.
📌 Layer2 (L2)
The meaning of Layer in the crypto ecosystem is a structure that represents layers, with different ecosystems on each layer.
Let’s start with Layer1, which refers to blockchains that have their own network as the system for recording, authorizing, and processing transactions in blocks, like the blockchain as we know it. Bitcoin, Ethereum, and Solana are some examples of Layer1 blockchains. However, while Layer1 blockchains provide the decentralization and security that are the hallmarks of blockchain, they are limited in scalability as a side effect, and Layer2 blockchains were born to solve this problem.
You can think of a Layer 2 blockchain as an “extension” of a Layer 1 blockchain. A Layer 2 blockchain is a way to interact with Layer 1 to improve scalability while maintaining security and decentralization. For example, you can have a separate blockchain for quickly recording transactions, and then bundle the transactions processed on that blockchain into some sort of unit and write only the summarized information back to Layer 1, reducing the burden on the Layer 1 blockchain while ensuring reliability. In this way, it maintains the decentralization of the blockchain and increases its efficiency, so in conclusion, it can be seen as an “extension pack” that helps developers and users who use the blockchain in various ways to use it more easily.
Polygon is a Layer2 scaling solution for Ethereum.
Polygons were created to solve one of Ethereum’s trilemmas, specifically scalability.
📌 Gas Fee (Transcation Fee)
Transaction fees are the cost of processing a transaction on a blockchain network, and they must be paid before the transaction is recorded on the blockchain. In Ethereum, these transaction fees are called “gas fees”.
Ethereum’s transaction fee algorithm automatically adjusts the gas fee based on current conditions on the Ethereum network. The gas fee is determined by the amount of work and computation required to process a transaction on Ethereum. When demand on the Ethereum network is high, the gas fee increases, and when demand is low, the gas fee decreases. This gas fee adjustment algorithm is one of the key factors in ensuring the stability and scalability of Ethereum.
These transaction fees protect the cryptocurrencies used on the Ethereum network and contribute to maintaining the stability and security of the Ethereum blockchain. Transaction fees also help maintain competitive transaction processing speeds on the Ethereum network. As such, transaction fees play a very important role in the blockchain ecosystem: supporting transaction processing, incentivizing block producers (miners) to validate transactions, and eliminating spam transactions (at a cost).
Polygon is characterized by high scalability and, as a result, low gas costs.
Polygon has very low fees per transaction for these units. This is due to their high scalability (fast transaction speed).
1-3. Again, what is a polygon?
Polygon is an Ethereum-based scaling solution, an Ethereum Virtual Machine (EVM)-compatible Layer2 blockchain that is highly compatible with Ethereum.
Through its unique Layer2 structure (Modular BlockChain), Polygon solves the problems of slow speed and high cost of Ethereum-based applications, while inheriting the advantages of Ethereum’s decentralization and security, such as high scalability (fast speed and low cost).
Polygon also has a diverse set of Layer2 solutions. To achieve this goal, we support Polygon PoS Chain, Polygon zkEVM, and are planning to support Polygon Miden. We will cover these various solutions in detail in the next article (2-Polygon Products).
In conclusion, Polygon is an EVM-based blockchain with high compatibility with Ethereum, and is expected to play an important role in solving the scalability and processing speed problems of the Ethereum ecosystem through various Layer2 solutions, and in developing blockchain-based applications and services.
With that in mind, here’s a glimpse of the direction from the perspective of a polygon operator.
Interview with Co-Founder Mihailo Bjelic Part1
Polygon is a multi-chain scalability project. We’re curious to know how you came up with the idea to provide a variety of scalability solutions to give users a choice.?
When Polygon first came out in 2017 under the name Matic, it was a single scalability solution project focused on Plasma. However, since then, many ideas for scalability solutions have started to emerge. Looking at the market situation, we realized that we needed to provide users with a variety of scalability solutions. This vision led us to plan a multi-chain scalability project.
Polygon has been offering Plasma services since the days of Matic. The Ethereum community often talks about rollups as the next step for Plasma. Does Polygon recognize the limitations of plasma, which is why they’re moving to a multichain solution?
I don’t consider plasma to be an obsolete technology. The market for scalability solutions is an ongoing experiment with no one company taking the lead. A lot of that is coming from the public, who have a relatively poor understanding of the technology and may think of plasma as an old technology. At Polygon, we want to create a space that connects users to multiple scalability solutions, but we didn’t move to multichain because we think plasma has limitations.
Interview with Co-Founder Mihailo Bjelic Part2
Solving scalability problems is a difficult task. What are the challenges of scalability solution projects in Polygon’s opinion in the current environment: 1.
I don’t think there is a specific one-stop solution. The market for scalability solutions is not yet mature enough for mass adoption. I think the technology is also immature. To solve this, I think it is important for developers and users to gain more experience. In particular, we need to gain experience across boundaries. For example, we should feel and apply the same UX (user experience) of centralized exchanges. Polygon is also focusing on this aspect.
Many projects are collaborating with Polygon. Why do you think you chose polygons when there are so many other scalability projects out there?
I think there are two aspects to this.
The first is that Polygon is well-reviewed by real people who use it. Polygon has been evolving since 2017, and the community has a lot to offer.
The second is the response from developers. Developers look at how validated the project is in the real world. For example, the larger the TVL of a DeFi, the higher the demand for security. If a project with proven scalability is connected to DeFi, developers will take notice. In the case of Polygon, 30 million blocks have already been validated. I think that’s enough real-world validation, and I think that’s why people are using Polygon with confidence.
Collaborations on games and NFT projects stand out.
Some of the other projects collaborated because of Polygon’s technical advantages, but the main reason was experience. Polygon has experience in gaming and NFTs since the days of Matrix, and other projects appreciate that. Of course, the fact that Polygon is technically compatible with Ethereum Virtual Machines (EVMs), making it easy to use, also played a role in the collaboration. It also saves on gas costs. But I think the biggest driver of collaboration is the trust we’ve built over the years as we’ve been working on scalability solutions.
He also collaborates with DeFi projects. What’s great about connecting DeFi with Polygon?
Polygon has been battle-tested since its launch. This means that the risk of other projects actually using our scalability solutions is low. I think that’s why DeFi projects are looking at Polygon. There’s also the technical advantage of being able to implement our scalability solution in 15 days. Polygon is currently working with several DeFi projects. In March, Polygon powered SushiSwap with its Layer 2 solution.
Sustainability and decentralization are his goals for the future. What kind of ecosystem will we eventually build?
The goal of Polygon is to build a service that everyone can easily use. We want Polygon to be the most widely used scalability solution in the future.
To summarize, Polygon is a multichain scalability project that aims to provide a variety of scalability solutions to give users a choice. However, we believe that the market for scalability solutions has not yet developed to the point of mass adoption, and we believe it is important to increase the Web3 experience for developers and users. To this end, we are actively collaborating with various game companies and brand-based NFT projects, and we are also supporting a number of DeFi projects such as JP Morgan, 1inch Network, and Uniswap.
OUTRO
In the first installment of our Polygon series (1. What is Polygon and Layer2?), we looked at how Polygon came to be, how it solves the problems of traditional blockchains, and what it is and what it does.
Three-line Summary
✅ Polygons came about as a result of solving Ethereum’s Trilemma.
✅ Polygon is an EVM-based Layer2 scaling platform for solving Ethereum’s scalability, with various sub-products.
✅ Polygons are characterized by high scalability and low gas fees.
In the next post (2. Polygon products), we’ll cover Polygon’s various solution products and technical details.
