Polygon: The Road to Mainstream Adoption
In collaboration with: Aaron Lindenstraus & Tobias Wynn.
Abstract
Polygon is a leading blockchain and indexes significantly on its ability to build a mainstream customer gateway.1 The successes of Polygon have come directly from its feature set that scales Ethereum and the blockchain is seeing an increase of roughly 80,000 unique wallet addresses per day, as of December 2022.
2 Scalability aside, Polygon has a strong value-add over other known blockchains as their business development team is composed of world-renowned operators from YouTube, Airbnb, Electronic Arts, and other large-scale organizations where these individuals have years of experience building client-side tooling that adapts to mainstream likings.
Polygon’s Backstory
Polygon, originally called Matic Network, is a blockchain developed in India by Jaynti Kanani, Sandeep Nailwal, and Anurag Arjun in 2017. Mihailo Bjelic joined later to officially start Polygon. The four co-founders met in an online chat forum called ethresear.ch where they shared an interest in creating blockchain scaling solutions. Polygon is best known for its ability to scale and preserve the Ethereum blockchain, making it faster and cheaper for all transactions. The Polygon blockchain is also bolstered by a native token MATIC, named after the project’s original name.
Ethereum is the blockchain development platform of choice for most developers, but it has many limitations including low throughput, poor user experience, and no sovereignty. These and other limitations inhibit Ethereum’s ability to scale. While there were projects exploring Ethereum-compatible blockchains to mitigate these limitations, none of these projects had developed a specialized framework to build such blockchains nor a protocol to connect them, creating significant developmental challenges and ecosystem fragmentation. Polygon is a protocol and framework for building and connecting Ethereum-compatible blockchain networks aimed at combating these limitations. Polygon combines the best of Ethereum and sovereign blockchains into an attractive feature set “built by developers, for developers.” 3
Polygon Edge: Scaling and Constructing Polygon
The Polygon Foundation spends a tremendous amount of capital on resources used to scale adoption as well as significant business development efforts securing partnerships with brands and businesses all around the world. Polygon takes an active role in scaling the blockchain while recognizing that the underlying technology must be the most superior compared to other existing blockchains. Polygon Edge is a modular framework that supports any Ethereum-based protocol and allows developers to create their own compatible networks, sidechains, and general scaling solutions. The thesis behind Polygon Edge is to make Polygon development as seamless as possible while creating easy avenues for Solidity developers on Ethereum to migrate and port over their code to support Polygon. Polygon is designed to support all the features that Ethereum supports but with an added layer of fast speeds and cheap transaction costs that Polygon provides. With a cross-chain environment, Polygon Edge creates the bridges necessary to create intersections across protocols and applications no matter what blockchain their home started as.
Polygon Edge provides developers with the tooling necessary to support JSON-RPC connectivity which allows the protocol to interact with a wallet most accessibly. Edge can also be described as an Ethereum bridge, meaning that any EVM (Ethereum Virtual Machine) application is designed to be used with this decentralized system. Even if there are various types of consensus mechanisms such as Proof of Authority or Proof of Stake, the voting processes can easily be modified without the need to roll back the state of the chain or perform a reset. On the other hand, since Edge is a layer-2 solution and not fully autonomous, it relies fully on Ethereum still being functional and running. There is also a barrier of entry for developers as there is a fair amount of EVM knowledge necessary to start developing secure and robust code. Although Polygon Edge is one layer above Ethereum, there is a need for node support on Ethereum which can add costs and time to development processes.
Polygon’s Team
Polygon’s holistic leadership team consists of four co-founders: Sandeep Nailwal, Jaynti Kanani, Anurag Arjunthe, and Mihailo Bjelic. All four have limited public information regarding their past and experience likely due to the project still being relatively new and the founders not prioritizing publicity over the development of the technology. They all come from computer science or tech backgrounds. As of December 2021, Polygon no longer has c-suite positions as it does not contribute to their vision of a decentralized and open network, but previously the CEO was Jaynti and the COO was Sandeep. Presently, all contributors to the blockchain are on equal terms beyond the co-founders who have maintained their titles. Over the last year and a half, the Polygon Core Team has grown from 40 employees to over 550 people.
While the lack of public information regarding Polygon’s cofounders’ background may be interpreted as suspicious, it is difficult to assess the expertise of most founders in the crypto space since it is such a new industry. The co-founders met on an online forum and had similar ideas for solving the scalability problems on the Ethereum blockchain. Unlike other major crypto founders that flaunt tremendous wealth, it seems like the Polygon founders instead focus on the day-to-day operations of the business. Through the limited information out there, it seems like the intentions of the founders are genuine. The $450 million in funding raised by Sequoia Capital India, Tiger Global, Softbank, and Galaxy Interactive show that the most reputable companies in the world are choosing to invest in Polygon after doing due diligence, showing the confidence that they have in the co-founders and the potential of the Polygon infrastructure.
Polygon Studios
Whether it is companies in Web2, traditional finance, brands, or media, Polygon is on a mission to land partnerships with major companies across all industries. At the helm, CEO Ryan Wyatt developed a powerful business development team to take on the blockchain industry from a completely new perspective. Wyatt was formerly the first-ever head of YouTube Gaming, where over his 7 years at the helm, grew YouTube Gaming to become the largest gaming platform in the world4. Through his myriad connections in tech and media, Wyatt has recruited experts from companies such as Amazon, Oracle, Apple, and Electronic Arts intending to develop products that are easy to use for everyone. Polygon has grown its business development team to not only drive Polygon adoption but to be a high-level and fast-paced Web3 marketing team.
How Web3 Reaches Mainstream Adoption
Polygon Studios is the active arm of Polygon that is designed to focus on two market areas: gaming and NFT media projects. The core goals are to promote the blockchain as the leader in decentralized gaming, develop a brand that grows a community of developers, gamers, and users, and to position and establish the Polygon blockchain as the mainstream adoption network. The Polygon NFT Studio is focused on working with brands to help them launch their intellectual property on the blockchain through digital collectibles and marketplaces to incentivize community participation. All in all, Polygon Studios aims to be the premier, full-scope, product studio that partners with traditional brands looking to enter and invest in blockchain technology while creating user-friendly avenues to easily interact with once “hard to use” blockchain-based protocols.
Polygon Versus Ethereum
As of December 2022, there are over 198 million Polygon-generated addresses compared to Ethereum’s 215 million unique wallets. 5 Even though Polygon’s lifespan isn’t nearly as long as Ethereum’s, the blockchain has experienced some periods with more active wallets than Ethereum, most likely due to cheaper gas fees during congested hours on Ethereum. Polygon has been fortunate enough to grow its amount of unique wallet addresses at a much faster rate compared to Ethereum, and even more since Ethereum migrated to Proof of Stake.
While there could be countless reasons for Polygon seeing high and growing amounts of daily active users compared to the bedrock, Ethereum, it's most likely in response to the onboarding of mainstream customers from recently announced partnerships with popular companies like Robinhood, Reddit, Nike, and Starbucks. These brand partnerships have continued to see momentum despite the recent bad press and rhetoric toward crypto assets with the fall of FTX. With more and more partners slated, Polygon is becoming the new home for mainstream adoption in Web3.
Case Study 1: Nike .SWOOSH
In November 2022, Nike launched a new Web3 platform called .SWOOSH that will offer Polygon-based NFT projects. The goal of .SWOOSH is to build a community across athletes and sports by launching engagement initiatives held together by digital collectibles to prove ownership. As the digital collections begin to launch, Nike Members can not only collect virtual shoes and apparel but participate in community events with a select few being selected to co-create products alongside Nike to earn royalties. This mechanism for community engagement not only creates a sense of belonging, but it introduces a new incentive model that democratizes ownership and financial incentives across demographics of all different sizes.
In late 2021, Nike acquired NFT and digital apparel startup RTFKT to bring its brand into the growing Web3 space where they have collaborated on joint drops on the Ethereum mainnet. Now, with the .SWOOSH launch, Nike has pivoted away from RTFKT by utilizing the Polygon network. The switch, despite a costly investment with RTFKT, can be attributed to Polygon’s lower gas fees, higher transaction speeds, and shared value to empower and compensate the user.
Case Study 2: Starbucks Odyssey
Starbucks has recently launched an experience-based Web3 initiative called Odyssey which allows users to go on virtual journeys and reward them with NFTs and points that can be used for future experiences. Odyssey will be built on the Polygon network due to its fast speeds, low fees, and commitment to the climate. Polygon committed to being carbon-negative by the end of 2022 and has already offset its network’s cumulative CO2 debt.6 Starbucks is looking to broaden access to Web3 products like NFTs with Odyssey by making them easier to use for everyday consumers. The NFTs on the platform are called ‘stamps’ and can be bought and sold via an in-app exchange by using a credit card instead of a cryptocurrency wallet which is currently a significant barrier for many consumers. Odyssey is already connected to its current loyalty program which many consider to be one of the most successful loyalty programs ever implemented. This means that it will already have a substantial pool of users once it’s out of beta that will be using the Polygon network.
Case Study 3: Intella X
In August 2022, Polygon announced a partnership with South Korean game development and publishing giant Neowiz to launch a Web3 gaming platform called Intella X (IX), bringing Neowiz’s popular gaming IPs to Web3 for the first time. As an increasing number of game developers seek to enter the Web3 space, many face high entry barriers due to a lack of technical expertise and market insight. This has led to the emergence of blockchain gaming platforms that provide developers with the tools and guidance in their adaptation to blockchain technology. While these services are great onboarding tools, they often maintain traditional, centralized revenue models where the generated revenue is shared exclusively amongst the platform providers and developers, not the users of the ecosystem. This goes against the fundamental principles of Web3 and is the reason why Intella X was created. 7
Intella X differs from other existing blockchain gaming onboarding services because it not only guides developers into Web3 but ushers a new standard with a decentralized platform revenue structure that compensates the users of the ecosystem and not just the game developers and platform providers. Developed and managed by Polygon, the IX platform uses a Proof of Contribution (PoC) service model where contributors to the platform’s ecosystem (like game developers and users) can be compensated in the form of the platform’s native token without the need of running hardware or software. Developer revenue is based on the project’s monthly revenue, monthly active users, and total value locked for the game’s designated liquidity pool. Users can receive compensation by staking, providing liquidity to various token pairs within the platform ecosystem, and by playing the games and swapping any unique game tokens earned for IX tokens on the exchange. Intella X is designed to distribute the shares of all generated revenue back to the contributors of the ecosystem.
Hypothetical Case Study 4: Polygon Partners with Meta
In November 2022, Meta announced that it would introduce a toolkit allowing Instagram users to mint and sell Polygon-powered NFTs,8 though many of the details have yet to be announced. In this hypothetical, Polygon takes this partnership to the next level, to create a Web3 social media platform where all users can be compensated directly based on the amount of revenue they generate. Users would be compensated in a native token and the value would go up, rewarding the existing users, if more users join the platform. Social media posts can be minted as NFTs where their value would correlate to their engagement (likes, comments, and shares). For example, a Kim Kardashian post as an NFT with 1 million likes could be worth 1,000 native tokens (based on its current and future engagement potential), where Kim could either sell the post (and the buyer collects all future revenue for that post) or keep the post and continue to earn compensation based on the post’s future engagement.
A similar Proof of Contribution (PoC) model to what’s used in Intella X could be followed. Influencers doing brand promotions can increase the efficiency and security in which they are paid (compensation would only begin upon the post publishing and would increase based on the engagement of the post). Users without large followings can also earn a significant percentage of the revenue they generate just through engaging with posts and watching ads. The value that Polygon brings to this partnership is in the creation of a native token that is used to compensate all users directly, efficiently, and securely. Also, Polygon’s network would provide a platform to create, buy, and sell NFTs (that would replace traditional social media posts) and give users the ability to be compensated directly for the revenue they generate; all done on the fast, low-cost, and secure Polygon blockchain. Like other Polygon partnerships, this would empower the user to be not just a consumer, but a partner who is compensated for their part in creating value on the platform. This hypothetical shows one of the many potential future uses of the Polygon network that could greatly disrupt multibillion-dollar industries and add millions of new users to the Polygon network.
Polygon’s Mainstream Adoption
These case studies show that companies are already choosing Polygon over the Ethereum mainnet and other layer 2’s as their partner to adopt and incorporate blockchain technology. The network’s technical capabilities, thriving ecosystem, and the team’s commitment to sustainability make Polygon a hub for some of the most important Web3 projects. These projects include DeFi protocols like Aave, Uniswap V3, NFT marketplaces like OpenSea and Lazy.com, and partnerships with Adobe, Stripe, and Robinhood. The “other secret” to Polygon’s mainstream success is organizational, where Polygon has hired from YouTube, Airbnb, EA, Amazon Cloud, and others. 9 These partnerships with some of the most valuable companies in the world, and many others to come, show how Polygon is becoming the industry leader for mainstream blockchain adoption across a plethora of industries.
Current Market Environment
As of early December 2022, there are approximately 8.7 million Polygon (MATIC) tokens in circulation trading between $0.88 and $0.95. Polygon has a market cap of about $8 million which ranks 10th among all other cryptocurrencies. Despite the recent downturn that has befallen cryptocurrency markets due to a variety of factors, including the infamous collapse of well-respected exchange FTX, Polygon has maintained its value better than other prominent tokens such as Ethereum and Bitcoin.
Weaknesses and Limitations
Polygon’s biggest weakness is that it’s not an autonomous blockchain given its reliance on the Ethereum network. Because its token is built on the Ethereum platform, if Ethereum were to have any issues or even collapse, Polygon would have significant issues. On the counter, this can be interpreted as a positive since Ethereum has established itself as a reliable system with a large community. Another threat to Polygon was the Ethereum merge to 2.0 since many predicted that it would greatly improve Ethereum’s current state of processing, therefore, improving its ability to scale and reduce network congestion. 10 Since these are some of the big selling points for Polygon, it was a concern that it would drastically decrease Polygon’s active users over time. As mentioned, this has not been the case, as Polygon’s user base is still growing rapidly. The merge itself didn’t reduce gas fees and therefore, had no impact on current decentralized applications or layer 2 solutions, making Polygon as relevant as ever. Another potential limitation is that Polygon’s growth and value potential is limited to the future investment companies are willing to make to adopt and implement Web3 and blockchain technology. A future without mass adoption to Web3 and blockchain technology would greatly limit the need for Polygon’s products and services.
A major limitation of the MATIC token is its limited use case. The token is designed to be a governance token that secures the Polygon platform. It is not commonly used for everyday purchases which limit its usability.
Lastly, there is concern over the great amount of competition in the scaling solution space, whether for Ethereum or other blockchains, with some of the main competitors being Solana, Polkadot, Arbitrium, and StarkNet.
Competitors
Solana
Similar to Polygon, Solana aims to address many of the scalability issues that Ethereum suffers from. Solana founder, Anatoly Yakovenko, created Solana to be able to handle 29,171 transactions per second compared to Ethereum’s 15 transactions per second.11 One of the biggest differences between Solana and Polygon is that, unlike Polygon, Solana directly competes with Ethereum rather than trying to make it more efficient. Solana has its own proprietary blockchain while Polygon is built on top of Ethereum. Solana’s independence from the Ethereum network can be a strength as they are not inhibited by Ethereum’s flaws and are not reliant on the network. One of Polygon’s biggest limitations is that it is reliant on the Ethereum ecosystem and Solana’s independence from that network makes it a very strong competitor.
Polkadot
Polkadot is a protocol that streamlines the process of creating purpose-built blockchains and isn’t built within the Ethereum ecosystem but rather has its own blockchain. Polkadot allows developers to create sub-blockchains off its own that can be used to create tokens, consensus mechanisms, and governance systems. It has a very popular Dapp ecosystem due to low gas fees and high scalability. Although Polkadot has fast speeds, Polygon has significantly faster speeds given that it can process 65,000 transactions per second while Polkadot can only process 1,000 transactions per second.12 Although Polygon has faster speeds, Polkadot’s greater functionality and lack of reliance on the Ethereum blockchain make it a strong competitor.
Arbitrum
Like Polygon, Arbitrum is built upon the Ethereum blockchain and aims to help Ethereum scale through cheap and fast transactions. Arbitrum uniquely offers developers the ability to code using any language that is compatible with the Ethereum Virtual Machine. This is a significant advantage for Arbitrum as it can attract developers who specialize in a wide variety of coding languages. Unlike Polygon, Arbitrum doesn’t have a token, limiting its exposure to retail investors who may want to support the protocol, which is a disadvantage to Polygon and its MATIC token.
StarkNet
StarkNet is considered to be the network built on top of the rollup system that allows any Cairo developer to deploy permissionless smart contracts. The user experience is similar to the other chains mentioned, while also acknowledging StarkNet based contracts can interact with EVM environments through asynchronous messaging. Although StarkNet could be classified as centralized due to sequencer management being fully controlled by the Starkware entity, there are plans to decentralize.13
Polygon’s Roadmap
In addition to Polygon’s continued investment in future partnerships with major companies entering the Web3 space, the core development team has also shown no signs of slowing down, even through the market downturn and bear circumstances. The following projects show the team’s investment in improving the aspects of the blockchain trilemma,14 specifically focusing on improving scalability with ZK-rollups.15
Polygon Zero is an Ethereum-compatible ZK-rollup that has the potential to further improve the scalability, speeds, and cost of ZK layer 2’s by using Plonky2, Polygon’s groundbreaking prover system, that generates ZK proofs faster than any other tech.16
Polygon zkEVM, the first ZK-rollup with source code available, provides complete EVM opcode equivalence for a frictionless user experience and the security of Ethereum.17 zkEVM executes smart contracts transparently by publishing ZK validity proofs while maintaining opcode compatibility with the Ethereum Virtual Machine.
Polygon Nightfall is a hybrid optimistic ZK-rollup that enables efficient and decentralized business transactions with privacy, which can open up substantial opportunities for enterprises on Web3.18
Conclusion
Polygon is becoming a clear leader in the path to building mainstream tooling while leveraging the benefits of blockchain-based technology through its intuitive user interfaces and deep partnerships with known brands. Recognizing Polygon’s success to this day and its packed development timeline throughout the market downturn, Polygon is well-positioned to make Ethereum more accessible while being the onboarding machine for the next billion users to Web3.
Aside from Polygon’s focus on being the most intuitive onramp to Web3, the network has a valuable commitment to sustainability and preserving Earth. Polygon has ambitious plans to go carbon negative and this is done by building accounting mechanisms to track the offset of each NFT and DeFi transaction.19 Polygon is serious about changing the world and they will continue to reduce their carbon footprint by buying credits, building initiatives that encourage others to pledge, educating the world on climate change, and donating to NGOs all to set an example for other blockchains and the technology industry in general.20