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Polygon Recap - 2024 [2,881 words]

Polygon Recap - 2024 [2,881 words]

December 11, 2024

Introduction

Polygon is a technology suite which is helping Ethereum scale. This includes Polygon PoS, Polygon zkEVM, Polygon Miden, Polygon ID, Polygon CDK and the Aggregation Layer. The average transaction cost is under $0.01 on both Polygon PoS and Polygon zkEVM. Polygon's ecosystem boasts over 446 million unique addresses, 4 billion transactions, and millions of created smart contracts. Polygon have spent over $1 billion on Zero Knowledge research and acquisitions.

History and Timeline

To understand where Polygon are, you have to understand where they have been. Here is a quick history and timeline of Polygon.

The Matic Network, was launched in 2017 and co-founded by software engineers: Jaynti Kanani, Sandeep Nailwal, Anurag Arjun, and latterly Mihailo Bjelic (2020) [1]. There aim was to help scale Ethereum.

April 2019 - Matic raised $5.6 million through an ICO [2].
June 2020 - Mainnet Launch with the Proof of Stake (PoS) Chain.
February 2021 - The Matic Network rebranded to Polygon to become a multi-chain ecosystem, positioned as an Ethereum scaling and interoperability solution.
August 2021 - Polygon aquired Zero-Knowledge Rollups (ZK Rollups) platform Hermez Network for $250m [3].
December 2021 - Polygon aquired Mir, for $400m, to help develop ZK Rollups and forms Polygon Zero for ZK proofs [4].
December 2021 - 800,000 MATIC tokens were stolen in a security exploit.
February 2022 - Polygon raised $450 million in a funding round led by Sequoia Capital India, Tiger Global, and SoftBank Vision Fund [5].
October 2022 - Polygon zkEVM Testnet launches. The first ZK scaling solution that’s fully equivalent to EVM launches on public testnet.
March 2023 - Polygon zkEVM Mainnet.
June 2023 - Polygon 2.0 Announced, which included the Polygon PoS upgrade announced to zkEVM Validium [6,7].
April 2024 - all time high of 1.3million daily active addresses.
June 2024 - Polygon acquired ZK prover researchers Toposware for $50m. Polygon has now invested $1bn in ZK research and acquisitions.
September 2024 - Polygon’s token $MATIC rebrands to $POL.

Token

Polygon’s coin ticker transitioned from $MATIC to $POL in October 2024. $MATIC was initially used for transactions and staking. $POL’s utility as a '“hyperproductive token” will now cover ZK proof generation and Data Availability Committees (DACs). The move to POL from MATIC provides a better brand image for Polygon. This balances the slight confusion with the different Polygon chains and around their new Agg Layer.

At $0.625, POL is 34th by market cap at $5.2bn.

Most of Polygon’s tokens have vested and are released into the market, with 92.8% of tokens now unlocked. This is a known advantage compared to newer competitors, as the sell pressure from token unlocks is not a big factor for Polygon.

Technology

Initially developed using Plasma (a L2 scaling solution), the Matic Network pivoted to a PoS Sidechain for their Mainnet Launch in Jun-20.

Polygon PoS - Side Chain

Polygon PoS is a Side Chain and a decentralised public network for Ethereum. A sidechain is a separate blockchain that runs independent of Ethereum and is connected to Ethereum Mainnet by a two-way bridge [8]. Sidechains can have separate block parameters and consensus algorithms, which are often designed for efficient processing of transactions. Using a sidechain involves trade-offs, such as decentralisation and security as they do not inherit Ethereum's security properties. Unlike layer 2 scaling solutions, sidechains do not post state changes and transaction data back to Ethereum Mainnet. Unlike a simple sidechain, Polygon is more of a “commit-chain” system that handles computation offchain and then commits some of its block data to Ethereum to inherit security from Ethereum. Polygon PoS works across three sections, using Ethereum for checkpoints, Heimdall is used for staking and Bor is used to produce EVM compatible blocks.

Polygon PoS currently has $1.143bn TVL, which peaked at $9.89bn in June of 2021. Polygon PoS has $5 billion in secured assets, facilitated 2.2 billion transaction with 197 million unique addresses, at an average transaction cost of $0.015. Polygon has over 3 million average daily transactions across 10K+ dApps.

Polygon PoS TVL [34]

The ultimate vision for Polygon 2.0 includes migrating the PoS chain to a Polygon zkEVM execution environment, called Polygon zkEVM Validium.

Polygon zkEVM Validium

As part of Polygon 2.0, announced in Jun-23, Polygon PoS will shift to its final Validum form [7]. The original PoS network will now operate using smart contracts on Ethereum and will serve as the data availability layer for zkEVM. Its validators will still continue consensus processes, but with smart contracts on Ethereum rather than a dedicated sidechain.

Validiums are different to ZK Rollups in that they execute transactions (tx’s) offchain and maintain their data via ZK proofs offchain too. This enables them to have higher throughput and lower costs than standard ZK Rollups. Ethereum’s validators will have access to ZK proofs and state commitments, so they can prove if all transactions were correctly included in the rollup state. However, they cannot verify the validity of the rollup state (lack of data availability), as only a transaction hash is posted to Ethereum.

Upgraded Polygon PoS (zkEVM validium) would offer very high scalability and very low fees. Use case - apps with high transaction volume and low fees, e.g. Web3 gaming and social and micro DeFi [9, 10].

Polygon zkEVM Rollup and Polygon zkEVM Validium Architecture [7]

Polygon zkEVM Rollup

Polygon zkEVM Rollup is a public network which launched mainnet in March 2023. This was the first ZK scaling solution that is fully equivalent to EVM to launch public testnet. Polygon zkEVM rollup already offers the highest level of security, being secured by Ethereum, by posting transaction data directly onto Ethereum (green for DA on L2 beat) [13]. It is also green for the proposer failure, as it is self propose and also green for stat validation as ZK proofs are used for state correctness (STARK proofs wrapped in SNARKs - requiring trusted set up). It is red for not having a Exit Window and for Sequencer Failure, because there is no mechanism for including transactions when the sequencer is down/censorings. Polygon zkEVM Rollup is a Stage 0 Rollup (Full training wheels) due the ability to censor user withdrawls, centralised upgrades, exit window issues and because the Security Council members are not known publically. Compared to Polygon zkEVM Validium, the tradeoff is slightly higher fees and reduced throughput.

Use case - apps that process high value transactions and prioritise security, e.g. high value DeFi applications.

Polygon zkEVM on L2 Beat [13]

Polygon zkEVM Rollup costs [14]

EVM Equivalence

Polygon zkEVM is Type 2 equivalence. It achieves high EVM equivalence because most minimal changes are needed for Ethereum smart contracts, tools, and wallets to work [11, 12]. This balances performance and compatibility.

Ethereum Stages 1-4 [11,12]

Comparisons to ZKsync Era

ZKsync Era is Type 4 equivalence, as proof generation times are very fast, transaction speed is high due to posting state diffs and centralisation risks are reduced. ZKsync Era is Solidity compatible, but not fully EVM compatible. EVM compatibility is a weakness, but they do have custom compilers, zksolc and zkvyper, allowing developers to write smart contracts in Solidity or Vyper. In addition to, other Ethereum tools and libraries. This offers flexibility and performance improvements, with the drawback being code changes due to compatability issues.

It will be interesting to see how ZK Sync’s Elastic Chain develops compared to Polygon’s Aggregation Layer.

ZKsync Era on L2 beat [16]

The costs associated with the rollup were covered in depth at ZK Summit 12 in Lisbon, where Stefanos Chaliasos presented his research - analyzing and benchmarking ZK-Rollups [14]. Recording here [15]. Stefanos Chaliasos compared Polygon zkEVM and ZKsync Era, with his findings shown below.

ZK Rollups Landscape [14]

ZKsync Era’s large batch size compared to Polygon zkEVM Rollup gives amortisation benefits, but higher Fixed Costs.

Polygon zkEVM Rollup & ZKsync Era Fixed Costs [14]

Polygon Zero (formerly Mir Protocol)

Polygon Zero uses Recursive Proofs to aggregate proofs from multiple tx’s (up to 3,000) into a single proof submitted to the Ethereum L1 [17]. This speeds up and reduces the cost of generating proofs. The recursive proofs come from Plonky2, developed by Mir Protocol (acquired by Polygon for $400m in Jan-22). Plonky2 is the current proving system for Polygon, and was introduced in January 2022. When developed it took the time taken to complete a recursive proof down from 2 minutes to 0.17 seconds. In July of 2024, Polygon announced the launch of Plonky3 and upgraded version of Plonky2 [18, 19].

Polygon Zero [20]

Polygon Hermez

The Hermez Network was acquired by Polygon for £250m in February 2022. They developed Ethereum’s first decentralised ZK Rollup in March 2021. They developed a novel consensus algorithm, proof of efficiency (PoE). The Hermez prover is used in the Polygon zkEVM.

Polygon Miden

Polygon Miden is a Rollup for high-throughput, private applications [21, 22]. The Miden VM uses STARK-proofs, meaning they do no need a trusted setup or pre-processing. Lean cryptography should future proof STARKs against quantum computer attacks. Client side proving enables users to “locally generate proofs for their own state transitions without having to disclose the state to the network”. Other privacy features include private accounts, private tokens and tx’s where only the account hash is stored on-chain. Miden also allows parallel tx execution. Some of the projects using Miden are Aze (Online Poker) and Spark (Onchain Central Limit Order Book) [24]. Although it is still in Alpha Testnet, it can process 5,000 tx in a single block, every 5 seconds, and 1,000 TPS is expected at launch.

Polygon Miden [23]

Polygon Nightfall

Polygon Nightfall is a Rollup for institutions who want private tx’s. It launched in May-22 in collaboration with EY (one of the Big 4 accounting firms), which combines Optimistic Rollups and ZK for privacy.

Avail DA - was Polygon Avail

Polygon Avail was developed for off-chain DA, but has since become a standalone company, ran by Anurag Arjun.

Polygon ID

Polygon ID is a self-soverign ID and privacy by default.

Other ZK Work

Polygon Labs and Near Foundation are working on a ZK prover for Wasm (WebAssembly) blockchains [25]. This will reduce the technical barrier for wasm chains (Near and Polkadot) to interact with Ethereum, benefitting the Polygon CDK chains, Aggregation Layer and wider industry. Near foundation will also become a core contributor to the CDK. Polygon are also collaborating on ‘Circle STARKs’ with StarkWare [26]. A Circle STARK has faster proving times, compared to the STARK proofs invented by StarkWare co-founder Eli Ben-Sasson. Brendan Farmer expects “seven to 10x improvement” by using Circle STARKs in Plonky3.

The Aggregation Layer

Polygon AggLayer Architecture [40]

You know there's a little uncertainty about a project when they release a blog titled “wtf is polygon”. In fairness, Polygon does have a lot of sides. The AggLayer is “a horizontally scalable multichain network that enables access to shared liquidity and state across sovereign, connected chains” [40]. It is designed for new chain design and composability for existing chains. The AggLayer will enable teams to reach the users and liquidity of other chains. This will generate network effects and spin the wheel for other projects.

All connected chains will share a unified bridge and native assets will be “escrowed on the same bridge”, achieving “asset fungibility”. Instead of minting (synthetic/wrapped) tokens on the chain your are interacting with. This reduces trust assumptions and security risks associated with third party bridges with modular blockchains. “You know - more like the internet as we know it.”

AggLayer Ecosystem [27]

At Devcon, I was able to see the number of projects building for the Agg Layer. A product demo by DapDap demonstrated their unique interface and the smoothness of the AggLayer. DapDap is made possible as part part Decentralised Front End as a Service (DeFFS) [27].

Monolithic - Modular - Aggregated

The agglayer aims to get the best out of both monolithic and modular blockchains. Monolithic blockchains are designed for a better UX by being interoperable. With the trade of being sovereignty and scalability (state bloat issues). They will have the same nodes running execution, settlement, consensus andcomposibility for existing chains. By being interoperable they are designed for a better UX , with the trade of being sovereignty and scalability (state bloat issues). Monolithic blockchains will have the same nodes running execution, settlement, consensus and data availability. Examples of monolithic blockchains are Bitcoin and Solana.

Modular blockchains are collections of sovereign chains, running independently in parallel. With a more fragmented UX, liquidity and new trust assumptions when bridging. Monolithic blockchains have different layers for execution, Settlement, consensus and data availability. This allows developers to customise requirements for security, latency and UX. Examples of modular blockchains are Cosmos and Celestia.

Monolithic and Modular blockchains have a balance to find in maximising the capacity, whilst not constraining the ability to add extra layers.

“For users, an aggregated network can mean one-click transactions across chains. It will feel like the experience of being online, except in a web of protocols”.

Polygon CDK

Polygon's Chain Developer Kit (CDK) is a”modular, open source collection of tools”. The CDK enables developers to launch composable L2s and connect L1s to the Agg Layer. On Polygon, examples include Aavegotchi, Quickswap and Vorz.

Polygon DePINs

DePINs are Decentralised Physical Infrastructure Networks, with incentivised supply side mechanics in the form of cryptocurrency tokens. As of August 2024, there were 29 DePIN projects building on Polygon, the 6th highest of all chains.

Polygon DePIN projects with the highest market caps as of December 10th 2024, on Coin Gecko [30] are:
**Geodnet - Real Time Kinematics (RTK) in 140 countries - $61m Market Cap.
*DIMO - car driving data of 80,000 vehicles - $59m Market Cap.
Weather XM - rewarding weather station owners - $37m Market Cap.
Streamr - provide serverless data broadcasting and decentralised content delivery networks (CDNs) - $35m Market Cap.
Aleph.im - decentralised storage and private compute - $32m Market map
WiFi Map - has 185 million users with 15.5 million hotspots in 190 countries - $16m Market Cap.
Mysterium Network -dVPN service with 22,000 nodes in 135 countries - $6m Market Cap.

*However, Geodnet is now available crosschain on Solana and IoTeX [36, 37].
**However, on 09-Dec 2024, DIMO announced a protocol migration to Base in 2025 [28]. This follows the transition of DeNet to Peaq in September 2024 [29]. Whilst the AggLayer enables interoperability, Polygon has to ensure that they continue to build their DePIN ecosystem and that projects grown on Polygon, not leave.

Witness chain is a proof system for DePINs that was built using the CDK [42]. Witness Chain had over $5bn in delegated stack from restakers (on Eigen Layer). Witness chains enables Proof of Bandwidth, Proof of Diligence, Proof of Location, and data privacy using ZK proofs on Polygon.

Polygon and IoTeX

IoTeX x Polygon started in 2021 with real-world NFTs and cross chain bridging. It was announced on the 17th of September 2024 that IoTeX 2.0 will interact with the AggLayer to connect DePIN projects to different blockchains. This will unlock new users and liquidity, allowing projects to scale. IoTeX will bring its DePIN Infrastructure Modules (DIM). Geodnet, a DePIN project built on Polygon, already uses a DePIN liquidity hub with IoTeX.

Polymarket - Killer App

Polymarket Homepage [35]

Polymarket is the killer app of 2024 and it is built on Polygon PoS. They have received plaudits for the fact that its not obviously a crypto app and for their clean UI/UX. Users can login using their email/google account and pay for USDC using their Visa/Mastercard. Of their total $6bn in volume, over $3bn was wagered for the 2024 US Presidential Election [30]. It will be interesting to see how Polymarket’s users interact with the platform after the election. Open interest peaked at more than $475m on the day of the election and has dropped by more than 50% since [31]. The FBI raided Polymarket CEOs home after the election and this remains an ongoing investigation [33].

But, daily active wallets has remain constant in the weeks following.

NFTs / Tokenised RWAs

Courtyard had $5.5m in collectibles trading volume for October 2024 and Pokemon card sales have done more than $10m in volume.

Courtyard NFT Volume [37]

RWAs

Polygon ranks 3rd on the RWA.xyz for RWA value, at $169m.

RWA Leaderboard [39]

Polygon Partnerships

Polygon 2022 Web2 Brand Partnerships [38]

The 2022 graphic above demonstrated Polygon’s partnership results. However, many of these were proof of concepts and Web2 companies testing Web3. Particularly focussed on NFTs, many died with the NFT hype. The Starbucks NFT based rewards program also failed, as brutally shown in the Coindesk headline below.

Starbucks x Polygon [43]

But, what remains in 2024? Polygon’s Reddit collectible avatars has over 30 million different holders and more than $30m in sales volume. Nike’s dotSWOOSH NFTs are minted on Polygon to develop Nike’s fashion and gaming presence in Web3. Nike’s jerseys and shoes have become virtual products, with benefits such as live experiences. Virtual products are available to use on Fortnite (shown below). EA Sports uses Nikes products for in game customisation with EA Madden NFL and EA Sports FC (used to be FIFA).

Nike Virtual Shoes on Fortnite [41]