What Is Polygon (POL) and How Does It Work?

What Is Polygon (POL)?

Polygon is a blockchain infrastructure ecosystem that started in 2017 as Matic Network. It was built to scale Ethereum. The best-known chain in this ecosystem is Polygon PoS: an Ethereum-compatible blockchain where apps and smart contracts can run.

A smart contract is basically a program on a blockchain that automatically carries out rules. Because Polygon PoS is compatible with the Ethereum environment, developers can build applications that fit into that environment.

POL is the native token of Polygon PoS. You use POL, among other things, to pay transaction fees. Since September 4, 2024, POL has been the native gas token on Polygon PoS and replaced MATIC there. Gas is the fee you pay to have a transaction or other action processed on the chain.

Important to know: Polygon is a broader name than just Polygon PoS. The ecosystem also includes infrastructure that lets EVM chains work together, such as AggLayer. These parts do not all use the same technology or security model.

Key Takeaways

• Polygon is an ecosystem that offers Ethereum-compatible blockchain infrastructure, among other things.
• Polygon PoS is its own smart contract chain with POL as the token for gas and staking.
• Validators produce blocks and send checkpoints to Ethereum.
• AggLayer is meant to let connected EVM chains work together.
• Polygon PoS has its own validator network and therefore different security assumptions than Ethereum mainnet.

How Does Polygon Work?

Polygon PoS processes transactions and smart contracts on its own blockchain. That chain is EVM-compatible. EVM stands for Ethereum Virtual Machine: the technical environment where Ethereum smart contracts can run. In practice, this means applications built for the Ethereum environment can also run on Polygon PoS.

The network uses proof-of-stake. In this system, validators help keep the network running. Validators lock up POL, also called staking, and carry out tasks to process transactions and blocks. The locked-up amount is meant to give participants a financial stake in behaving well.

The architecture has two important parts:

• Bor handles block production. A block is a bundle of transactions added to the blockchain.
• Heimdall supports validator tasks, such as signing Heimdall blocks and checkpoints.

A checkpoint is a record of Polygon PoS data on Ethereum. Validators send these checkpoints to Ethereum. That requires ETH on Ethereum. This does not mean Polygon PoS has the exact same consensus security as Ethereum: Polygon PoS works with its own validator layer.

The native POL token is used on Polygon PoS to pay gas. For example, if you want to send tokens or use a smart contract, you pay the cost of that action in POL.

Polygon (POL) Overview

How Does POL Work Within the Polygon Ecosystem?

POL has two main current functions on Polygon PoS. First, you use it to pay the gas costs of transactions. Second, POL is used for staking to secure the validator network.

Validators manage their staking, rewards, and delegations through Ethereum. Delegation means someone can connect POL to a validator without running that validator themselves. The validator owner uses an Ethereum address for this.

The move from MATIC to POL happened on Polygon PoS at a 1-to-1 ratio. MATIC that was already on Polygon PoS was automatically converted to POL. For MATIC on Ethereum, a separate 1-to-1 migration was available. That is why it is important to always check which network your token is on. Native POL on Polygon PoS and ERC-20 POL on Ethereum are tokens on different networks.

POL may possibly get additional roles within AggLayer and connected networks in the future. That is not an active feature yet and depends on later decisions within the ecosystem.

A yearly emission of 2% for ten years has also been proposed for POL. That would be split between validator rewards and a community treasury. This is a proposal for the tokenomics and not a reason to treat future changes as certain.

What Is Polygon's AggLayer?

AggLayer is an interoperability protocol. That sounds technical, but the idea is pretty simple: different EVM chains should be able to work together at the infrastructure level.

A connected chain can keep its own architecture and governance. Governance is about how rules and decisions are made within a network. So the goal is not for all chains to become the same just so they can communicate with each other.

AggLayer is designed to move assets between connected chains without wrapping. Wrapping normally means a token appears in a wrapped version on another network. AggLayer is also meant for atomic operations across chain boundaries. Atomic here means: an action either happens completely, or not at all.

One important part is the unified bridge, a shared bridge infrastructure for connected chains. AggLayer also uses a pessimistic-proof system. This is meant to cryptographically ensure that a compromised connected chain cannot withdraw more from the shared pool than that chain itself deposited.

That protects interoperability and the shared bridge balances. However, AggLayer does not take over the consensus or finality security of every connected chain. Finality means a transaction is considered final and should no longer be reversible.

Who Founded Polygon?

Matic Network, the predecessor of Polygon, was co-founded in 2017 by Jaynti Kanani, Sandeep Nailwal, and Anurag Arjun.

Mihailo Bjelic is also referred to as a co-founder in later communications. That is why you sometimes see a founder list with three names and sometimes a list that also includes Bjelic.

Anurag Arjun left Polygon Labs and the Polygon Foundation in 2023 to focus on Avail. Sandeep Nailwal is a co-founder and CEO of the Polygon Foundation.

What Is the Difference Between Polygon and Bitcoin?

Polygon PoS and Bitcoin are both blockchain networks, but they were built for different things and work differently.

Polygon PoS is an Ethereum-compatible smart contract chain. That means smart contracts and applications can run on it. Bitcoin is a peer-to-peer payment network with a UTXO transaction model. UTXO is a way Bitcoin keeps track of which amounts can still be spent.

The way the networks are secured is different too:

• Polygon PoS uses proof-of-stake. Validators stake POL and have tasks around block production and checkpoints.
• Bitcoin uses proof-of-work. Miners use computing power to find blocks.

On Polygon PoS, you pay gas in POL. On Bitcoin, you pay transaction fees in BTC. Polygon PoS anchors checkpoints on Ethereum, while Bitcoin is a standalone network with its own blockchain and consensus mechanism.

Bitcoin blocks are found on average about every ten minutes. Polygon PoS uses a different architecture, with Bor for block production and Heimdall for validator and checkpoint tasks.

What Are the Benefits of Polygon?

Polygon PoS has a number of features that can be useful for applications in the Ethereum environment:

• EVM compatibility: smart contracts and applications built for the Ethereum environment can run on Polygon PoS.
• POL for gas: transaction fees on Polygon PoS are paid in POL, not ETH.
• Clear division of tasks: Bor focuses on block production, while Heimdall supports validator tasks and checkpoints.
• Bridge with Ethereum: the native bridge makes two-way asset transfers between Ethereum and Polygon PoS possible. When you deposit, tokens on Ethereum are locked and matching pegged tokens become available on Polygon PoS. When you withdraw, it works the other way around.
• Interoperability through AggLayer: connected EVM chains can work together without giving up their own governance or architecture.

EVM compatibility does not automatically mean every Ethereum app can safely run on Polygon PoS without changes or extra security checks.

What Are the Downsides of Polygon?

Polygon PoS also has trade-offs and risks you should keep in mind.

First, Polygon PoS relies on its own validator network. That means its security assumptions are different from Ethereum mainnet's. Checkpoints on Ethereum are important, but they do not make Polygon PoS's consensus the same as Ethereum's.

Staking also comes with risks. Validators and delegators can be slashed. Slashing is a penalty where part of the staked tokens can be taken away, for example if a validator signs twice or stays offline for too long.

Bridging also adds extra risk. When moving assets between networks, you deal with smart contracts, cross-chain processes, and possible delays. So a bridge is more than just a simple transfer within one network.

The migration from MATIC to POL can also cause confusion, especially when MATIC was outside Polygon PoS. Depending on the network or platform, a separate migration process may have been needed.

Finally, protocol changes can affect things like staking, emission, fees, and validator selection.

Conclusion

Polygon is an ecosystem of blockchain infrastructure that started as Matic Network and includes Polygon PoS, among other things. Polygon PoS is an Ethereum-compatible smart contract chain with POL as the native token for gas and staking.

The chain works with proof-of-stake, validators, Bor for block production, and Heimdall for validator and checkpoint tasks. Information is sent to Ethereum through checkpoints, but Polygon PoS keeps its own validator layer and its own security assumptions.

AggLayer focuses on interoperability between connected EVM chains, while those chains can keep their own architecture and governance. There are also trade-offs, such as validator risks, bridge risks, and possible future protocol changes. In short: Polygon is more than one chain, and it helps to look at Polygon PoS, POL, and AggLayer as separate parts.