Over the years, Ethereum has brought all kinds of advancements
into the cryptocurrency space
including smart contracts and
high interest paying decentralized applications.
However it faces three big challenges.
The first, is the Low Throughput issue.
Which is a fancy way of saying Ethereum can only handle
Thirty transactions per second.
For the amount of people that are actually using Ethereum
This processing speed is considerably low.
Since many alternatives can process
Many more transactions in the same time-frame.
For example, the Cardano blockchain does around
257 transactions per second
While Polkadot can do upto a 1000
And Solana all the upto 65000
The second big problem is that
The Ethereum network isn't really user-friendly
Since you are effectively
Bidding in an auction against everyone else
Who wants to be one of those 30 transactions
In short, this means it is expensive.
And I mean like 20 dollars just to
Send your friend 1 dollar expensive.
Lastly, the Ethereum blockchain
Presents developers with limited options.
All Ethereum projects run on the same network
And have a similar Throughput
This implies that they all share an Ethereum's problems
With no exceptions.
But, what if there was another blockchain
That leveraged Ethereum's technology
While also offering higher Throughput,
Extremely low transaction fees
and better options.
Welcome to Whiteboard Crypto
The number one Youtube channel for crypto education
And here we explain topics
of the cryptocurrency world using analogies,
Stories and examples so that you can easily understand them.
In this video, we're going to explain what Polygon is,
How it works, as well as the specific
Tokenomics of the Matic coin
So in 2016, three Indian Developers
Sought to find a solution to Ethereum's problems
Which resulted in the creation of Matic
Which is now rebranded to the Polygon network
Now one thing to note here is that
even though they rebranded to the Polygon network,
The coin is still called the Matic coin
Polygon is a layer-two scaling platform
That allows Ethereum based applications
To tackle the problems that I mentioned earlier.
While also leveraging Ethereum's security.
It's primary focus is the
Increase the usage of DeFi tools and applications
By basically connecting blockchains together
The network currently hosts over 3000
decentralized applications, of which
Over 80 big names migrated from the Ethereum main chain
Since Polygon is so similar to Ethereum
Many creators that develop useful tools
Will actually move them from Ethereum
To other EVM blockchains like Polygon
That way they can increase their reach and usage.
Now, if you're wondering what EVM is,
It stands for Ethereum Virtual Machine
And it's the actual code that is ran by computers
Around the world to actually carry out
the blockchain's smart contracts.
Now I must say at this point in the video
If you have no idea what hardly any of these words I mentioned are
You can watch some of our dedicated videos
That explains some of these terms.
Anyways, Polygon actually has an EVM
But so does the Binance Smart chain,
Fantom and a few other big networks
They all utilise the main Ethereum code.
And since they run basically all the same code,
It makes sense how developers can
simply move their project over to a new network
And it'll work basically the same way
Without making many changes.
Moving on, when we think about Polygon
Most people think about the
Polygon proof of stake chain
Which is simply a side chain to Ethereum,
Utilising a proof of stake consensus mechanism
There's a few other changes to this side-chain,
But what's really important is that
It's way faster and can handle way
More transactions per second
Also meaning it's much more affordable to the end user.
Well technically the Polygon network
Is lot more than just a side chain
One of the core ideas behind Polygon
Is to equip developers with
User friendly and flexible tools
That way they can fast track Ethereum's transformation
Into a multi chain platform
To put this in simpler words
Polygon isn't just a single
proof of stake chain that we usually think of.
They are a series of blockchains
That can help scale Ethereum.
When they actually achieve this
Developers can easily create
All kinds of different scaling solutions
That they can use with Ethereum
Like completely seperate chains
Like Zk Rollup chains Optimistic Rollup chains,
Or any other side chains that they desire
By the way, you can check out our videos on side chains
And Rollups if you want to learn more about
How those specifically work.
They're really unique and creative ways
To bundle up data and save
space on the main Ethereum chain.
The Polygon proof of stake chain
Is just one way to scale Ethereum
In reality, Polygon plans to create
Many different solutions for users to scale it.
So at first glace, I thought Polygon was pretty simple
But when you look at it's internals,
There's lot more than regular users see
For users like you and me,
We can sum up Polygon in one sentence
It's basically Ethereum but
With super cheap gas fees.
Right now, to transfer your Ethereum
From one account to another,
The fee is like 20 dollars
However, on the Polygon network,
It is less than a penny.
This means, users are free to try out
New apps and test things out without the fear
of losing a 150 dollars over a token swap.
Personally, the Polygon and Binance Smart chain
Are the two DeFi blockchains that I recommend to new users.
So take that for what it's worth.
Moving on, let's get into a little bit
more about how Polygon actually works.
So Polygon is driven by the layer-2 Scaling Solution
And the proof of stake protocol serving as
What is called a commit chain
To the main Ethereum chain
Now if you don't know what a commit chain is
It functions as a transaction network
That operates close to the real chain
Therefore, in Polygon's case
It actually works alongside Ethereum.
Now before we continue
A lot of the future stuff I'm going to
be talking about is pretty technical
But if you're interested, Let's dig in.
The Polygon commit chain groups up
Clusters of transaction
and processes them altogether
Before sending the data back to the main Ethereum chain.
Think of it like this.
Instead of sending an entire video
of all the transactions,
Polygon simply takes a single snapshot
Every now and then, so that the
Ethereum chain can still understand what is happening
But without processing tons of data.
This is why the Polygon network can actually
Upto 65000 transactions per second.
Some experts predict that a time
will come when developers will host
Thousands of chains that work hand in hand
With Ethereum to increase throughput
All the way upto millions of transactions per second
Now let's get a little bit more technical.
Polygon's architecture runs on a
4 layer system comprising of the
Ethereum Layer, the Security Layer
The Polygon networks Layer and
Finally the Execution Layer
Now I'm gonna be honest with you
You don't really need to know this stuff
So skip ahead if you want to get into the Tokenomics
The Ethereum Layer is made up of different
Ethereum based smart contracts.
These contracts are in charge of staking,
Transaction approval, and interaction
Between the Ethereum blockchain and
Numerous Polygon chains.
This Layer is how Polygon actually
Checks in with Ethereum from time to time.
Next up we have the Security Layer.
and It works alongside Ethereum
To provide validator services
Giving chains an Additional Layer of security.
That said, it's important to note
That both the security layer
and the Ethereum Layer are actually optional
They are not required for Polygon to work.
Layer 3 is the Polygon Networks Layer.
and it's the ecosystem of projects or blockchain
networks developed on Polygon.
Basically, every project or blockchain
That exists within this ecosystem
Has it's own community.
Where local consensus is reached and Blocks are produced.
Finally we have the Execution Layer
This is popularly known as
Polygon's Ethereum Virtual Machine
and It's main function is to execute
Smart contracts on the actual Polygon Blockchain.
The compatibility with the EVM like I mentioned earlier
Smoothens the user experience
For developers and programmers
Using the Ethereum chain.
Finally let's get into the Polygon's Tokenomics
The Polygon network has a native token.
It's called Matic
Which has been trading for around 2 dollars
With a market capitalization value
Of around 13 billion dollars.
Matic tokens are dispurged monthly
And have a total supply of 10 billion tokens.
Of which nearly 6.8 billion is already in circulation.
The difference between these two numbers
Is that tokens that are held for staking rewards
and tokens with a time-locked release
Schedule that we'll talk about later
Initially, the developers sold around 3.8%
Of Matic's total supply in their Initial private launch
All the way back in 2017.
Then later, they had an initial exchange offering
Where they sold another 19% of their max supply.
If you're wondering where the other tokens are,
The development teams own 16% of the supply
The advisors have 4 percent,
Staking rewards come to around 12%
The ecosystem already has 23%,
Well around 22% went to the Polygon Foundation.
And since Matic tokens are technically
Being printed to reward stakers
Right now, it is technically inflationary.
However Matic does have a limited supply
And soon they will be implementing
Their version of EIP1559
If you have no idea what that is
What it basically means, is that
Base transaction fees will effectively be burned
Which Matic will eventually
Be a deflationary token.
Now if you're anything like me You might be wondering
How are they gonna reward the stakers when the funds run out?
Well, the Polygon team will hope by then
The extra transaction fees
That users add to prioritise
Their transactions above the base fee
Will be enough to incentivise
Staking validators to keep doing thier thing.
To wrap this video up, Personally I love
Polygon ecosystem to invest in
Namely the Curve.finance application.
And it has actually earning me around
30% APY for the past few months
Aave on the Polygon network also had
Some amazing rates a few months ago
But that does seem to have caught on to these great rates.
Lastly, if you're curious about how to actually invest
Or make money on the Polygon network
You can check out our DeFi for beginners guide
To get it for free, just go to WhiteboardCrypto.com
And enter your email, This will
Also sign you up to our newsletter
Where we share the best rates in DeFi
And go over a few great projects that
That we don't make videos on.
Anyways, thank you guys so much for watching
We really hope you enjoy this video
We really hope that you learnt something
And most of all, We hope to see you in our next video.