Say goodbye to MATIC! Because Polygon is switching its token from MATIC to POL. As per Polygon founder Sandeep Nahiwal, POL is a massive upgrade to MATIC. And I can clearly see that but are there any risks of this move? Will MATIC see massive sales pressure?
As the title and thumbnail suggested, don’t buy Matic until you read this article to the end.
POL is a massive technical upgrade to MATIC
POL delivers the benefits of multi-chain staking without the added risks of restaking. With the Polygon 2.0 proposal, the Polygon Ecosystem will expand from a single chain to an ecosystem of L2s that can easily interoperate and share…
— Sandeep Nailwal | sandeep. polygon 💜 (@sandeepnailwal) August 28, 2023
What is happening?
Polygon is a layer-2 scaling solution for Ethereum. It is currently using the MATIC token – native token to its Proof-of-Stake chain (PoS) chain, but it is going to switch to a new token called POL.
The introduction of POL is part of a broader overhaul of the Polygon ecosystem, called Polygon 2.0. Polygon 2.0 will be a network of interconnected blockchains, and POL will be the token that powers it.
How is POL different from Matic?
As part of its transition to Polygon 2.0, the founding team has proposed an upgraded token called POL to deprecate MATIC
In terms of function, the new Polygon token will let POL holders also become validators within the network, allowing them to validate any number of chains and networks that Polygon is seemingly spawning every day. Essentially, POL will power the staking layer of Polygon 2.0. The Polygon team is positioning POL as a “hyperproductive” token. The team calls ETH a productive token because it enables holders to validate transactions and collect fees for that service. POL will be more productive than ETH because holders will be able to validate multiple chains, according to Polygon Labs. Each chain will also be able to offer POL holders “multiple roles,” each of which would accrue fees.
Polygon is pivoting to become a sort of network of networks built to help scale Ethereum. The vision, first laid out last month, has been termed Polygon 2.0 and paints a picture of multiple Polygon-based chains, bridges, and the integration of privacy-enhancing zero-knowledge (ZK) proofs.
Polygon has been making some good moves lately. Let's look at two of the important ones:
1. Polygon CDK
2. POL( Matic's third-generation token)
♦️ Polygon CDK
Developers and users can deploy Zk-powered Layer 2 chains on Eth with Polygon's Chain Development Kit (CDK).
The CDK… pic.twitter.com/Xw4WzhdsqR
— Hercules | DeFi (@Hercules_Defi) August 31, 2023
The initial supply will be 10 billion, the same as MATIC.
- Along with supply, there would be 2% yearly emissions of POL tokens **-**Token holders would be given ample time to upgrade, e.g. 4 years or more.
- Validator Rewards (1%)
- Community Treasury (1%)
What are the Benefits of this Move?
“The vision for Polygon 2.0 is to create the Value Layer of the Internet,” Polygon co-founder Mihailo Bjelic said at that time. “In the same way that the Internet allows anyone to create and exchange information, the Value Layer will allow anyone to create, exchange, and program value.
A whitepaper on POL cited providing guarantees that transaction data is published and publicly available or proving a zero-knowledge proof’s validity as examples of additional roles.
The introduction of POL is part of a broader overhaul of the Polygon ecosystem, called Polygon 2.0 which was unveiled last month. Polygon 2.0 involves the transition from isolated blockchains like Polygon’s proof-of-stake chain, which developers are transforming into a Layer 2 validium, and the newly launched zkEVM chain, to an interconnected ecosystem of blockchains.
POL would theoretically accrue fees from all those future chains.
According to Naiwal, POL is the protocol that will ensure users reap the benefits of “multi-chain staking without the added risks of restaking. With the Polygon 2.0 proposal, the Polygon Ecosystem will expand from a single chain to an ecosystem of L2s that can easily interoperate and share liquidity with each other.”
Users will be able to exchange their MATIC tokens for POL-on a one-to-one basis. The swap will be available for a four-year window.
It’s all about speed and security.
Polygon CDK lets devs build ZK-powered L2 chains on Ethereum, with near-instant finality and cross-chain transactions.
But how does that compare to fraud proof-based (optimistic) approaches? pic.twitter.com/DVAhfZVTwj
— Polygon (Labs) (@0xPolygonLabs) September 1, 2023
Benefits of this Move
MATIC’s exchange outflow has suddenly increased since 17 July. The exchange outflow is defined as the number of tokens withdrawn from crypto exchanges. Sometimes, these withdrawals go into non-custodial wallets as users prefer to beef up security.
But an action like that doesn’t just end there. From an investor’s perspective, taking out from exchanges means securing assets with a possible good performance in the future. And this seemed to be the case with MATIC.
What are the Risks of this Move?
As previously mentioned, POL’s coming does not mean the exit of MATIC. Rather it would be an upgrade if approved. As I write, Polygon’s network growth has fallen to 464. This implies that the initial adoption experience had decreased. So, traction was no longer as stirring as it was before.
Despite the decrease in network growth, MATIC’s weighted sentiment has been on a steady increase. The weighted sentiment describes the unique social volume linked to an asset. When the metric is positive, then it means that the average comments about the asset reeks of confidence.
When it comes to the 90-day dormant circulation, on-chain data showed there have been some movements lately. The dormant circulation tracks the movement of tokens which has been held for the long term. Specifically, on 17 July, about 19 million dormant MATIC tokens moved wallets. While it was unsure what wallets these tokens went into, it was almost certain that it was not exchanged. Therefore, MATIC is unlikely to experience any major selling pressure.
In conclusion, POL isn’t just another token; it’s a paradigm shift for Polygon. As the Polygon ecosystem grows, embracing a network of zk-powered L2 solutions, POL will be at the epicenter, driving growth, ensuring security, and hopefully maximizing staker returns
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