Compilation & Editing: Deep Tide TechFlow

In this issue of Empire, Sandeep Nailwal, co-founder of Polygon, details the bold approach of Polygon 2.0 in achieving unlimited scalability in blockchain networks. This conversation explores the various components of Polygon 2.0, including the innovation of zk EVM and the pillar of governance. Nailwal also outlines the perspectives in the Polygon paper, viewing it not only as a scalability solution but as the foundational "Internet of Value" layer.

Here are the key points from this conversation, translated and compiled by Deep Tide:

Host: Jason, Empire Podcast

Speaker: Sandeep Nailwal, co-founder of Polygon

Source: Empire Podcast

Goals of Polygon and the Importance of Web3

Nailwal points out that Polygon has been committed to building a robust infrastructure for the broad applications of Web3. He believes that current blockchain applications have not achieved true scalability, as no application or chain can handle millions of daily active users without crashing.

Nailwal states that previously, people's digital lives were controlled by intermediaries, but these institutions have lost the trust of the public over the past decade, resulting in a low-trust environment. Web3 aims to provide a trustless environment, where people's digital lives are based on decentralized trust mechanisms, free from control by intermediaries. To achieve this goal, an infrastructure capable of accommodating hundreds of millions of daily active users is needed.

Nailwal points out that the goal of Polygon 2.0 is to create an infinitely scalable blockchain infrastructure where developers can create and expand trustless applications. Web2 is described as the "Internet of Information," mainly focusing on the sharing of data and information, while Web3 is seen as the "Internet of Value," emphasizing the creation and exchange of value in a decentralized environment.

Although Polygon 2.0 allows for the addition of infinite chains and scalability, its liquidity is still settled through the Ethereum settlement layer. Multiple chains can run in parallel, but all transactions and liquidity are settled on Ethereum.

Nailwal reviews the development journey of Polygon's technology. Polygon initially started with Plasma, an early scaling solution, then explored another scaling method called state channels, and eventually shifted towards more advanced scaling solutions and decided to adopt ZK technology.

Nailwal explained that ZK technology allows you to prove your computation by providing a constant-sized proof without revealing all the transaction data. This proof requires the same amount of computation for each verification, making ZK technology highly efficient and scalable.

Nailwal and many researchers in the industry believe that ZK is the ultimate solution for scalability and security in blockchain and decentralized systems, while optimistic rollups are just a short-term solution.

Nailwal explained that optimistic rollups work based on optimistic assumptions that all transactions on the chain are correct unless someone objects. This approach is technically relatively simple but also brings challenges. For example, when a user wants to withdraw funds from the rollup chain to the main chain, they have to wait for a long withdrawal period of seven days, during which anyone can check the transactions on the chain and raise objections if they discover any misconduct.

The core of optimistic rollups is conducting computations off-chain, which allows for processing more transactions and operations to improve scalability compared to the main chain. Although the computation is done off-chain, all transaction data and proofs of state transitions must be submitted to the main chain, ensuring the correctness and transparency of off-chain computation.

Polygon's multi-chain future vision

Nailwal described a future where tens of thousands of chains operate in the same system, adopting different technologies and structures, including Layer 1, validiums, and rollups. This multi-chain structure will provide developers and users with greater flexibility and choices, allowing them to choose the most suitable chain based on their needs.

Nailwal explained the main differences between validiums and rollups. Rollups are chains that put their data back on the main chain (such as Ethereum), while validiums keep their data off-chain. Both approaches have their advantages and limitations, but the key is that they can interoperate within the same ecosystem.

Nailwal emphasized that while we often discuss the decentralized nature of blockchain, the real goal is to achieve trustless computation. Users and developers can trust the computation results of the system without relying on any intermediaries or third parties. In this environment, decentralization is just a means to achieve trustless computation, not the ultimate goal.

Nailwal mentioned that different chains like Bitcoin and Ethereum provide solutions for different types of trustless computation. For example, Bitcoin provides a trustless payment solution, while Ethereum allows users to execute any type of general-purpose program.

Nailwal believes that platforms providing trustless computation are competitors to each other. This includes ZK, optimistic rollups, and potentially other technologies that may emerge. He emphasized that the goal is to provide trustless computation for those who want to build in DeFi, gaming, or other fields.

For startups, Nailwal advises them to choose the most suitable chain based on their needs. If they are building DeFi, they should choose a chain with more liquidity; if they are building games, they should choose a chain with a larger gaming community.

Nailwal mentioned that in order to support a multi-chain environment, the architecture of Polygon 2.0 will support validiums, rollups, and other possible chains such as Cosmos, all of which can interoperate within a unified framework.

Polygon will transition from a fixed supply of 10 billion to an inflationary model, increasing by 1% annually, to incentivize validators to participate and continue providing funds for the community. Additionally, to further develop the ecosystem, 1% of the treasury is reserved for the next 5 to 10 years, which can be used for ecosystem growth.

Polygon's Three Pillars of Governance

Nailwal discussed Polygon's governance structure in detail:

Protocol governance, involving decisions related to core protocol and client development. Unlike Ethereum and Bitcoin, Polygon's core protocol and client development are not governed by the community. For core technical decisions, Polygon does not rely entirely on token holders or community voting.

Nailwal believes that the governance model of Ethereum and Bitcoin is very successful, especially when it comes to handling technical details and core development decisions. This model allows the technical team to make decisions without excessive external interference, ensuring the stability and security of the protocol.

Smart contract governance, involving the governance of smart contracts running on the Polygon network. This governance model allows the community to have broader scrutiny and decision-making power over smart contracts, ensuring transparency and fairness of the contracts. Smart contracts are a core component of blockchain networks, and their behavior and functionality must have the trust and support of the community.

Community treasury governance, involving the management and allocation of Polygon community funds. Community members can vote on how to use and allocate community funds, ensuring the transparency and fair use of funds. Proper and fair management of community funds is crucial to ensure the continuous development and expansion of the Polygon ecosystem.

Nailwal points out that despite the significant growth of Polygon in the NFT and DeFi space in recent years, it still faces fierce competition from other blockchain projects.

Nailwal mentioned that one of the main challenges faced by Polygon is the narrative formed within the community. He believes that despite Polygon's success in technology and practical applications, it still faces competition from other more influential blockchain projects in terms of narrative formation.

Polygon's Business Model

Nailwal emphasizes that Polygon is a protocol, not a company. Polygon Labs, as a non-profit organization, does not generate profit.

Nailwal introduced the core functionality of the Polygon protocol, which is to provide third-party developers with trustless computing services. Developers can perform operations on the Polygon network without worrying about the intervention or improper behavior of intermediaries.

When developers perform operations on the Polygon network, they need to pay transaction fees. These fees are intended to compensate validators who maintain and protect the network. Validators are critical participants in the network who ensure its security and integrity by validating and confirming transactions.

Nailwal explained that in order to participate in the network and receive transaction fees, validators need to stake tokens. The amount of tokens staked determines the proportion of transaction fees that validators receive from the network.

Tokens are not only a means for validators to earn transaction fees. They also provide incentives for validators to act with honesty and integrity, as poorly-performing or malicious validators may face penalties or have their staked tokens confiscated.

Nailwal expressed his appreciation for traditional business models, particularly those based on tangible capital and revenue. He believes that compared to the speculative nature of the crypto space, these models are more stable and reliable.

Nailwal mentioned that although they are striving to build a decentralized ecosystem in the crypto space, most community members are still interested in speculation rather than creating real value. He believes that if the crypto space continues to primarily focus on infrastructure rather than applications in five years, it would be considered a failure.