Original source: Messari

Compilation of the original text: The Way of DeFi

Summary:

• Original source: Messari

• Compilation of the original text: The Way of DeFi

• Summary:

• Polygon is a blockchain Internet company focused on scaling Ethereum through a portfolio of Zero Knowledge technologies.

• The company is actively developing seven scaling solutions ranging from various ZK Rollups to sidechains to engineering infrastructure such as software development kits (SDKs).

• With ZK-based scaling solutions coming online in 2022, Polygon will benefit greatly from an ecosystem of 7,000+ dapps in DeFi, Metaverse, NFT, and Gaming.

Polygon's corporate growth strategy includes leveraging partnerships with venture funds, managing its own NFT/gaming ecosystem, and running an internal investment fund tasked with finding promising crypto projects.

Upcoming milestones for Polygon include establishing additional business partnerships with existing protocols, and redesigning the MATIC token to better fit the company's future plans.

Polygon's global Web3 ecosystem benefits greatly from India's thriving Web3 tech talent. Polygon provides developer training, partnerships with leading universities like Indian Institute of Technology (IIT), and hackathons to grow the developer talent base and incubate high-quality Web3 startups in India and abroad.

The crypto industry has come a long way in the past two years. In the summer of 2020, DeFi primitives came to the fore in the so-called "DeFi Summer". The following year, NFTs took off — first as profile pictures, then community tokens, and now revenue-generating use cases like music and gaming.Naturally, there has been a surge of users with growing interest in blockchain. The total value locked (TVL) of the entire smart contract network has risen from $500 million since the start of the pandemic to $170 billion two years later. What’s more, the growth of cryptocurrencies is only expected to continue with further interest in the metaverse, asset ownership, and banking the unbanked.While investors have all benefited from the maturation of cryptocurrencies, the industry's expansion has not been without growing pains. Notoriously, current blockchain infrastructure struggles to support user growth. Transaction throughput slowed and network fees soared. Ethereum in particular struggles to handle the load of transactions submitted to its blockchain. According to Etherscan, the average gas cost jumped from 10 gwei in March 2020 to 60 gwei two years later - and this does not take into account the time period in 2021 when gas prices have been hovering around 150 or even 200 gwei, which highlights the The need to improve infrastructure.

So an emerging consensus that we're seeing among investors is the need for a

Cross-chain ecosystem

. In other words, a single blockchain may not be enough to support everything users need. By distributing the work among multiple entities, the total amount of work required for a single blockchain will be reduced. If investors are right, building a cross-chain world is the way to achieve the scale needed for the first billion users.

This report will focus on a major component of Ethereum’s cross-chain scaling efforts: Polygon Technology. Key sections of this report include an overview of the company, a brief introduction to ZK Rollups, Polygon's ecosystem of projects, and the company's upcoming roadmap.

A multi-chain Ethereum world

Polygon Technology, better known as Polygon, is building a series of platforms for blockchain infrastructure, specifically the Ethereum ecosystem. Its products are designed to support the growth of Ethereum as the network expands its user and application base. Notably, Polygon’s specific focus on Ethereum reflects the company’s core belief in the network as the center of the future cross-chain paradigm.

Looking at the bigger picture, Polygon is competing in what we should call the blockchain-as-a-service industry. Along with competitors like Starkware, Arbitrum, Loopring and Matter Labs, these startups have created solutions aimed at enhancing blockchain scalability by increasing network throughput and reducing transaction costs.

Currently, the lack of a one-size-fits-all answer to blockchain scaling means that every startup’s solution—whether it’s Optimistic Rollups, ZK Rollups, or other alternatives—has a place in the current ecosystem. This competitive research effort is what Polygon co-founder Mihailo Bjelic used to call "a hundred flowers blooming."

Polygon started in 2018 as a joint effort between Bjelic (who was experimenting with Plasma rollups) and Jaynti Kanani, Sandeep Nailwal, and Anurag Arjun, who had been working on another scalable blockchain, the Matic Network. At the time, this joint entity combined several products: (1) a blockchain SDK development framework developed by Bjelic and (2) a Plasma rollup and a Matic sidechain powered by the MATIC token. Unfortunately, blockchain researchers discovered data availability issues shortly thereafter (discussed further later in the report), causing Plasma to be deprecated from other solutions. The resulting period allowed the team to focus on the Matic sidechain, the SDK framework (later renamed Edge), and look for the next steps forward.

Around February 2021, the team announced the renaming of Matic Network to its current Polygon and announced its strategy to become an Ethereum cross-chain hub. Its new goal is to serve as a company that provides a large number of multi-chain services. Offering an emerging suite of products will become the company's new focus, starting with a user-facing product that has survived from the beginning: Matic Network, now renamed Polygon Proof-of-Stake (PoS).

First product: Polygon PoS sidechain

Users may already be familiar with Polygon PoS. This sidechain has been around for almost two years. It launched ahead of DeFi Summer and fully capitalized on the opportunity in May 2021 when the industry's curiosity about decentralized applications exploded.

Given the company's efforts around Layer 2 scaling, much work has been done on the technical classification of Polygon PoS. We believe that characterizing the current iteration of this PoS chain as a layer 1 (layer1) sidechain is an important distinction, primarily due to the fact that the Polygon network does not inherit security from Ethereum nodes and has its own set of validators. Regardless, for users looking for affordable transaction costs, this EVM-compatible network is an option worth exploring; in fact, many of Ethereum's most popular DeFi platforms, such as Aave, Curve, and Uniswap, operate on this Services are provided on the PoS chain, and the required gas cost is only a fraction of that on Ethereum.

The graph above highlights the difference in average transaction costs between Polygon PoS and Ethereum. The data presented are astounding. The average cost of Polygon PoS is a fraction of a dollar, and users are often paying $20 or more on Ethereum. If we assume that every transaction completed on this PoS chain in the past year was conducted on Ethereum, users will pay nearly $15 billion more in total transaction costs.

Now, it's important to know that these figures are affected by the lower price of MATIC relative to ETH. If the displayed cost is adjusted to US dollars, the absolute cost on this PoS chain is lower than that of Ethereum, but the difference is not obvious when measured by gas price. Still, this PoS chain is a great option for users who want to avoid the high costs of Ethereum today. This is also a big reason why sidechains process more daily transactions than Ethereum - including peaking at 4x more than Ethereum - and have attracted 100+ million wallets to date.

Reaching those numbers is a milestone in itself, but one could argue that it's just the start of Polygon's bigger ambitions. As we saw above, sidechains do not improve blockchain scalability like layer 2 solutions like rollups. This is why Polygon is devoting its resources to layer 2 scaling and ZK Rollups, with the goal of finding solutions that increase throughput and reduce the amount of gas required to conduct transactions. Polygon’s move resonated across the industry as both leading tech and crypto-native investors opted to take a seat at the negotiating table. In fact, well-known investment institutions such as Sequoia Capital India, Andreeson Horowitz (A16z), Tiger Global, Union Square Ventures (USV), Galaxy Digital, etc. all support the company, showing confidence in the team and alignment with the company's vision.

Polygon’s roadmap includes the development of seven product solutions, ranging from the aforementioned PoS sidechains to L2 Rollups and other blockchain infrastructure. In total, Polygon has committed over $1 billion to acquire promising projects, invest in research, and create an Ethereum scaling ecosystem. Since a large part of Polygon's future is tied to adopting ZK technology, it's important to first understand how it works before reading the rest of the report.

A Brief Introduction to Zero Knowledge Rollup (ZK Rollup)

ZK Rollups is one of the two types of Layer-2 rollups, alongside Optimistic rollups. The core idea of ​​ZK Rollups relies on cryptographic proofs to verify network state changes before bundling them into the Ethereum blockchain. Therefore, some people refer to ZK Rollups as "proof of validity". This is in stark contrast to Optimistic rollups, which "optimistically" assume all transactions are correct and have validators on the mainnet check for fraudulent transactions over a period of time. Optimistic rollups are also known as "fraud proofs".

Let’s take a deeper look behind ZK Rollups and see why they are so promising. The basic premise behind ZK Rollups is to have third-party operators batch transactions together, rather than verifying each transaction individually—hence the “rollup” taxonomy—in order to increase the total processing power of the network. Blockchain state changes are submitted to validators on the mainnet for checking in the form of ZK proofs. Due to ZK properties, validators can be confident of the validity of all submitted transactions through proofs without having to run each individual transaction.

An important part of this process is the soundness of the proof, which ensures that a malicious prover cannot deceive the verifier with false statements. Inferring this property for Rollup is straightforward: all batched transactions must be valid if they are to be accepted on the blockchain. And since the main network needs to verify ZK for each transaction, there is almost no interaction between the two chains, which makes the gas fee cheaper and rollup expansion easier overall.

Another core benefit of ZK Rollups is the network's ability to verify transactions instantly. Automatic verification brings many benefits to users. The easiest is being able to transfer funds from the Rollup chain to the mainnet instantly without waiting for someone else to check for fraudulent data like with Optimistic rollups.

The technology behind ZK Rollups is promising, but to be fair it's also worth mentioning that ZK Rollups have so far fallen short of expectations. This is an important caveat, as ZK Rollups have not been fully compatible with the EVM so far on Ethereum mainnet. This is why almost all active Rollups to date use Fraud Proofs. However, some research plans are close, with some EVM-compatible ZK Rollups running on testnets in the first half of 2022, including those owned by Polygon. At the risk of sounding like a broken record, the long-awaited day seems to be around the corner.

Polygon's product stack

In August 2021, Polygon announced the acquisition of Hermez for $250 million, one of the largest blockchain network M&A transactions to date. The deal was financed through Polygon's native MATIC token held in the company's token pool. Previous holders of the Hermez native token (HEZ) will be able to convert their tokens to MATIC at a ratio of 3.5 MATIC tokens to 1 HEZ token. The result of the acquisition means that Polygon will be responsible for the newly formed entity, Polygon Hermez.

source:Polygon Hermez

Of the four ZK Rollups in the Polygon suite, Polygon Hermez is the most actively used. This is the first open-source decentralized ZK Rollup to run on the Ethereum mainnet (albeit without a compatible ZK EVM), and it will be available to the public since March 2021. Users deploy funds into the rollup network and can quickly and cheaply send funds wallets between them as transfers and payments. Polygon Hermez is capable of processing up to 2,000 transactions per second, and that number is expected to go even higher as Ethereum implements sharding sometime in 2023 after The Merge. In any case, the current effect of this product is to reduce the transaction cost by more than 90% compared with the general main network gas fee.

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Like Polygon's other ZK Rollup products, Hermez has its own research focus. Hermez places a high value on decentralization. It is the only active layer 2 that does not require a centralized operator. While the centralization resulting from the use of decentralized sorters may seem trivial, especially in the early stages of ZK Rollups, the long-term impact could be significant. As cited by the Polygon team, the transition from a centralized operator to a decentralized operator can be both operationally and technically challenging, giving Polygon Hermez a head start on the competition.

Polygon Hermez will release Polygon Hermez 2.0 in the future, a future iteration that combines the existing ZK Rollup and ZK EVM implementations. The need for the latter is critical to scaling Ethereum, as non-ZK EVM Rollups can only handle token payments and token transfers. A ZK EVM enabled blockchain would allow the network to process smart contracts directly on rollup and open up another avenue for innovation. The final product is expected to closely emulate the 50-70 instruction code available on the original EVM. The decision to stick with machine language-like opcodes allows engineers to port existing applications into Rollup, or easily create new ones if needed.

A testnet launch is expected sometime in the next three months (Q2 2022). Once testing is complete, the full release of Polygon Hermez 2.0 is expected to arrive sometime next quarter. If that timeline holds, ZK Rollup enthusiasts will have the opportunity to see this scaling option take shape.

Polygon Zero: All about speed

Polygon Zero was formerly known as Mir Protocol, a decentralized application project powered by recursive ZK proofs. In December 2021, Polygon announced the acquisition of the Mir Protocol team, seeking to combine synergies between the Mir project and Polygon's other technology stacks. The deal is even bigger than the Hermez acquisition. The announced price is about $400 million, funded by cash and Polygon's MATIC tokens.

As part of the Polygon ecosystem, the Mir team has always had the same goal: to build the world's fastest ZK Rollup. Unlike Polygon Hermez, which dedicates most of its research resources to decentralization, Polygon Zero's goal is speed. The best solution found so far is through scalable ZK-SNARKs, also known as recursive proofs.

Recursive ZK proofs speed things up by increasing the number of transactions that can be processed at any one time. We can make a comparison here: Existing ZK Rollups usually require a lot of computing resources to generate proofs for batches with a large number of transactions; this is true for ZK Rollups that need to support general-purpose applications, and for This is especially true for applications that are slowed down by EVM compatibility. In contrast, efficient recursive ZK proofs allow processing to be distributed into more manageable chunks of concurrent work. Once each transaction has been verified, a recursive algorithm traverses and aggregates all proofs until they finally form a single proof. The best way to visualize this is with a pyramid shape, where the base layer represents all transactions. As each transaction is proven, it is sent upwards until they all peak at the top. Ultimately it turns out that sending to mainnet can be done faster and more cost-effectively than current alternatives.

Polygon Zero is able to do this with Plonky2. Plonky2 is a recursive ZK proof generator capable of generating a SNARK proof every 0.17 seconds, making Plonky2 the fastest recursive ZK prover in the world.

Inventing this technology required years of research. The practical application behind recursive zero-knowledge proofs only started in 2014. In 2019, it takes two minutes to generate each recursive proof. Slow proof generation apparently makes the technology useless for blockchain scaling. In 2020, the development of Plonky combined with some other technologies brought the time down to 15 seconds. Plonky2 further reduces the time to 170 milliseconds, making it the fastest recursive ZK prover in the world.

That said, further research is required before Plonky2 goes live. A timeline has yet to be announced, but the Polygon team will provide more information as other prover breakthroughs are achieved.

Polygon Miden: STARKs are not SNARKs

The tradeoff of using STARKS is that larger proofs are required, resulting in higher gas costs and lack of recursion. Implementing the latter may be possible, but is currently unproven. Further research into SNARKs and STARKs will continue to open new doors for layer 2 proofs.

source:Polygon Miden

As shown in the figure below, the transaction Rollup process is similar to the traditional ZK Rollup, replacing the usual SNARK with STARK.

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Miden's strength lies in the creation of the Miden VM of ZK-STARKs compatible with the EVM. Miden VM is a general-purpose ZK virtual machine that lets developers take advantage of the platform's full Turing-complete capabilities. In addition, multilingual support is provided for developers. These languages, including Solidity, Move, and Vyper, are compiled into Miden assembly language for the VM to read.

Development of the Miden VM began in 2019 with a library called genSTARK, which allowed developers to create simple STARK provers. Distaff VM (earlier STARK-based VM) and Winterfell (upgraded iteration of genSTARK) continue to improve, such as being fully Turing-complete. The current iteration of the Miden VM is a public v0.1 prototype combining the capabilities of the Distaff VM and Winterfell, launching in November 2021. Developers interested in building with the new virtual machine can experiment with the product's capabilities. The v0.2 prototype is expected to be released in the second quarter of 2022. Testnet development should continue the project until the end of the year, after which a mainnet deployment is expected sometime in 2023.

As mentioned in the ZK Rollup introduction, ZK Rollup does not provide privacy protection by default. That's where Polygon Nightfall comes in. Nightfall is an Optimistic rollup enhanced with the privacy benefits of ZK cryptography. Here, the type of ZK encryption used in Nightfall is slightly different from ZK Rollups in general; the former is used to facilitate data privacy, while the latter is used for transaction verification. The idea behind ZK Cryptography and Fraud Prevention Rollup stems from the need to provide businesses with a differentiated product that preserves the privacy element of ZK Cryptography while keeping transaction costs low.

Nightfall was originally created in 2019 by Ernst & Young, one of the Big Four auditing firms, as a way to conduct private transactions on Ethereum. This is an important milestone, as it marks the first time a large enterprise has actively participated in the development of Ethereum. In the years since, as demand for privacy-secure blockchains has grown, EY has sought partners to help expand the offering. The result was Polygon Nightfall, a collaboration between EY and Polygon to create a privacy-focused rollup for the public, making it ideal for businesses.

Enterprise transactional and operational tools benefit the most from such privacy features. Nightfall will also be legal and KYC compliant. The goal of the collaboration is to create a whitelist of companies that can access the network; when a business makes a transaction, it needs to provide proof of access before the privacy-safe transaction is completed.

Polygon Avail is the first of Polygon's two architecture offerings. Avail aims to solve the challenges nodes face when dealing with malicious or incomplete data. In the blockchain world, these challenges are known as the data availability problem, which is the problem mentioned above that caused researchers to abandon the Plasma rollup plan. Common situations where this issue occurs include when a node accepts a block with incomplete data or when a node is unable to verify the accuracy of transaction data in the network (i.e. blockchain censorship).

source:Polygon Avail

Polygon describes Avail as a solution to the problem of data availability across the multi-chain Ethereum ecosystem. Avail is a data availability specific blockchain designed for standalone chains, sidechains and other scaling technologies - meaning the entire Avail chain is designed to store Ethereum "call data" tracking changes to the Ethereum state machine. No smart contracts will be deployed and no applications will be built on Avail. Instead, the whole purpose of Avail is to sort and store data in such a way that it can still be accessed by the sampling process performed by light client nodes.

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Compared to the current blockchain architecture, the Avail network will focus on ensuring that complete transaction data is published, rather than validating state changes. Unlike full nodes, light nodes do not download the entire block data, but instead randomly sample a set of data from each block to evaluate integrity. This process is called a data availability check. This is a technique shared by other data availability platforms and can be done at constant resource cost regardless of data size.

In its final form, Polygon envisions a scenario where developers create their own independent PoS chains and outsource network security to Avail. Operators on independent chains will send transactions to Avail for ordering and storage. This helps immediately bootstrap network security, as full transaction data is kept off-chain for easy access.

Polygon Edge, formerly known as Polygon SDK, is an open-source modular blockchain development framework built for engineers who want to create their own blockchains. The framework allows for the creation of secure chains (layer 2 blockchains) and independent Ethereum sidechains.

source:Polygon Edge

Both options have their own advantages. Securechain provides two unique features: easy bootstrapping for those with limited resources, and enhanced security on a separate layer from the mainnet. Enterprises that don't have the resources to bootstrap secure new encryption protocols or want to increase transaction throughput on their own networks may want to leverage edge frameworks to build secure chains. At the same time, sidechains require their own set of validators, ideal for businesses looking to maximize independence or community-based networks capable of supporting their own decentralized blockchain.

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a The figure above represents the various components of the development framework. Each component, including known modules such as blockchain and consensus, and more obscure modules such as Libp2p, GPRC, and JSON RPC, represents a function in the technical architecture. Developers are able to modify these modules to suit their needs, combining them like building blocks to form a network. Polygon Edge supports both Proof-of-Stake (PoS) and Proof-of-Authority (PoA) as consensus algorithms.

Edge, an independent chain framework, will start rolling out in May 2021. A second iteration of the Security Chain framework is expected to follow shortly. Products such as Polygon Edge align closely with Polygon's thesis for a more advanced multi-chain Ethereum ecosystem, helping to address a pressing need for L2 communication and ease of project deployment.

Polygon Enterprise Fund

• As mentioned earlier, the company is also actively encouraging protocols to use Polygon-enabled networks. Direct strategies include investing in the founder team, providing support for the project's token economics, staking, governance, and leveraging the Polygon network for marketing campaigns.

• ecosystem partnership

• One of Polygon's strategic efforts is to partner with active venture investors within the crypto community. Polygon maintains relationships with four organizations, though the company does not have decision-making authority over invested capital.

• Polygon x Wintermute: Partnering with $20M Fund to Support Project Liquidity, Business Development and Token Exchange Listing Purposes

Polygon x 776: Partnering with $200M General Fund Investing in Web3 and Other Crypto-Native Apps

Polygon x Outlier Ventures: Polygon-based accelerator to facilitate mentoring and collaboration with Outlier Ventures venture teams

Polygon x StableNode: Cooperate with experienced blockchain node management operators in providing practical services such as staking and governance

Polygon Studios

Polygon Ecosystem Fund

The firm's ultimate corporate development team is its Ecosystem Fund. Unlike the aforementioned partners, this ecosystem fund is Polygon's own internal investment fund. Capital allocation decisions are strategically designed to facilitate the adoption of the Polygon blockchain.

In the summer of 2021, Polygon launched Polygon Studios, an in-house division aimed at engaging existing gamers with blockchain gaming. Polygon Studios works with ambitious NFT projects and marketplaces to expand user base on low-cost platforms.

leadership within the community

More than 100,000 gamers and more than 500 applications have joined. The team has announced partnerships with crypto-native projects like The Sandbox, Decentraland, and OpenSea, as well as traditional entertainment brands like DraftKings, Electronic Arts, and Atari. Money from the Ecosystem Fund will also be used to invest in projects that benefit the company's NFT/gaming initiatives.

Leading Polygon Studios is Ryan Wyatt, who left his previous positions at Google, where he was head of partnerships at Google Games and head of gaming at YouTube. Wyatt began his career in professional esports as a game commentator, making him uniquely qualified to lead Polygon Studios' efforts.

In addition to its great reputation in the global crypto community, it is also important to pay attention to Polygon's role in the Indian crypto community. The company’s status as India’s start-up unicorn helps validate the industry in the eyes of skeptics and encourages more young people in the country to try cryptocurrencies. Given the Indian government's hot and cold relationship with the industry, this form of leadership by example is particularly beneficial to the country's thriving ecosystem.

route map

Polygon also takes an active role in investing in its community. Polygon frequently sponsors, directs and judges hackathons in India. It is closely related to ETHIndia. Additionally, the company works with students, offers smart contract applied engineering courses, and works with blockchain clubs in several IIT institutes, IT Mumbai and other select Indian universities.

To demonstrate Polygon's status as a financial platform, we can compare the company's valuation to India's largest banks. Following this approach, Polygon would be the seventh largest financial institution. Of course, this type of analysis has some major caveats. On the one hand, Polygon does not provide direct financial services and operates more as a financial payment platform. Additionally, the startup’s ecosystem includes indirect financial use cases such as NFTs and blockchain games. That said, this quick and easy comparison does highlight the speed of Polygon's rise and the level of investor expectations for the company going forward.

route mapMuch of the Polygon team's focus for the next few years will be enterprise rather than technology, which may indicate how happy the team is with the state of its product suite. As each product continues to research, test, or roll out its own extended solution, greater emphasis will be placed on finding the right partners and agreements to integrate into Polygon's product network.In public interviews, Polygon expressed interest in restructuring the company's team structure and expanding partnerships with crypto projects, especially in the NFT and gaming space. Headcount growth is expected to continue, with the goal of doubling its headcount by the end of the year. While the exact details of each team's organization are unclear, it's important to note that Polygon wants to centralize key leadership while maintaining the decentralized autonomy of each team.Token Redesign。

in conclusion

. The current MATIC token is a holdover from the old Matic business and can be used with Matic's network, Polygon PoS. Future tokens will have a new code and apply to all Polygon products. Given what we know today, use cases could include staking for enhanced security or choice of blockchain operator. Interestingly, tokens are not mandatory for all users, meaning there is no need to buy, stake or hold; for many users, it may just be a back office thing. Although timing is unclear, Bjelic expressed hope

Complete token redesign sometime in 2022

in conclusion