Polygon 2.0 Token Upgrade Proposal: MATIC to be Upgraded to POL! 2% Annual Inflation, Introducing More Staking Rewards

The Polygon 2.0 project is progressing rapidly, with the Polygon team recently announcing a token upgrade proposal to transition the original protocol token MATIC to POL. This upgrade, in conjunction with the new protocol architecture of Polygon 2.0, aims to bring advantages to the ecosystem. If successful, POL will completely replace MATIC and be issued incrementally each year.

Polygon Token Upgrade Proposal, MATIC Upgrading to POL

Since its launch in 2020, MATIC has been the native token of the Polygon protocol. With the continuous development of the Polygon 2.0 project, the Polygon team has proposed a new token upgrade, suggesting to upgrade MATIC to POL. At the same time, adjustments to its functions are proposed to protect and develop the Polygon ecosystem.

The Polygon team categorizes cryptocurrencies into three generations based on their nature, as detailed below:

• First-generation tokens: Non-productive assets where holders cannot participate in the protocol and therefore do not receive rewards, such as BTC.
• Second-generation tokens: Productive tokens where holders can become validators of the blockchain and receive token rewards and fees, such as ETH.
• Third-generation tokens: Highly productive tokens that not only enable holders to become validators and receive rewards but also allow validators to verify multiple blockchains, with each chain providing multiple identities and corresponding rewards to validators, like the protagonist in this article, POL.

Advantages POL Brings to the Polygon Ecosystem

By combining the features of POL and the redesigned protocol architecture, POL will bring several advantages to the Polygon ecosystem, according to the official announcement.

1. Ecosystem Security: A highly decentralized PoS validator pool can provide security, flexibility, and neutrality for every Polygon chain.
2. Scalability: POL allows the validator pool to scale to support thousands of Polygon chains without compromising security.
3. Ecosystem Support: As the Polygon ecosystem and the entire industry are still in their early stages, POL can provide sustainable, protocol-level mechanisms for these activities.
4. Frictionless Costs: Blockchain protocols often require users and developers to hold, stake, or consume their native tokens to use the network. This creates friction costs and reduces user and developer experiences, which POL's design aims to eliminate.
5. Community Ownership: With decentralization as a core value, Polygon's governance is executed by its community. POL will have governance rights and be applied within the governance framework.

Diverse Rewards for Staking POL

The functionality of POL mainly relates to validators, aiming to coordinate and incentivize them to perform useful work. Once validators stake POL, they enter the validator pool and are eligible to subscribe to verify any Polygon blockchain, while receiving three types of rewards:

1. Protocol Rewards: Staking the protocol will continue to distribute pre-set POL, which will be distributed to all active validators as basic protocol rewards, replacing the current MATIC protocol rewards received by Polygon validators.
2. Transaction Fees: Validators are allowed to verify any number of chains and typically collect transaction fees from all these chains.
3. Additional Rewards: To attract more validators, certain Polygon chains may choose to add additional rewards, which can be any token, including but not limited to POL, stablecoins, or the native tokens of that Polygon chain.

Important Notes on Polygon Token Upgrade, POL Will Have Yearly Issuance

If the token upgrade proposal is successfully passed, the current MATIC tokens will be sent to the upgrade smart contract, which will automatically return an equal amount of POL. The initial supply of POL is 10 billion, equivalent to the total supply of MATIC.

In addition, to incentivize validator participation and retention, POL will have an annual issuance rate of 1% as validator rewards, not subject to modification for the initial 10 years. To provide ecosystem support, Polygon proposes introducing a Community Treasury, with an annual issuance rate also set at 1% of the POL supply, to be maintained for at least 10 years without lowering below 1% in future modifications.

Therefore, POL will have a continuous issuance rate of 2% of the supply annually.

Lastly, each community of a Polygon chain can decide which token to use to pay gas fees, with POL being the most used token for payments in the Polygon PoS.

For detailed information on the complete Polygon token upgrade, refer to the official whitepaper.