Interview with the Founder of Polygon | How did the Swiss Army Knife on Ethereum, the Indian Crypto Unicorn, come into being?

With the continuous tightening of regulations, the vitality of cryptocurrencies has been greatly affected after the "519 plunge". Especially in the face of policies that have not yet been fully implemented, the market rebounded weakly, the profit effect was not ideal, and investor sentiment continued to be low.

(This article is authorized to be reprinted from PANews, the original title is "Interview with Polygon Co-founder: The Great Migration of New and Old Protocols, How Did the "Indian Cryptocurrency Unicorn" Come into Being?", original article here)

However, Polygon (formerly Matic), known as the "Swiss Army Knife on Ethereum," has grown against the tide in this avalanche-like plunge. According to CoinGecko data, since the "519 plunge", MATIC has rebounded by over 196%, outperforming the vast majority of cryptocurrencies. Looking back over time, MATIC's performance has also been noteworthy. From its initial issuance in 2019 to the present, the highest price of MATIC has surged nearly 490 times.

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The soaring price has made Polygon's co-founder a billionaire and has transformed the Indian cryptocurrency unicorn, initially valued at only $26 million, into a multi-billion dollar entity. What "magic" does Polygon, which has attracted numerous fans, possess? Recently, PANews interviewed Polygon's co-founder Sandeep Nailwal to see what real skills are behind the explosive rise of this Ethereum scaling superstar?

From Matic to Polygon, How was the Layer 2 Aggregator Formed?

Dubbed as the "Ethereum of India," Polygon, formerly known as Matic Network, claims to be a scaling solution born to address Ethereum's congestion issues. In 2017, as Ethereum was gaining wider public attention, it was criticized for congestion and performance issues, leaving users frustrated. To create a more open world, three tech enthusiasts with years of technical and product development experience, Sandeep Nailwal, Jaynti Kanani, and Anurag Arjun, founded Matic Network in 2017. Subsequently, Mihailo Bjelic, a prominent contributor to the Ethereum ecosystem, joined the team as a co-founder in 2020, and the "Four Little Dragons" officially formed the team.

Based in the sixth-largest city in India, Ahmedabad, Jaynti (JD) was passionate about scaling solutions like Plasma and state channels, and made significant contributions to the Ethereum ecosystem, including projects like Web3, Plasma, and WalletConnect.

Polygon initially adopted the Plasma scaling solution and even became a representative project for this solution. In 2017, due to the surge in Ethereum usage, its performance buckled under the increasing demand, causing developers and users to worry about Ethereum's application prospects and urgently seek new scaling solutions. Among them, Plasma, co-promoted by Ethereum founder Vitalik Buterin and Lightning Network whitepaper co-author Joseph Poon, quickly gained widespread attention. Although Plasma was once considered a major player in scaling solutions, issues such as complex fund exits and incompatibility with DeFi smart contracts gradually led to Plasma falling out of favor.

Subsequently, various scaling methods like ZK Rollup, Optimistic Rollup, etc., each with its own trade-offs, took center stage. However, in Polygon's view, the Ethereum scaling race is not a winner-takes-all game, and the diverse and increasingly mature scaling solutions may coexist in the long term. Polygon is determined to break the isolation effect caused by the fragmentation of current Layer 2 solutions and underwent a "rebirth" in February this year, rebranding as Polygon. It introduced an "integration" approach, starting to develop multiple Layer 2 scaling solutions such as zkRollups, Optimistic Rollups, Validium, aiming to provide Ethereum with a modular, universal, and flexible scaling framework.

However, Sandeep Nailwal also stated, "Polygon's goal has always been to support developers and users in using their preferred scaling solutions, and Plasma as one of the scaling solutions will continue to receive active support from Polygon. Polygon hopes to become a Layer 2 aggregator by supporting various scalable solutions, including Plasma, to allow developers to choose the solution that best suits their needs through easy-to-use products like the Polygon SDK."

Although the Layer 2 race is gaining momentum, many see Layer 2 as a compromise, merely a transitional solution until ETH2.0 is fully implemented. With the arrival of ETH2.0 in the future, how will Polygon, as an aggregator of Layer 2 solutions on the Ethereum chain, position itself?

"The arrival of ETH 2.0 will make Polygon more scalable and flexible, providing scalable supply. The demand for ETH 2.0 is already present in the development process on Ethereum. Even with rapid growth, it will encounter similar bottlenecks. This is why Vitalik proposed the Ethereum roadmap centered around Layer 2. Vitalik pointed out that ETH2.0 will only have data availability shards, which means they will only have data for applications, while the final execution will still be on Layer 2. In the future, Ethereum's scalability will be 64 times what it is now, but the demand will be 1000 times what it is now, so users will need Layer 2 scalability solutions provided by Polygon," Sandeep Nailwal stated in an interview with PANews.

From Matic to a Layer 2 aggregator, Polygon is opening a new door for the scaling race with an aggregation mindset.

Rising Ecosystem, DeFi and NFTs to be Future Catalysts

Behind the strong surge in MATIC's price, Polygon's ecosystem continues to expand and prosper. Particularly, mainstream applications like Opensea, Aave, Sushiswap, Curve, and 1inch have all integrated Polygon, accumulating considerable locked funds and further boosting Polygon's reputation. For example, Aave on the Polygon chain has attracted over 30,000 users and more than $7.5 billion in total value locked. However, other scaling solutions like Optimism and Arbitrum are also gaining support from top projects like Uniswap and Metamask, and have yet to launch governance tokens, showing significant momentum.

According to DeFiPulse data, as of the time of writing, Polygon's Total Value Locked (TVL) exceeds $7.5 billion, ranking fifth. Meanwhile, The Block's statistics show that the Polygon ecosystem has attracted a total of 356 projects and companies across 13 sectors.

The diverse ecosystem of Polygon is supported by technology. Sandeep Nailwal explained that Polygon is the first structured and easy-to-use Ethereum scaling and infrastructure development platform, with its core component being the Polygon SDK. This modular and flexible framework supports building and connecting layer two chains. In addition to Plasma, it also supports Optimistic Rollup, ZK Rollup, Validium, and sidechains like Matic POS to provide better independence and flexibility. Polygon's Ethereum scaling solutions have been widely adopted by over 350 DApps, approximately 1.12 billion transactions, and around 9.72 million users.

The Polygon SDK can provide a framework for further rapid development of multi-chain Ethereum, turning Ethereum into a mature multi-chain system. Sandeep Nailwal introduced to PANews that multi-chain Ethereum will be similar to other popular multi-chain systems like Polkadot, Cosmos, but as Ethereum's blockchain internet, the Polygon SDK has its unique advantages, including benefiting from the network effects of ETH, higher security inheriting from Ethereum, and more flexibility and strength.

"Top DeFi protocols, popular games, NFT projects, and enterprises or organizations that can apply blockchain to real-world use cases will be the focus of Polygon. With the increasing migration demands from various projects, Polygon aims to provide a one-stop 'store' solution," as pointed out by Sandeep Nailwal.

To attract and support more DeFi projects, Polygon launched the $100 million DeFi special fund "DefiForAllFund" in April, aiming to support DeFi projects over the next two to three years to improve the adoption, accessibility, and cost-effectiveness of DeFi, eliminating the need for high fees and costs.

The future ecosystem of Polygon holds great potential.

Controversies over Fund Security, Future Aims to Become a One-Stop "Shop"

While Polygon enjoys significant popularity, it also faces external scrutiny over its fund security. In Polygon, fund security is achieved through the Plasma framework and PoS validation mechanism. Plasma relies on the underlying Ethereum blockchain for security but requires a 7-day waiting period for withdrawals, meaning that users' funds are frozen and inaccessible during this time.

On the other hand, PoS Bridge is more flexible, with withdrawals taking about three hours, but its security is guaranteed by the same set of validators and staking MATIC tokens. Node validators can earn newly minted MATIC token rewards by staking MATIC tokens. When validators stake MATIC to an Ethereum mainnet-hosted smart contract, transferring funds from Ethereum to Polygon requires a bridge. This fund extraction process can be understood as unlocking Ethereum funds once the tokens sent by validators to Polygon are burned, allowing for withdrawal.

However, Polygon's multi-signature wallet controls the agents responsible for all staking and bridging contracts. It is known that the transfer of funds using a multi-signature wallet requires authorization from multiple key holders. Polygon's multi-signature wallet has eight signers, including Polygon's co-founders and members from Polygon DeFi projects, raising concerns about its centralization. Nonetheless, Polygon's multi-signature wallet has upgraded from 2/3 multi-signature to 5/8 multi-signature to alleviate external concerns about fund security.

At the time of writing, there are 100 validator nodes with nearly 1.64 billion MATIC tokens staked, accounting for 16.4% of the total supply, distributing over 268 million MATIC rewards, valued at $380 million. Notably, approximately 30.9% of staked MATIC tokens are delegated to Binance nodes, reflecting the centralization of MATIC token staking. However, Polygon penalizes malicious behavior by validators by confiscating staked MATIC tokens, reducing such occurrences.

Furthermore, there are concerns about a 51% attack on Polygon. For example, Ethereum founder Vitalik Buterin once questioned that the distribution of MATIC tokens is not widespread, and 51% of MATIC token holders could conduct an attack. Polygon is not protected by the Ethereum Foundation but by its own PoS consensus, prioritizing functionality over security, which is a weakness in its network.

However, this security concern over a 51% attack is not endorsed by Dankrad Feist, a developer at the Ethereum Foundation. According to him, a 51% attack can prevent users from using the blockchain and rolling back transactions but cannot change the system's rules. This means attackers cannot simply issue new tokens outside the blockchain system rules. Also, if they do not have the private keys for a specific address, they cannot use the tokens from that address.

Despite its imperfections, Polygon is helping Ethereum evolve into a highly scalable and mature multi-chain system. Its developer-friendly SDK may become the technical pillar of the Web3 application revolution.

Sandeep Nailwal told PANews, "Next, Polygon will continue to focus on developer and user adoption, empowering more users worldwide to engage deeper in DeFi and Ethereum. Especially with the launch of the Polygon SDK, developers, projects, and enterprises can launch sidechains for various application needs. We will soon integrate other Layer 2 scaling solutions like zK and Optimistic rollups into the Polygon SDK, making it a one-stop 'shop.' Additionally, Polygon may even introduce shared security chains, such as Polygon's Commit Chain, supported by Ethereum security."

In conclusion, as the demand for Ethereum scaling solutions surges, although the Polygon ecosystem layout is taking shape, everything is still in the early stages, especially with competitors eyeing opportunities and preparing. As co-founder Mihailo Bjelic puts it, "The cake is very big, so don't rush."