You are reading an excerpt from our free but shortened abridged report! While still packed with incredible research and data, for just $20/month you can upgrade to our FULL library of 50+ reports (including this one) and complete industry-leading analysis on the top crypto assets.
Becoming a Premium member means enjoying all the perks of a Basic membership PLUS:
- Full-length CORE Reports: More technical, in-depth research, actionable insights, and potential market alpha for serious crypto users
- Early access to future CORE ratings: Being early is sometimes just as important as being right!
- Premium Member CORE+ Reports: Coverage on the top issues pertaining to crypto users like bridge security, layer two solutions, DeFi plays, and more
- CORE report Audio playback: Don’t want to read? No problem! Listen on the go.
The article delves into the upcoming Polygon 2.0 upgrade and its potential impact on the cryptocurrency ecosystem. It scrutinizes the transition from MATIC to POL, the newly introduced re-staking protocol, and the broader implications for network security and validator engagement. The article also explores the technological advancements introduced by the Chain Development Kit (CDK) and the strategic restructuring of Polygon's governance model.
Polygon 2.0 Design
Web3 has been grappling with a persistent scaling problem since its inception. The continuous addition of new chains to meet the demand for blockspace invariably leads to fragmented liquidity and a subpar user experience. Polygon 2.0 emerges as a solution to this problem, offering an elastically scalable, unified environment for accessing value, akin to how the Internet provides a scalable, unified environment for accessing information.
Polygon 2.0 is envisioned as an ecosystem of ZK Layer 2 chains based on Ethereum, referred to as "Polygon Chains." This structure is designed to improve both vertical and horizontal scalability, much like the layered structure of the Internet protocol suite. Polygon 2.0 comprises layers that perform different roles.
Staking Layer
The Staking Layer is a Proof-of-Stake (PoS) based protocol that leverages Polygon's native token to provide decentralization to participating Polygon chains. It achieves this through a common, highly decentralized validator pool and an in-built restaking model.To reinforce network security, the new POL token will be pivotal. Its role extends beyond traditional use, enabling holders to partake in network security activities across various chains in the Polygon ecosystem. Validators will be granted the opportunity to compound their earnings by engaging in activities ranging from transaction validation to the generation of complex ZK-validity proofs.
The Staking Layer is responsible for all matters related to Polygon 2.0 validators. It exists on the Ethereum network as a smart contract. There are two types of smart contracts in this layer: the Validator Manager and the Chain Manager. The Validator Manager manages the pool of validators in the Polygon 2.0 ecosystem, including a list of all validators, which validators are participating in which Polygon Chains, their staking size, staking/unstaking requests, slashing, and more. The Chain Manager exists for each Polygon Chain and manages the list of validators, configurations for validating that chain, and more.
Validators can join the common validator pool in Polygon 2.0 by staking tokens and participate as validators on multiple Polygon Chains if they wish. They are responsible for ordering and validating users’ transactions to create blocks, as well as the proving process of generating Zero-Knowledge Proofs (ZKPs) and ensuring the availability of transaction data. Validators are compensated for their various roles with protocol rewards, transaction fees from participating Polygon Chains, and additional rewards from Polygon Chains (e.g., native tokens).
Interoperability Layer
The Interop Layer facilitates secure and seamless cross-chain messaging within the Polygon ecosystem. It abstracts the complexity of cross-chain communication and makes the whole Polygon network feel like a single chain to users. Every Polygon Chain manages Message Queues, which are messages sent to other Polygon Chains containing the content, the destination chain, the destination address, and metadata. Message Queues have a corresponding ZKP, and if the ZKP of a particular message is verified on Ethereum, the destination chain can safely perform this cross-chain transaction.
The Interoperability Layer also adds an Aggregator component that brings together multiple ZKPs generated by Message Queues in Polygon Chains and allows them to be validated cheaply on the Ethereum network. The Aggregator is managed by Polygon 2.0’s common validator pool to ensure decentralization for liveness guarantee and censorship resistance. This cross-chain interaction is designed to give users a "Unified Liquidity" experience, as transactions can be processed almost instantly and atomically, despite using multiple networks.
Execution Layer
The Execution Layer is where the actual computation takes place in Polygon Chains.It enables any Polygon chain to produce sequenced batches of transactions, also known as blocks. This protocol layer is relatively commoditized and is used in a similar format by most blockchain networks. It has components similar to a typical blockchain network (e.g., P2P communication, Consensus, Mempool, Database, etc.). Polygon Chains are highly customizable at the client level, including the native tokens, transaction fee flow, additional validator rewards, block time and size, checkpoint time (how often ZKPs are submitted), and rollup/validium selection.
Proving Layer
The Proving Layer is a highly performant, flexible ZK proving protocol. The Proving Layer is responsible for generating ZKPs for every transaction on Polygon Chains. The prover utilizes Plonky2, a technology developed by the Polygon team.
The novel design of the Proving Layer offers several major benefits, including efficient proof generation and verification, straightforward and efficient proof aggregation, implementation of different ZK state machines, and safe cross-chain communication between those state machines.
Validiums
Polygon also proposes an upgrade to their flagship scaling product, transitioning it into a zkEVM Validium. This unique approach stores data off-chain and uses validity proofs to ensure data integrity. This method reduces computational costs, making user interactions more cost-effective.
A validium is nearly identical to a ZKR, with the only difference being data availability in a ZKR is on-chain (Ethereum L1), while Validiums store it off-chain for cost-reduction reasons. This means “true” ZK-rollups post data on the Ethereum mainnet itself while validiums post proofs on-chain, but the data remain on a separate network.
This benefit enables Validium to achieve considerably higher throughput than traditional rollups. By sending data off-chain rather than on-chain, it further reduces the cost of each transaction and increases the transactions per second (TPS). Validiums are the cheapest on a per-transaction basis in this spectrum.
Accessing the latest state in a validium requires that off-chain data be available. This is fine except in cases where the data provider misbehaves or goes offline. As a result, there are different DA guarantees and security tradeoffs associated with a validium.
Polygon plans to leverage the existing POS chain validator list to disseminate transaction data across the entire 2.0 ecosystem. If successfully implemented, Polygon could be the pioneer in using a decentralized sequencer for ordering transactions on its solution, a significant achievement that rivals such as Arbitrum and Optimism have yet to attain.
In this model, the Ethereum smart contract serves as the "source of truth" for the state of the validium. The inclusion of validity proof-verification by Ethereum nodes significantly enhances security, allowing the network to leverage an economic stake of $40 billion and approximately 8000 individual validator nodes. This level of security is far superior to that of the original Proof-of-Stake (PoS) network.
Technological Advancements
Polygon 2.0 envisions the transformation of the Polygon PoS chain into a zkEVM validium, with the goal of augmenting the chain's security and performance. This adaptation is expected to significantly reduce transaction fees while maintaining strong security guarantees.
Introduction of the Chain Development Kit (CDK)
The CDK stands out as a landmark innovation within Polygon 2.0. This open-source framework is designed to facilitate the development of ZK Layer 2 solutions, and the conversion of Layer 1 solutions to Layer 2. The CDK is crafted to support the sovereignty of developers, ensuring extensive customizability and promoting interoperability among chains within the ecosystem.
Governance Restructuring
Polygon Governance 2.0
The new governance architecture of Polygon is structured around three principal pillars, each with its distinctive framework aimed at creating scalable and efficient governance mechanisms. These include Protocol Governance managed by the PIP framework, System Smart Contracts Governance overseen by the community-governed Protocol Council, and Community Treasury Governance aimed at fostering a self-sustainable fund to support public goods and ecosystem projects.
Polygon Labs actively encourages community involvement through various feedback mechanisms and proposal processes. The PIP Bounty Program is one such initiative designed to reward valuable community contributions to the ecosystem's development.
Conclusion
Polygon 2.0 presents a significant advancement in the realm of cryptocurrency, with its focus on community-driven governance, enhanced security protocols, and validator incentives. As the ecosystem prepares for this transformation, the implications for investors, developers, and users are profound, potentially setting new benchmarks for security, efficiency, and democratic governance in blockchain technologies. The transition to Polygon 2.0 will require astute attention from stakeholders to navigate the changes and harness the opportunities that this evolution presents.
Ethereum (ETH) Crypto News DeFi Polygon (MATIC) Polygon
How do you rate this article?
5
As Expected Solana Is Now Going Through Price Correction!
Portfolio October update - $3470 of passive crypto income
Sam Bankman-Fried Sentenced to 115 Years Imprisonment for Money Laundering