Bankless - SotN #34: Polygon: Ethereum's Internet of Blockchains – Mihailo Bjelic & Sandeep Nailwal

Episode Date: February 17, 2021

Guests: Mihailo Benjic & Sandeep Nailwal We bring Mihailo & Sandeep of Polygon (formerly Matic) to the Bankless State of The Nation, to discuss Ethereum's Internet of Blockchains and Polygon's approach to connecting networks. ----- 🚀 SUBSCRIBE TO NEWSLETTER: http://bankless.substack.com/​​  ✊ STARTING GUIDE BANKLESS: https://bit.ly/37Q17uI​​  🎙️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/​​  👕 BUY BANKLESS TEE: https://merch.banklesshq.com/​​  ----- 💪BECOME A BANKLESS PREMIUM MEMBER: http://bankless.cc/membership​​  ----- GO BANKLESS WITH THESE SPONSOR TOOLS: ⭐️ AAVE - BORROW OR LEND YOUR ASSETS https://bankless.cc/aave​​  🚀 GEMINI - MOST TRUSTED EXCHANGE AND ONRAMP https://bankless.cc/go-gemini​​  💳 MONOLITH - GET THE HOLY GRAIL OF BANKLESS VISA CARDS https://bankless.cc/monolith​​  📱 DHARMA - MOBILE ONRAMP DIRECTLY INTO DEFI https://bankless.cc/dharma​  ------ 📣LATTICE | NEXT GENERATION OF HARDWARE WALLETS https://bankless.cc/gridplus​  ------ Relevant Links: Polygon https://polygon.technology/​  Our Tactic on Using Polymarket https://newsletter.banklesshq.com/p/how-to-bet-on-defi-with-polymarket Sandeep on Twitter https://twitter.com/sandeepnailwal?s=20​  Mihailo on Twitter https://twitter.com/MihailoBjelic?s=20​  ------ Don't stop at the video! Subscribe to the Bankless newsletter program http://bankless.substack.com/​​  Visit the official Bankless website http://banklesshq.com/​​  Follow Bankless on Twitter https://twitter.com/BanklessHQ​​  Follow Ryan on Twitter https://twitter.com/ryansadams​​  Follow David on Twitter https://twitter.com/TrustlessState​​  ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time we may add links in this channel to products we use. We may receive commission if you make a purchase through one of these links. We'll always disclose when this is the case.

All right, everyone. Welcome to another bankless episode of State of the Nation. We are super excited to bring, I think, a very timely set of guests on today talking about Polygon, which is Ethereum's Internet of Change. This is a layer two solution. We've got the co-founders of the Polygon project on to discuss that. I think that is really the big news this week with gas fees as high as they are, David. But how are you doing? And tease this episode a little bit. for us here. Yeah, I'm doing just fantastic. Just another week in the crypto, just blazing news of an industry. And so, you know, the Matic team and Polygon has been, I would say a little bit under the radar, or at least under my radar, you know, heads down building. And now they are exploding onto the scene. And so we're bringing the co-founders on to talk about the specific implementation details of this specific flavor of L2. I think going into 2021 and definitely in the second half of 2020. It was all about people picking out their favorite flavors of L2. And Maddick, now known as Polygon, is another flavor of L2 that I think deserves people's attention. And so we are going to

investigate what that flavor is in this state of the nation. Yeah. And I think what's cool about this project, Polygon, it's more than just a flavor. It's like a whole ice cream shop with all the flavors because they're executing on all of them. But anyway, we will get to that. Of course, this is state of the nation. It comes out every Tuesday. We try to bring up a really relevant topic and discuss it in depth. We release it on YouTube. If you're watching live, how's it going? And we also release it on the podcast as well. David, before we get to Polygon, let's talk about some things that are new in the bankless nation. You had a fantastic conversation with Hugh Karp, who is the founder of the Nexus Mutual Project, Insurance Protocol for D5.

We've had Hugh on the podcast previously. But what was that conversation? When's it coming out? and why is it important for folks to tune in? Yeah, an unfortunate part of Defy history now. Hugh Carp is the founder of Nexus Mutual, and he was the owner of a bunch of NXM tokens, as the founder would be. This is normal. And so he was playing with the Defi.

I think he was redeeming some farming rewards or something of this nature, and he pressed approve on his ledger to send a transaction, and turns out the transaction that he approved on his ledger was not actually the transaction that he made. to approve. And what happened was that a hacker was able to inject a rogue file into his computer that hot-swapped Metamask with a forked version of Metamask that injected a bad transaction into his ledger, which I make out of every single day at least a couple transactions on my ledger,

and I never like view the little like little display that's going to tell me what to do. And so, you know, I don't think anyone really does. And so, you know, Hugh press send to claim his farming rewards or whatever, but what actually happened was that this hacker had geared up this transaction to send all of his NXM tokens to the hacker's address, which then the hacker then just cleaned up through like RenBTC, Tornado Cash, and then exited. And so it's an ongoing investigation, but we brought Hugh on to talk about the vulnerabilities that he was exposed to and how he got, how he got attacked by this hacker. And so if you are worried about how this may have happened and you want to protect yourself. We have an article coming out on the bankless

newsletter and this video is coming out tomorrow on the bankless YouTube. The attack on Hugh Car post-mortem. Thanks Hugh for coming out and sharing all this information. And I think defy, it's an unfortunate reality. It's an unfortunate part of this crypto industry that these are the things, the things just work this way. And, you know, tip of the hat to Hugh for sharing how he got attacked to make sure that none of us fall to that same fate. Yeah, if you are a DFI power user, super user, you've got to tune into this. When I heard about Hughes Hack, I think it happened in December, he lost $8 million this way. So it's a massive attack, and it's scary that this came through metamast. So if you're a DFI power user, super user, make sure you tune into this and glean

some of those lessons from Hughes experience. That's why he's making it public to help the DFI community. So take a look at the article and check out the YouTube video that comes out tomorrow. By the way, David, we should mention that we are teaming up with lattice wallet as well over the next two weeks because we're really excited. They've got some new lattice wallets in stock. So, oh, David's showing his right here. Okay. So see that screen? This is like a ledger, like a hardware wallet. But it has a big screen. And what's nice about the big screen is that you can see all of the transaction details on that screen. And it's

much more human readable. So we're teaming up with lattice. They wanted to give bankless readers, bankless watchers first dibs on some new stock that they have on lattices. So we'll include a link to the lattice. And we're going to be publishing some more about the lattice. Kind of a hands-on experience from David and I here shortly. But that is a tool for DFI power users to prevent the hue hack, actually reading your transaction details before you click send. So stay tuned for that. We've got Liquity on Meet the Nation, David. I don't know if we have time to tease that. And then we also had the Dollar Milkshake Theory with Brett Johnson, a podcast that came out on Monday. So take a look at that.

But maybe just give us a quick high level of your conversation with Liquity. What is that project? And when is that going to be posted on bankless YouTube? Yeah, that's going to come out this week on the bankless YouTube. Liquity is a governance minimized stable coin. It's a similar protocol to Maker Dow, but with less governance features. And it's also much similar to Robbins. which is also a governance minimized stable coin project but rye importantly is not making a dollar peg

stable coin they're making their own peg yet um maker dow is making a government a dollar stable coin uh and die but it's not governance minimized it's pretty heavy on the governance so liquidity is kind of trying to be this middle ground between maker dow and rye where they're pegging it to the dollar but they're having governance minimization and so that are that video is coming out on the bankless YouTube this week. Yeah, what's so cool we say this all the time is we're going to see all the things attempted in defy. All of the experiments will be attempted here. And this is just another one that's kind of a hybrid of the two models here. So super cool. All right, David, before we get into talking with Polygon, I've got to ask you the question. I always ask on these state of the nations,

what is the state of the nation today, sir? Yeah, the state of the nation is expanding. We are expanding our territory, expanding our real estate. The whole conversation about L2s is to create like new virtual real estate that isn't so crowded, right? Ever since Haseeb Qureshi came on the podcast and he gave out that metaphor of how like DFI is Manhattan or the Ethereum L1 is Manhattan, I've really been a fan of this like real estate or just like physical landscape metaphor. I made my first loop ring wallet this week and so I now have a plot of land on the loop ring L2. And so that's my new plot of land.

There's not as many inhabitants there. And so gas fees are really, really inexpensive and really, really instant. And so people are flowing out of like Manhattan trying to find new areas of land to settle on. And one of those areas of land is Polygon, which we're bringing on to the bankless state of the nation this week. And so the state of the nation is expanding. We are expanding the fold. We are moving outside of Manhattan and settling in the suburbs a little bit. Yeah, I think that's a great articulation of what's going on right now.

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That's monolith.xy-Z. All right, everyone, welcome back. We want to introduce our next state of the nation guest. We have Sandeep, who is the co-founder of the Ethereum Layer 2 project Madik, and Mihalo, who is the co-founder of a project aiming to create the polka dot of Ethereum. Well, these two have fused their brains together

and their teams together to create Polygon, formerly called Madik, which is Ethereum's Interpretion. internet of chains. A quick disclaimer before we get in. I'm actually an advisor on this project because I think so much of it. So keep that in mind as well. It's not the reason we had them on. We have them on because this is a fantastic project that you need to know about. I'm not an advisor, so I get to be the bad cop. It's not. So let's start here, if we could, guys. This narrative, if you go to the Polygon website and you sort of see the

description of what Polygon is. It says Ethereum's internet of blockchains. I want to get to the Ethereum part in a little bit. But first, can we talk about this idea of an internet of blockchains? What is an internet of blockchains? And why is that something that people should be paying attention to? And is that the future? Yeah. First of all, thanks, thanks Ryan and David, for inviting us, even though, David, you're not an advisor and it's amazing that you actually still invited us really on a year. Yeah, thanks for the question, Ryan. I guess Ethereum blockchain is a concept that appeared a couple of years ago and it's a, it's a, I say, I say a belief or a bet that in this whole crypto ecosystem matures, there cannot be one

chain to rule them all, as some like to say. And the reality will necessarily be a multi-chain reality as I said once the ecosystem matures and I would say there are two primary reasons for that one is that blockchains are hard to scale as we I guess so know by this point they are very sophisticated machines built with security and resilience and this decentralization in mind but they are hard to scale as we said so as we are as more and more people are joining the bankless nation and there's more users basically competing for the limited throughput it becomes i would say relatively obvious that the future will have to be multi-chain the second major reason i would say is that um so far both i would say Sandip and i through

various roles he worked with probably definitely 100 plus blockchain projects and if there's something that we realize is that different projects have different requirements, basically, when it comes to technology and the features their projects and their community require. Sometimes some of them are more focused on security, some of them are more focused on privacy, etc. So that being said, any single blockchain, if we assume the existence of that single blockchain that rules them all, you cannot tune those parameters, basically, to cater to those, specific requirements. So that's, I guess, I would say that's probably the second major agreement that explains why the future, as we believe, it has to be a multi-chain future.

If we agree on that, that there is, sorry, sorry, Ryan, if there is a multitude of blockchains, it becomes relatively obvious that we definitely should connect them. We don't want that to exist as isolated islands and that's where the whole, now we, I guess, have the whole picture. I mean, the Internet of blockchain is a concept of multi-chain reality where chains are connected among each other and can communicate and exchange messages and collaborate if you want. So definitely the Polygon thesis believes that there is going to be some Internet of blockchains, but Polygon isn't the first project to say that. There have been some other projects that have been saying this for a while.

Maybe we could touch on them. So I remember in 2017, a project called Cosmos is talking about the internet of blockchains. So that's one approach. And another has been the Pocodot network, which is talking very much about an internet of blockchains. Maybe Sandeep, could you build on what Mahalo was saying about the internet of blockchains and talk about these two attempts, Cosmos and also Pocodot and how they're kind of similar or distinct from what Polygon. on his building? Yeah, sure. So I think one of the biggest thing that we know,

we also keep discussing among ourselves is that both of these attempts, like first thing is very clear that 99% of, I would say like I don't have exact number, but 95% to 99% of all the blockchain developers, Ethereum developers, right? First, like, you know, principally, like slightly wrong step, we believe, or, you know, at least from our opinion, is that these, you know, ecosystems don't, like, try to create a separate, you know, environment than Ethereum, right?

So they don't kind of utilize those network effects Ethereum already has. Secondly, you know, the one more important part is both of the platforms are, you know, sort of opinionated in their sense, right? So, like, they have particular kind of solutions that they are looking to build, right? like an opinionated approach. For example, in Cosmos, you have, like, each of the separate or the chains, actually, they have their own security and then they connect to the Cosmos Hub. And then, you know, the problem is that, you know, if let's say one chain is communicating to some other chain, how do they trust the, you know, the things that are coming from the other chain.

Similarly with PolkaDot, you know, PolkaDot is trying to build a shared security thing. right so you know you will have a like a central chain which will have some validators and they will kind of you know validate on para chains which would be like shared security chains again like that is also one flavor of you know kind of application so you know what when we teamed up like you know one of the biggest parts of our synergies was that we you know after talking to so many developers is like you know like the eventual solution that will end up winning the overall like the scalability or winning the infrastructure side of thing, would be something that is unopininated.

That means that caters to the requirements of the developers, you know, as for their projects, right? So those two are, I would say, are the most important things in my mind that how we differentiate from that. Like first I already mentioned that, you know, being closer to Ethereum and then, you know, building on top of Ethereum

and providing the scalability to like, you know, the projects which are all, already bear on Ethereum by providing EVM compatible chains and then, you know, connecting them via Ethereum. And one important thesis we also have is that, you know, eventually whatever happens, Ethereum is going to be the ultimate settlement layer and the business activities will move to these various flavors of, you know, like the execution environments, be it like, you know, standalone chains, be it shared security chains or L2 chains which derive their security

from Ethereum. So that would be like, you know, so that's, that's the main idea on it. Sandeep, why do you think that? Why do you think Ethereum will be the settlement layer for this entire internet of chain? Yeah. So I think like the, the Ethereum's primary, you know, this thing like a decentralized and secure programmable money, you know, part is the, like, it has been proven over the years. And then the like overall, the developer ecosystem, there are multiple things.

Like we can go on and on about it, but then, you know, like, like we were just talking about the, the kind of hacks that, you know, Defy environment is, is already having now, right? So, and then, you know, previously apart from Defi also, Ethereum has seen so many, like, maybe like a billion dollar worth of attacks, right? And then Ethereum has reached this stage, which is a level of maturity where we can see, like, you know, billions of dollars of Defi and, you know, we are seeing all the, like, you know, the traditional finance sector talking about it and all that. So that level of maturity and the network effect,

it takes like time and there is no shortcut to that. Like that's organic, you know, movement that Ethereum has, has, has, you know, evolved in the last, you know, like six, seven years. Right. So for any other blockchain platform to reach that, you know,

organically, it is going to take time. There's no shortcut, no matter how big money you have raised, no matter how many billions you have raised. And, you know, like how much, you know, how you are, you're trying to build your developer community, those tooling, though, you know, your wallets, your security paradigms for your smart contracts and all that, everything, you know, takes time. So like Ethereum is at a stage where it's very hard to,

you know, take back or take those network effects out of Ethereum. You know, that's what, that's what I feel that. That's why we believe that, you know, this programmable money paradigm, which has proven itself over the time with a huge amount of decentralization and security, I think that will control the central sort of network effects in order to remain the settlement layer and the business activity can happen on the side chains. When side chain means like other kind of execution environments.

Ryan, you're muted. Ryan, you do. Thank you. So let me kind of summarize, Sandy, for folks that are kind of new to this, because I think, and I've seen this on Discord, I've seen this on Twitter, there's a lot of fear and certainty and doubt going on about Ethereum given high gas fees. So Ethereum kind of, quote unquote, killers are coming in and saying, hey, we've got more advanced technology. We've got a chain that doesn't have these

high gas fees. Defi is going to migrate over to our chain. A chain like the Binance smart contract chain comes to mind or a chain like the Pocodot network comes to mind, all of these kind of Ethereum killers. And I think what you're saying is the difference between sort of an Ethereum killer or a competitor and what you're doing with Polygon is that basically your Polygon is Ethereum's internet of chains because you're using Ethereum tooling. That works out of the box. So like the Ethereum virtual machine, all of the wallets, all of the infrastructure, all of the smart contracts can just be ported over. So you've got that, which is kind of Ethereum native, if you will. But secondly, the plan for Polygon or any layer two is also to use

Ethereum as a settlement layer and also to use Ethereum's security. So all of Ethereum's economic security, if you guys were building out sort of an optimistic roll-up or a ZK roll-up or something, the polygon chains would essentially be backed by Ethereum's economic. security. If you're an eth killer competing as another layer one, a cosmos, for instance, you have to bring your own security to the table. You're not bootstrapping that on the value of ether the token and its economic security. If you're polka dot, it's the same thing. So a layer two is something that uses Ethereum as a settlement and uses Ethereum for security and uses some of the Ethereum tooling like the EVM. Is that an accurate representation?

of the difference between a layer two and an eth killer? Yeah, largely, largely. And I think Mihailo can expand on that, like, you know, multiple, like, one part like Mihalo has, you know, very nicely articulated is the various degrees of, you know, connectivity to Ethereum. So there is, like, you know, there's various kind of tethering. So one is like a very strongly coupled tethering into, you know, tethering into the Ethereum layer, which will be like a layer to, you know,

trading like, for example. Apple ZK rollups, optimistic roll-ups. Then you have another layer of a kind of connectivity, which is like, let's say, in the form of bridges. And then there are multiple flavors to it. So, for example, the polygon POS chains, if you see, the whole of, like, although many people think of it as a separate, like a proof of stake, you know, side chain,

but then it actually, the whole of POS logic actually stays inside of Ethereum. So all the validators actually have to register on Ethereum. They make periodic checkpoints onto Ethereum, whatever is happening on the side chain. They put a proof of even on, and I'm talking about the polygon POS chain, thematic number of POS chain. You know, they put the checkpoints onto the Ethereum, this thing. And their reward, staking rewards are actually given out basis the checkpoints that they've given. So like there is a lot of like, you know, the connectivity to Ethereum is also a spectrum. Right.

So you have the extreme end of like, you know, let's say optimistic rollups, which actually are putting the transaction. call data as well as the state route also on the Ethereum. And then you know, you have the, you know, the standalone chains on other side, like which might be an enterprise chain. But still, again, like, you know, just something like what we, what everybody is trying to do with Coram and, you know, you know, Ethereum Enterprise Alliance. The idea is that if the larger number of developers are building on EVM,

solidity and all that, the Ethereum ecosystem overall, you know, is. Yeah, maybe just a few, few lines. But I think Sandy articulated it pretty well. First of all, I guess the most prominent internet of chains projects out there are Cosmos and PolkaDot and maybe Avalanche. And I first of all would like to say that these are amazing projects with very, very good teams and huge kudos for all the work they're doing. And that being said, I think that I would say the fundamental. from our point of view, fundamental mistake when these projects were initiated or started, is the decision to build a separate ecosystem or some people would like to say Ethereum killers?

We believe our bet is that, and we are, I would say, pretty sure of that, that was a strategic mistake. Like, we strongly believe Internet of Chain is the future, but Internet of Chain done right, if you will, is Ethereum's interrath of chains. That's the only thing that in our opinion makes sense because of everything that you mentioned, networking effects, the majority of the tech, stack, and all the other things. And that's what we basically decided to do.

That is, I would say, the major difference between us and these other projects that we mentioned. And that major difference, actually, when you go a little bit deeper and you start really thinking about it, might not sound like a big deal, but then like once you start going deeper into the weeds, it really, really can, I would say, even blow your mind. Like in a sense that how you get so many more options in terms of the architecture. You get by default higher security because you

have all of a sudden, like all these projects, Cosmos, beat Cosmos or Pocod or whatever. For example, Pocado has the relay chain as the, let's say, Settling, layer or their source of security. It is still, of course, I'm really not saying, trying to say anything bad. I won't, I would never say anything bad about those projects, but you have a chain that is still not better tested, that is just basically starting to run, and you are using it as a source of security for the whole ecosystem of chains, and that can be tricky and can introduce some challenges. Here you have the most battle tested and the most secure program.

blockchain in the world as your settlement layer and source of security. I mean, it's like a very huge difference. We have to admit that the second thing is all the tech stack. Like when you're building an ecosystem from scratch, Ethereum was, I would say, some sort of perfect storm happened. And as Sandeep said, no matter how much money you have, it is going to be, in my opinion, extremely hard to replicate the success of Ethereum. all that organic interest and like the whole digital nation that gathered and formed around

Ethereum, it's like really, really impressive. So yes, I mean, I think that's like really a major difference. And once you start building such a multi-chain system with Ethereum in mind, like there are, I guess, two, again, major impacts. One is, or aspects. So one is strictly technological and I would say pretty obvious. You get to inherit all the tooling, all the, I mean, for example, EVM as a global standard for programmable, programmable blockchains and all the ancillary tools and whatnot. And for any competitor, if it takes years to reach to that point very tier, it is now.

And the second thing is, I would say a little less obvious. and it's kind of abstract or maybe sociological, if you will, is that I think the community understands if something is built. I think a community understands and will understand that Polygon is built as an integral part of the Ethereum ecosystem, both technologically and from the point of you, I mean from the cultural point of view, if you will. I think community is very much able to recognize this thing. So these two aspects, I believe, are putting polygon in a very good, I say, position. So here's my takeaway so far. Sorry, one moment while I adjust the screen.

So my takeaway is that there is this construct, this construction that we can label as like an internet of blockchains. And that can be a relatively neutral thing to build. We can build it as a neutral piece of infrastructure that we can do. deploy it wherever. You know, Cosmos has it deployed as its own kind of like internet interchain. Pocodot has it deployed as this, you know, L1 ecosystem. And then you guys have it deployed as strictly an extension of the Ethereum-based protocol as an L2. But it's the same con, it's more or less the same construct depending on with maybe some tweaks and parameters suggested. But what you guys are saying is that when you take this neutral construct that is possible to be

built in any sort of context, and then you put it inside of the Ethereum context, you get to draft on some of what makes Ethereum so awesome, one of these things being the value of Ether and the native security of Ethereum, the blockchain. And then also, you could also draft on all the multitude of assets that are being issued on Ethereum, right? And so any sort of ERC20 token, and correct me if I'm wrong, but any ERC 721 token can also be worked. with Madik natively with with Madik, right? And I guess the whole point of Cosmos and Pocodah is to also be able to make an interchained world. So in theory, I should be able to take my assets to Cosmos as well. But the difference there is that, you know, Cosmos isn't as natively integrated with

the security of Ethereum and having that native integration. And the same way that like loopering offers you the same assurances that the Ethereum L1 offers you, so does Mattox slash polygon, polygon, now known as Polygon. And I think, Mihailo, what you were just finishing up there is that committing to Ethereum is not only committing to the technology, but also to the values and ethos of the community, right? And so, like, the energy that is in Avigachis, like, all of that community can actually be carried over without loss into Polygon, right?

Because we are committing to the ethos and to the ethics that we think that, Ethereum brings to the world, the politics that we think Ethereum brings to the world, is matched by Polygon. So far, that's my takeaway. Do you guys want to add on anything to that? I think you phrased it very well. I think that's a very good recap of everything that we said so far. Like, as you said, and again, these are these two aspects. As you said, assets can be indeed transferred to Cosmosor to Pocadot in similar manner, relatively similar manner, at least on a high level but it just comes from that if your design decision from the get-go is that I'm building a system that is integral part of the Ethereum ecosystem and on the other side there is another

design decision that says I'm building a separate ecosystem and then I'm going to build bridges to it has to reflect along the way it will reflect many times it's like you and I decide to do this show from your apartment or we decide to do it from the get-go from different environments and and then think of a way to connect. It has to reflect in all sorts of faiths along the way. And the second part is, as you said, we are completely adopting Ethereum ethos and itos and culture. And we are, I think, already very much active members of the Ethereum community and supporters

all these years and all that. So yes, I would say that's a great trick. Ryan, you're muted. David, I want to go back to something you said, right? Because it, and feel free anyone to kind of chime in here. But so here's kind of the thesis and the thesis that we've been talking about is that if you are a base layer one chain like you're a Bitcoin or an Ethereum or even a Pocod, you have to be in the game to compete as a money.

Your asset has to compete in the game for a monetary premium. right? So Bitcoin obviously competes for a monetary premium. More recently, I think people are realizing that ether, when it's used as collateral, as a store of value, when it's used inside of the economic parameters of the theorem, is competing as a money. And this has been always my problem with like a dot or an atom in cosmos is that they don't seem to be competing as money, right? Like the folks on the cosmos project will tell you explicitly, no, atoms are not money. There's some sort of a token, a capital asset, but they're not money. The folks on Pocodot with dots, they're not quite as clear, but the challenge with treating

dots as a money is that there's on-chain governance. So essentially, you have issuance that's ruled by coin vote and by plutocracy. And the reason I think it's important that layer ones compete for money is because that's where their security comes from. Their economic security at the end of the day comes down to what's the value, of the token. So Bitcoin's economic security and its double spend prevention is based on the value of Bitcoin as an asset. Ether's economic security theorems is based on the value of ether, right? So you have to be competing and playing in this money game. And if the other layer one chains

aren't competing as a monetary asset, they don't have a credibly neutral plan to compete as as a money, they can't possibly be the chain that offers the highest security. And at the end of the day, it seems to me that DFI will all move to the settlement layer of the chain that offers the highest security. So I wanted to just throw that idea out there to you guys, because we've been talking about kind of network effects and sort of the EVM and the tooling, and that's all true too. I also think that there is a network effect in being a money that you can't easily be replicated by a, and we've been calling them ETH killers, but like, you know, that's just a term that the industry,

uses, you know, to your point, guys, these are, these are good projects, these are good teams. Everybody has, you know, the best, uh, intense, I suppose. But it seems to me that unless they compete as a money, they can't possibly be as economically secure as Ethereum. So I guess what I, what I see in sort of the polygon approach is, um, you don't have to bootstrap, you know, the polygon token as a money. You could just, you know, use the economic security of Ethereum. and that's an advantage too, because it's really hard to create a monetary asset that the world accepts as a money. Any comments on that from Sandeep or Mahalo? I think that's absolutely a great point.

And definitely positioning Ethereum as money has been very valuable in terms of increasing the security of the whole ecosystem, primarily Ethereum. main net and then indirectly the whole the whole Ethereum ecosystem and that's something that I think everyone it should be an obvious thing to to understand and admit and that being said of course for us that's that synergy basically between polygon and Ethereum like once you build the interior part of the system our best interests very much align with your best interest and Ethereum ETER being strong or hard money and having, I mean, providing or enabling high security to us. So it's like a very nice incentive alignment between in this case, this particular case, Polygon and Ethereum or any other basically Ethereum ecosystem project and Ethereum.

Just to confirm, it is money. I just want to say to us. Oh, well, you know, you won't get any disagreement here on that. So can we talk a little bit about the types of change that Polygon has? So it's not just one solution, right? And actually, I'm going to share my screen here. This is a great way to look at it. There are multiple types of roll-up.

It's not just ZK roll-up. It's not just a plasma or proof-of-stake chain. you got to try like this list of different chains kind of encapsulates all of the different approaches, maybe besides state channels or that sort of thing, but all of the different internet of chain types of approaches that are being attempted on Ethereum today. And you guys are doing them all at once. Maybe could you go over each of these solutions and kind of talk about their advantages and disadvantages and how far you are in the process of actually. bringing them to market. Sure. Sandi, do you want to take this one? Yeah, so maybe I can start with the first tool. If you see the current like the Matic POS, hybrid POS and plasma chain,

that actually is very interesting, which is not very talked about, is that on a single chain, you have an option of two different kind of, right? So you can either choose a pure POS. you know a solution for you and then you can actually choose you know like a like a pure or a plasma based solution also i mean the the benefits and you know the the pros and cons are like you know i mean a lot over there for example like with with you know like with simple POS you know the solutions which only want to rely on the you know security of the of the proof of state layer they you know end up using that more like for example

some sort of NFTs and you know like you know like some some Dow voting and all that where they don't need like that hard level of security like you know as I think that analogy of having a Manhattan versus a you know suburb so you know the

per square you know mile number of policemen in a in a Manhattan area would be much bigger than the you know like a suburb so I think that's that's a very nice analogy to do that So, you know, like, so the kind of use cases which want that, they can have that. If the projects, like, for example, as far as we know, like, for example, Auger wants, like,

more Ethereum-based on-chain security, like, which is, which comes with plasma, using fraud-proofs and things like that. So then, you know, you can use, you can use that. But that comes with its own kind of caveats where, you know, the development and, you know, like you need to put more developer protocol, you know, specific developer as into it. things like that. So similarly, you have other different, different other solutions and, you know, maybe Mihailu can take from there. And I think he has a very nice, you know, this thing of categorization of, you know, the larger piece of solutions into two different, two main ones, when are the standalone

chains and other ones the secured chains. So yeah, mehalo, like, if you want to take over from there. Yeah, sure. Thanks. Yes, as Sandeep said, basically, we like to categorize because the, the Ethereum scaling and infrastructure ecosystem is very vibrant. And there's a lot of flavors and a lot of projects offering different solutions. And the whole ecosystem is really amazing, I would say. What Polygon introduces here is basically some sort of, we are trying to introduce structure for the first time, maybe for the first time in this fantastic and vibrant and organic ecosystem.

Ethereum is developing organically by default, and that's a wonderful thing and very powerful. But organic things often lack structure. So speaking with different projects, we kind of realize that there is awareness about different scaling solutions, but it's kind of hard to navigate that ecosystem and understand the trade-offs and deal with some implementation complexities, I would say. And Polygon is, I would say, community-driven effort to introduce some structure in that beautiful, organic, a bit chaotic, scaling ecosystem. To introduce structure, we can start first by defining, let's say, two major categories of Ethereum or Polygon chains. First one are these standalone chains. I would say that's how we call them.

standalone chains are chains that do not necessarily inherit security from Ethereum. They by default have their own validator set and they are in simplest terms you can think of them as some sort of side chains or enterprise chains. And it is, I would like to say, first of all, I guess to understand if some people are generally into Internet of blockchain projects, those chains would be something similar to cosmos zones. I think it's fair to compare them with cosmos zones because cosmos zones also have their own validator sets and they are by default responsible for their own security. In Ethereum, we already have, I would like to say, a very high success with chains like that. For example, if you

Google, there's something on GitHub called Ethereum Atlas. It's like a list of Ethereum-competable chains that are currently live and have assigned chain IDs. And there's already, I think, 60 plus chains over there. Plus, there are, I would say, hundreds of enterprise implementations. And all these chains are in that group, standalone chains. And they are alive. They are running. They are fulfilling their purpose.

And I think they're, to be honest, I think they're not getting enough attention, or at least as much attention as they deserve. We are, the community tends to focus on layer two solutions, strictly layer two solutions in a narrow sense. And we will get to them in a minute. But I just wanted to say that I think these standalone chains are also providing a lot of value to the Ethereum ecosystem and community. And I think we are often forgetting that. All these chains are still using Ethereum in one way or another to generate their assets, to their bridging to Ethereum to transfer assets back and forth.

They are using Ethereum for checkpoints for all sorts of activities. And they are, in my at least humble opinion, significantly contributing to the Ethereum network effect and the ecosystem overall. And I think we're kind of doing them a bit of an injustice because, let's say, we have hundreds of such chains in production today. And layer two solutions, we unfortunately still have maybe dozens alive. But like a layer two, strictly layer two solutions get probably like 90% of the attention. So that's just something I wanted to briefly say. So polygon and the polygon is decay that we'll be releasing soon supports by default building these standalone chains. Once you have a standalone chain, as I said, you can interact with Ethereum in various ways.

Use it for checkpointing, transferring assets, even staking like we do for our METIC POS chain, which is one example of such standalone chains, et cetera. So I would say it's like it's a really, really important component of the Ethereum multi-chain. So there's the first group of chains. The second group of chains are what we call secure chains. These are chains that derive security from Ethereum. And these would be a layer two solutions in the narrow sense. And there I really like your analogy, Ryan, when you said that we are actually like an ice cream shock

or instead of providing any specific flavor, we are actually like an ice cream shop where you developers or project founders can come and pick their basically pick the flavor that fits their requirements and needs the best. Yeah, that being said, we are kind of, we spend a lot of time also working and me personally and Sande and the whole team spend a lot of lot of time analyzing different layer two solutions, working with specific projects to help them find the optimal scaling solution. And one thing we realize is that there is no silver bullet for Ethereum scaling. There is no one-size-fits-all flavor that will at least we believe that, and that's our bet, that will fit, that will be an optimal solution for all the projects out

there. We believe that multiple scaling approaches will definitely coexist in the long term. And that's how we decided basically to offer a multitude of solutions, instead of any specific solution. We have, like, of course, also enormous respect for all the teams out there, like huge shout-out to teams like, I don't know, Metrolabs, optimism, and all these things are doing fantastic work. And we will be working with those teams, hopefully, closely in the future,

and already working with many of them. but they are by default also focused on one specific solution, one specific implementation. So once you're in that position also you cannot, you have no other option, but you're actually betting on that solution. You're all in on that specific flavor. We think it is not really a safe bet because, as we know, Ethereum scaling the ecosystem is still developing the whole industry, basically, developing. This industry is, we must not forget, 10 years old in total.

And Ethereum and programmable blockchains are like five years old in total. So this industry will still see a lot of changes, innovation, turbulence, and all these things. So that's why we decided to, and because of there is no one-size-fits-all solution, these were the reasons that made us basically introduced something that the community already likes to call layer-two aggregator. Like you have dex aggregators that came along and aggregated multiple dexes. That's how Poly1 is basically aiming to aggregate or offer a multitude of layer two solutions to projects and teams out there. So I want to ask about how that works. And so on Polygon, we just went through a couple examples of the chains that we found.

Like you said shared security blockchain, standalone blockchains. And I think if people are familiar with Cosmos terminology, this would be application-specific blockchains, I think, would be how they would have called it. But then we also have other polygon chains, which are things like, you know, just a plasma chain, Zika roll-ups, optimistic roll-ups, things that we've seen in the rest of the ecosystem. But my question is, why, how is this different than just a normal optimistic roll-up chain? And, like, how does consensus of the many polygon chains happen? and where does that consensus happen when it when in relation to Ethereum right so like are these blockchains polygon chains all talking to each other or like where is the canonical like convergence onto one kind of state of truth as to what is true about the Polygon L2 and then how does

that get communicated to Ethereum because we have all of these different flavors of blockchains how do they interoperate or like how does how does Polygon come to know what is true about all these various different blockchains. Like where is that actually happening? Yes, that's a, that's a fantastic question. Basically, there is, in polygon, in the multi-chain reality that we envision, there is no such thing as global consistency, like strong global consistency. We kind of believe that it is pretty much not possible to achieve on a like global scale, like in, let's say in traditional systems, be it financial systems, traditional financial systems or Web 2 systems, you always have some either autonomous systems or some systems that are

functioning independently and can fail independently. And by allowing that, you are actually making the system more resilient. That's what we believe. So there is no such thing as global consistency because let's say, I think PolkaDOT is an example of a project that strives to achieve global consistency and on the other side, Cosmos is a project that aims to isolate security and avoids global consistency as a goal. And we believe this Cosmos approach the approach that Cosmos took is a better one.

Because this global consistency approaches, number one, never can scale unlimitedly. That's simply, I would say, not possible by design, because you always have some sort of set of validators that at the end of the day has to validate this proof. So there's always an upper limit to how much you can scale. And the second thing is that it's actually really hard to achieve. Once you have a multitude of chains,

all of them in the end of the day can produce some, there can be malicious activities or even mistakes, unintentional, non-malicious mistakes, that can cause involuntiful, invalid transactions, let's say, to appear in that specific chain. And if you are strongly insisting on a global consistency, global security of the system, the question is what happens then? And I say it has to happen sooner or later in any such multi-chain system.

So, yes, that's the approach when it comes to security. And we strongly believe that Polygon really tries to be as unopinionated and as flexible as possible. Like every project, every community on Polygon should decide for themselves what level of security suits them. If security is absolutely critical for them, I would probably at this point at least advise using something like ZK roll-ups or Validium implementations if possible, because they provide high level of assurance and all the transactions of that, implementation get validated on Deuterium directly. Some other chains, for example, like enterprises, they really do not require that strong security of Ethereum,

but they require many other things from the Ethereum ecosystem. So they might decide to pick something like a standalone chain and form their enterprise network and interact with Deuterium Mainnet as they all generally want to. So the approach to securities, I would say absolutely unopininated and flexible, I would say. Yeah, go ahead. Go ahead, please.

I mean, just one, like, if David, your question is regarding, like, where is, where everything converges, right? Like, and if your question was not regarding the security, then, like, everything converges on Ethereum. That's the whole point, right? So all the assets and everything, like the inter, you know, communication, let's say, between two and enterprise chain. So we are already working with one particular enterprise implementation where, let's say both chains are run by enterprises themselves, but then they communicate with each other using a checkpoint like we have like, you know, a cryptographic proof on the, on the Ethereum main chain. So basically everything converges back to Ethereum. That's the whole point. But yeah,

sorry. Absolutely. Absolutely. No, no, no. Thanks for, it's a great point. Everything converges on Ethereum. Like, an Ethereum is the nexus. We envision Ethereum as the one and only nexus of all this activity, especially economic activity in this multi-chain reality. Okay, guys, we're going to pause for some sponsors. And when we get back, we'd love to talk to you some more about some of the D5 projects using Polygon today, the full landscape of Ethereum layer two and the projects out there. And then hopefully we can get to the Matic token and the token economics. So, guys, stay tuned. And we want to tell you about these sponsors first. Gemini is the world's most trusted cryptocurrency exchange.

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That's AAVE.com. All right, guys, we are back with the Polygon team, Hilo and Sandeep. Guys, want to talk about DFI projects that are using Polygon today and what you guys are seeing with the growth. So it seemed over Defy summer, gas fees got really expensive, and there was a frenzy. Oh, we got to get to layer two, and then they cooled down, right?

But now we're back into this frenzy. Gas fees are high again. It seems like there's, you know, an uptick, a massive uptick in conversation about migrating, maybe even starting DeFi projects on layer twos. Can you talk about some of the projects that are using Polygon today? I want to maybe bring attention to two things that I found were sort of interesting, maybe reflect on that.

The first is this tweet. There is now $200 million in total locked value on the Polygon plasma chain and the POS bridge. So on Polygon, 200 million in total locked value. So where's all of that coming from and what project? are using Polygon today? Yeah, so, you know, large part of it is actually, and which is the good news is that, you know, is this stable coins. So like one of the, like in the D5 side of things, like prediction markets,

like, you know, like I think the the Polygon Pierce chain is like really doing well over there with Polymarket, you know, like some of the bigger prediction markets, for example, in the space, Polymarket is on, is on, you know, the, the, you know, the, is on Polygon. Then you have this Sportex, which is doing a Canada-based team very, very, very well. Their sport X token is doing very well.

Similarly, like, you know, Auger team has multiple times said that, you know, they are integrating their, this part, you know, UI and on that. And then you have other ones like plot X and, you know, the upcoming months, upcoming ones, some of the upcoming months they are doing. So, you know, the prediction markets, things are going very, things are going very well.

And due to these prediction markets, markets, a lot of stable coin come to Maddox. So like the polygon, you know, peers, chain. So the previously, like out of, like when the TVL used to hover around, I think, $50 to $60 million, like $40 to $50 million was in stable coin. But now I think some of the, because of quick swap. So basically quick swap is a uniswap clone on, you know, on the, on the, on polygon. So that is also attracting a lot of liquidity.

And now I think you have a few tokens like Avecotech token is there. Then you have, you know, SportX token, which are like available in pretty large numbers, you know, in terms of their USD amounts. So, so yeah, those are there. Then you have a lot of other protocols like, you know, EasyFi, for example, which is, which is sort of a fork of compound. But they want to do a lot of like micro lending kind of use cases because we still believe that for the last. larger kind of like multi-billion dollar you know tvls and all that like i think ethereum is is still like ethereum is the best layer for that for those those veil like you know let's call it like v i for a lack of a term right so for that like ethereum remains to be the the biggest this win but

and you know like some of these maybe some of these protocols can have a like a micro versions of them on on the like on this chain which is now like guarded by more than 100 100 million dollars of like steak, like on the proof of stake side of thing. So like easyFi is basically into micro defy, it's, you know, this thing. So they are now innovating on top of it and trying to bring, bring, let's say, under collateralized loans or payday loans, for example, like some of the cool features, some of these projects are trying out. Then you have, you know, like synthetic kind of applications like, like Oro Pocket is there,

which is issuing, let's say, gold and silver, silver, actual. like, you know, backed by custody. So it's not purely DFI. It's like C5, D5, but then they are issuing, let's say, silver and gold backed, you know, actual, you know, assets on, on the, on the, on the PSEN. So similarly, like, you know, there are multiple, like, multiple D5 plus NFTs also becoming pretty hot. So Awe Gautjee's is one of them. So Sandeep, all these projects, right, that, that you mentioned, you know, one you mentioned was, was polymarket, which we're familiar with, we've a tactic on before it's the prediction market. And I remember when we, when we first started using a polymarket, the first tactic, bankless tactic we did on polymarket, it was on main chain,

right? But now this is all on Polygon today. Is that correct? So if I am using Polymarket, I can use my same metamask instance. So same user experience I've had previously, but it's going to be faster and no gas fees or low gas fees because it's now on on polygon is that correct yes yes and you know you can actually say that no like you can say no gas fees because why because the applications actually pay those gas fees for you so it's like it's like kind of a web two model so you know if we want to attract the mass users you need to have that kind of model where you are like the gas fees is so low that you know you can maybe a decent application or a mid-tier application can actually have a hundred dollar worth of, you know, magic tokens.

And then, you know, they can pay the gas. And so polymarket itself, that's just an example of a project where instead of, like, they started in Manhattan, but the rent was too high, it got too expensive. So they're just moving to the suburbs. That's all they're doing. Just moving to the suburbs. You get the same user experience. And because their numbers are smaller than something like a uniswap, so they're not doing

billions in total locked value. They might be doing millions today. Well, the economic security, I don't know if they're using your proof of chain or what, but let's say they are. They are. Okay. So the economic security offered by the Polygon proof of state chain, well, that's good enough. That's all you need in the suburbs when you're doing lower amounts of total locked value. And then I suppose the idea with Polygon is if they needed more economic security later, they could migrate essentially to a polygon, you know, layer two that's, that's based on optimistic roll-ups or ZK roll-ups, you know, in the future. So that's kind of what's going on

here. Can we talk about this other posts too? So I saw this. This was super interesting. The question in my mind for Polygon in all of these Ethereum layer two solutions, because Polygon isn't the only one, of course. And I know our listeners know that. There's all sorts of layer two projects in Ethereum's Internet of Chains. But Avagachi went through, this is an NFT project. They went through why they picked Polygon, and it was for these reasons. One, sufficient decentralization. Like you guys had enough decentralization for their needs and enough economic security, EVM compatibility, right to the box, they could just migrate things, production readiness. So the nice thing about Polygon is it's ready like right now, some growing network effect, which we just talked about.

So this does seem to be a case where some suburbs might do better than others, right? Like Brooklyn might do better than the Bronx for whatever reason. Developer ecosystem and interoperability with other NFT projects. Those are some of the reason they mentioned going with Polygon. Is this kind of common? How do you attract DFI projects to your specific layer two? Like, what are they looking for? And how does Polygon differentiate itself?

Yeah. Before I hand it over to Sandif, sorry, Sandy, I just want a small thing to add or a small correction that the user experience is actually far better once you move from the Ethereum, main and to polygons. Far better and you're able to allow your end users, I would say, web two user experience,

which is like probably critically important, like highly likely. If you talk to UX engineers and then experts, everyone will tell you if you want to disrupt an app or a system or an industry, the disruptor has to offer at least the same level of user experience, if not better, at least the same. And we now have still this reality of people of having to learn about gas and acquire it and all these things that are like huge, huge barriers to entry.

And these things are pretty much gone once you, in the case, for example, of Avegochi or Polymarket once they moved to Poly 1. Yeah, so sorry, Sandip, handing it over to you. Hold on, San Diego. You're muted. Yeah. So with the defy kind of projects, like, you know, now that the stake on the network is like growing, growing. Like, you know, like now I think it's like around 100 million plus proof of stake is guarding the network. And we have like 90 plus validators to give you a context.

Like I think, Mihalo, correct me if I'm wrong, but like, you know, cosmos has primarily 100 validators or something like that, right? So like I don't have an exact number, but roughly like that number, right? So, you know, imagine you have a, you know, Ethereum side chain or layer two chain, which is guarded by almost like equal number of validators that are, you know, like a very high profile, you know, layer of a project like that is there. So that, you know, that's why like Avecocci mentioned that sufficient decentralization is there. And then, you know, the stake is also pretty high. So for, you know, some of these defy use cases, as you mentioned, like for polymarkets, polymarket. Which are, which are handling, let's say, 40 to 50. million dollars for now, right? So they are pretty happy having, having, you know, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the, the user assets are not, not being managed by one particular smart contract, like, only those amounts which are on bets, they are actually in the smart contract. So that also, like, kind of diversifies the, the risk profile over there. So, so, so that's why, like, you know, D5 projects are now getting more and more attractive, attracted towards the, towards Porigone. But, you know, like, D5 plus

NFT, because NFTs, like, you know, as you can already, you know, realize that, you know, $30 NFT, you need $100 to mint on the main chain. So like, NFT projects are, you know, they're in droves and droves. And I think that Avegochi, you know, even mentioned, article even mentions that, you know, there is like a, you know, like, even OpenC is looking to have an NFT store you know, on this one because so many like high profile games, like almost, you know, like out of, if you pick like, let's say, 10, you know, gaming and NFT projects, you will find that, you know, six, seven, eight of them would be on, on Polygon. So because of the, you know, obvious benefits, that low cost, you know, transactions and all that. And even like, I think for NFTs, even whenever,

like, you know, the other solutions, like optimistic rollups and more secure solutions will come in, But they will definitely have more, you know, their gas footprint will still be pretty high because optimistic golobs actually are putting all the transaction data on the Ethereum main chain, right? So for the NFT kind of use cases, this level of security as well as the, you know, the two and fro bridging with Ethereum works very well. So that is attracting now an FT plus defy use cases, which is kind of, you know, you must already be seeing that a lot of projects are exploring in that direction. Yeah, and that's going to be huge. I think Dave and I've talked about so much in the roll-ups and otherwise, like, NFTs are going to be a gateway for people to discover crypto. You know, they're going to come because they saw a tweet from their favorite celebrity and they're a big fan of the community. And they might just enter on a layer two rather than the way we all entered, which was like we bought some ether, we bought some Bitcoin, which is it's going to be a fascinating inroad.

Another question about in general Ethereum's layer two is because Polygon is not the only layer two of. course. There's optimistic roll-up. There's ZK roll-up. Starkware is doing some stuff. Dave and I are going to be doing a lot more on layer two, on bank lists in the coming months. In fact, we're talking to a panel recording tomorrow with a panel of defy applications who are talking about selecting their layer two in the criteria and they use to select it. That'll be on the podcast coming next Monday, guys. But I guess a question for you, is it like a battle to the death kind of competitive landscape? Are all of these Ethereum, projects really fighting each other? Like kind of, is there a layer two wars going on? Or are the

projects all friendly and working together to solve this as a community? What's the feeling right now? I would say definitely not. I would say that definitely there's a lot of room for all these fantastic projects to work and grow and gain traction. And we will definitely act in the same manner. And so far, like, I personally know founders of, I guess, many of those or most of these projects. And we are already either actively collaborating, changing knowledge, helping each other, or even planning on some things that maybe we'll be able to share more in the future, maybe even things like mergers and stuff like that. So, no, I would definitely say Ethereum, there's no such thing as Ethereum scaling wars, what you might see actually on Twitter, which is,

or elsewhere, it's probably like healthy debate between researchers because each of these scaling solutions, every scaling solution has trade-offs, like any other technology in the world. Every technology has trade-offs. So when you see sometimes some conversations around that, it's just basically mainly researchers discussing those trade-offs and that's about it, I would say. So as far as it goes for us and I would say all the other projects, there's no such thing as Ethereum scaling worse. There's like a lot of room for everyone. And especially for us like, you know, where we are looking to aggregate and provide a better, you know, developer experience for the users and, you know, kind of making it easier to navigate through this whole, you know, layer to space. I think she, you know, especially for us, like, it's not like that.

So speaking about tradeoffs, since, Because Polygon has, you know, optimistic roll-ups or ZK roll-ups as a potential polygon chain, what, if somebody was thinking about doing a native optimistic roll-ups or doing optimistic roll-ups via Polygon, what are they giving up when they go to the Polygon version of optimistic roll-ups? What is the cost of doing this? It's not always, it differs from a case to case. But for example, with optimistic roll-ups, our optimistic roll-ups, our optimistic role-ups,

technology is not ready yet. It will be ready in months to come. I cannot share any more details at this point, but we'll be hopefully able to share very soon with the whole community. But the thing is sometimes for some solutions, we will have partnerships with specific project that is working on that specific type of scaling. For example, for example, like partnership with StarCare, just giving an example here. With other solutions, we will have our own implementations. I guess the major difference would be that we are really trying to make it easy to use for other projects to implement their own roll-ups or Validium or Zika implementation.

And the other difference is that it should be easy to switch, as Ryan nicely said. You can start with one scaling solution or one implementation and as the time goes, then your project may be matured and your community becomes stronger. You might decide that you actually want to change the specific implementation and move from, let's say, from, let's say, ZK. You may be started with ZK chain and then your community became strong and you are realizing that you can have your own standalone chains. That can actually even introduce some nice incentives for your community members and for your, let's say, projects native token and whatnot. So all kinds of possibilities are possible. So I think Polygon can allow any project to evolve or to follow the evolution of every project from in terms of infrastructure

and technology that we support. We are there to support you with your infrastructure. We will provide you good infrastructure. So you can focus on what you do. Best is your project, your application, and its adoption. The last thing I'd love to cover. Yeah, it does. So the last thing I'd like to cover, and you guys may not be willing or want to kind of weigh on this too much,

but I think it's an interesting, it's a super important point for bankless listeners to sort of wrap their heads around because we're not only going west on the journey and actually using these protocols, but we're also investing in them. And I think it's kind of curious, because what we see here on like the token market cap top 10 list is a number of alternative non-eth layer

ones that are in the top 10 list, right? So we've talked about this before. So Pocod right now is valued at a fully diluted valuation of $28 billion. That's billion with a B. We've got Binance chain, which is $19 billion. We've got Cosmos somewhere here. with their atom token, that's at $6 billion right now. What's interesting, I think, is if you're evaluating things using sort of the bankless lens, which is there are asset superclasses and you're either competing as a commodity or you're competing as a store of value or a capital asset or in Ether's case, all three of those things we would argue.

The question in my mind is what are these alternative layer ones competing as? And if they're not competing as a money, as a store of value, and maybe they're competing partially as a commodity, they're mostly competing as a capital asset. So what's interesting to me is to observe the relative market cap difference between like the Pocodots and the Binance chains of the world and the Adams Cosmos of the world versus like the loop ring, for instance, right? Loop ring is a Ethereum layer two. It's $859 million in terms of market cap or even like Polygon is, you know, $517.

Yeah, half a billion. So I guess what I'm saying here is it seems to be the case that either these ETH killers are like way overpriced in terms of market cap or the, the ETH layer two is are way underpriced. Or it could be the case that these Heath killers are basically these alternative layer ones are just sort of being assumed that they will accrue some monetary premium in the way that Ether does and being priced based on the value of Ether. So I think if you if you guys are thinking about like alpha leaks and opportunities, there's got to be some like mismatch pricing here. And I'm not saying this will play out like now or this cycle even because, you know, who knows what retail will will will be. buy as they're entering the market. But I'm talking about like long term. And long term, it seems to be the case that if you're a layer one, you have to compete as a money. Otherwise, you're just competing with the other layer two's. And if that's the case, why is Pocod $28 billion in market cap versus

some of the Ethereum two's, layer two, which are in the, you know, still the hundreds of millions? It doesn't make sense to me. And it seems like there, you know, one of us is going to be right, I guess. on these bets. I don't know. Maybe the Polygon folks don't want to weigh in on this because it's talking about like tokens and that sort of thing. But David,

I'd at least like to hear, what's your take on this? I mean, how do you see things? Yeah, I would say that I think if you are a token on an L2, you are not bothering to compete as like a native trustless money, right? You are giving up that value accrual mechanism

to the native L1. right? You are not, you're just not even bothering to fight that fight. And instead, you are trying to focus on what, um, what is the core competency of the L2, which is to be an extension of the L1, while also providing uncompromising levels of, of security. Um, and I think, I think maybe the conversation could turn into, uh, the actual role of the mat of the mat, and I'm probably, I'm assuming there's going to be a rebranding in the future of thematic token in the Polygon network. and the role of Polygon validators. Can you guys explain the relationship between validators and the token and Ethereum?

Yeah. So basically, like the thematic token is essentially a proof of stake token, which is used for, used by the validators to kind of, you know, to stake and, you know, and basically earn the rights to become or kind of validate the transactions. And then transactions have the same, you know, gas model as Ethereum. So if you are a validator and you, you know, you have staked your token, you've earned the right to validate those transactions, you get to have the transaction fees. Plus you also get to, you know, participate in putting the checkpoint on Ethereum, right? This is specifically for like I'm talking about this POS and plasma chains.

I mean, there can be future kind of chains which might not like, you know, have a checkpoint or have stronger checkpoints, you know, that will depend on the kind of solution. but then essentially it's like the proof of stick mechanism, you know, basically the validators actually earn the right on the transaction fees, right? So the value approval mechanism is actually directly dependent upon the adoption. So if the large amount of adoption comes in and then the network starts generating hundreds of millions in transaction fees, then, you know, if you are a validator in this network, you get a piece of that file, right? And then, you know, let's say a 10% return for you yearly is a good enough return.

then the network is, let's say, generating $100 million per year in the, you know, transaction cost, then let's say a billion dollar worth of tokens can be staked, right? And that amount of tokens are out of the supply. Sande, this is essentially the same role that the atom token plays in the Cosmos network, correct? Exactly. Yeah, exactly. Except what are the fees actually denominated in? So I've got my Matic token. I've got my validator. I'm staking my Matic to my Matic. I'm taking my tokens to my validator. processing transactions on the Matick L2, and I'm getting fees.

How are those fees measured and what is the denomination of those fees? How do the fees happen? So the current POS chain, the plasma chain, they have the fees denominated in Matic tokens itself, but then that's not the primary value approval system of this. So in future, like I and Mihalo have been discussing, that we can very easily make, let's say, ETH as the gas fees in that. And that actually increases the user experience. We kind of realize that, you know, that like later on in the cycle that, you know,

we should have like with this change also, ETH could have been the gas fees. So that people also have a mental model, easier mental model that, okay, on Ethereum, I am paying 350 or like whatever way as the gas fees. And here I'm paying like, you know, maybe one to five way as a gas piece. So, you know, that could be a default option. So, but in terms of like, you know, currently it's mattock. And then in future, it can be, again, like, as Mihalo said, that, you know, we want to make it like completely unopininated. So, like, the default option might be eat in future, but then there can be some chains which say that, hey, I want die to be my transaction fees mechanism.

And then as a as a validator, you earn the fees in whatever token, the relative, like the chain you are validating on, you know, denominates its fees on. So with Ethereum gas fees, the gas, the amount of fees that. is paid by the user to the miners or in the future the validator is determined by how much demand there is for block space. How is the fee size determined on Polygon? So it's exactly the same model, the free market model for the gas, gas fees. And you know, we are also exploring like the newer like, you know, like ERC 1151, 1 Factor 9 kind of scenarios. So, so yeah, like currently, but the model is exactly like Ethereum. the demand goes up and there are larger number of transactions, then validators choose the higher

gas fees paying transactions. But the scalability of the current chain is pretty high. Like, you know, it's around like, you know, 7,200 TPS in some of our, you know, measurement. So like network is right now far from, you know, that stage. So and then plus there are staking rewards. So the validators also subsidize some sort of piece right now. And the top of that, just to add to that, Now we are introducing a multitude of chains, so it's not like META POS, even though it's nowhere near the peak capacity, but we will have a multitude of chains, hopefully, in the future, that will all have significant capacity. And, yes, that's the general intention.

Will all of those chains, Mihal will all of those chains, if they're proof of stake in Polygon, will they all be backed by Maddox economic security? Not necessarily. Not necessarily. We also think it's like a kind of a slippery slope or a double-edged sword. It's always like, I guess it's always tempting to, tokens are a very powerful mechanism, I would say. Like token-powered systems are really amazing to analyze. And the way if you think like something like Bitcoin or Ethereum works as a, let's say, fully independent. but again, consistent and functional system, only driven, primarily, at least driven by the token. That's like a very, very interesting paradigm. And it's tempting to try to use that powerful tool as much as possible, but it also can introduce friction. So we want to, like for developers that are building end-user apps on Polygon, for them, the primary concern should be the user experience of their end-eusers.

users. For us, our primary concern is the developer experience, the experience for people who are building on polygon. So we kind of have to be very flexible. If someone, there will be options and there will be many cases, I believe, where people like to take either or their native token or our native token to secure their system. So we just want to, there's that famous misquote, let thousand flowers bloom. We just want to allow a, uh, uh, uh, all sorts of architectures, setups, whatever basically works the best for any specific project or the community. We think some projects made that mistake previously, and if you're forcing someone to stake, let's say, one hundred thousand dollars of your native token, which is by default volatile,

because this is a very volatile market. And in its nature, I mean, you are kind of instantly rejecting. 90% of developers, I would say, out there. And that's definitely something to consider. So, yes, I hope that answers the question. We just want to allow people to pick their favorite or optimal setup for their specific projects. And we believe, like, that will provide in the long term the best value to all the participants,

including token holders, metric token holders, steering token holders. developers, basically all the stakeholders in the system. If you set up the system properly in the long term, like everyone will be happy, I guess. So there are a number of questions in the bankless YouTube. And thanks everyone who's in the YouTube for being there in the chat box. The chat box, I know is a very fun place to be. While you're there, please like and subscribe. We won't be able to get to every single question. But there is a question I want to get to is the roadmap for Polygon. What's on the roadmap? What do you guys have as like, you know, deadlines or deliverables, like what can we see coming down the pipeline?

Yeah, so we are, we are yet to publish a fully detailed and timeline roadmap. But then we like the next upon release is our Polygon SDK, which is like equivalent of PolkaDOT substrate, which you know, you can use to launch your own chains like, you know, para chains and in poker dots. So that is very close. But then beyond that, like all the, all the things, you know, at time, the roadmap is yet to be published. So, yeah. We will share it with the community very, very soon, basically.

But probably in the next couple of weeks to the month. Well, actually, before we close out, I would like to squeeze one last question in here because I've seen this asked a couple times in the chat box. Sandeep, this one's for you. We recently saw some hostile regulation out of India when it comes to crypto and blockchain development. I was wondering if maybe you could get your comments on that about your opinions on the government stance towards our industry. Yeah. So, you know, like India has a, like when people see India's crypto regulations, they actually don't see the background India is coming from. Like as near as like, you know, 10 years back, they used to be a saying, even though,

India is like, you know, fourth or fifth, you know, largest, you know, country by GDP, but there used to be a saying that, you know, like, you know, like if you have two billion, two trillion dollars of economy in the, in the white markets, you have two billion worth of, you know, two trillion dollars worth of economy in the black markets. So government is actually, the current government has been trying to put a lot of like, you know, gubs around, like how people can, you know, move their money around and all that, like bringing everything to system, everything to the books and then suddenly you introduce crypto and boom everything is gone right so their discomfort is you know their discomfort you know it's pretty understandable and they are like you know

generally the tendency is to scare away the retail because you know they are like it's a pretty large country and then you know you have a lot of scams coming up and all that so uh i think that's their intention mostly but right now seeing the like the global scenario where like Elon Musk is mine, you know, bitcoins and, you know, like these micro strategies of the world and all that, I think they would be, I don't see, like, you know, the kind of, like, media sensationalism that has been done that there will be an outright blanket ban and all that. Like, it's very hard to do in India in a democratic country like India. It has, like, almost similar, like, values of liberty and all that as, you know, as you have

in the U.S. So it's very hard to ban things outright. Previously government tried to do that. And it was, like, you know, it was squashed by the by our judiciary. and Supreme Court actually issued an order against it. So I think like for any of the people who are like, especially in India, they are who are panicking on this.

Like just relax. Even if there is a, you know, difficult regulation comes in, government will give you time to, you know, liquidate your assets, no need to panic, sell or anything. Secondly, for, for Polygon, you know, like Matic Network,

when we evolved into Polygon, this idea of larger, like, you know, like kind of a, you know, like a sub-foundation, for Ethereum in the sense itself. Like, you know, we are working for the Ethereum ecosystem. In that sense, we at least we internally, culturally believe. So we actually have already expanded our entities into multiple geographies.

So we are, we are like immune to any particular geographies, you know, concern. And previously also when we had built our entity structures, we are built for these eventualities, right? So we have like our token entries in British version Virgin Islands and then, you know, our, you know, the other token interfacing entities are in Singapore. Indian entity is absolutely free from any sort of relation to crypto. So, you know, like no need to worry, especially related to, you know, to the team and the protocol. And then now it's a very diversified team with our entities in, you know, in Europe and, you know, and in multiple other areas of the world. So no need to worry on that.

And the team is also pretty distributed now. So, yeah. Oh, guys. Yes, and that is... Oh, go ahead, Mila. No, just one sentence to that. Basically, a polygon is a... I want to stress again,

we consider it a community-driven project, and it is not owned by anyone. It's not located in any specific country or anything like that. It belongs to the whole community. It belongs to the world, and everyone is very much free and welcome to contribute, and it has, as I think we all can see, it is a quite powerful but quite ambitious vision.

So you will definitely need all the help we can get to build this, to make this all happen. So, yes, we're inviting everyone to join us, whether you're technical or not. If you, I don't know, if you heard about Polygon, if you understand what you're building it, if you like it, if you see, it might be a good thing for you. Please reach out to us. We are welcoming to open hands. Well, fantastic, guys. Mihalo Sande, thanks for spending some time with us in describing Polygon.

It's been a pleasure. This really feels like 2021 will be the year of layer 2 on Ethereum, and thanks for your work in making that happen. Thank you so much, Diane. That's David, for having us here. Thank you, guys. It's pleasure to be here. All right. Bankless community, there are a number of ways to get involved. If you're a developer, of course, Mihailo mentioned that. You reach out to the project, reach out to Polygon and see what they're doing. Also, if you're a user, I would encourage you to start using Layer 2. So that Poly.com,

is one way to do that. You can experience one too. That's a good way to get your arms wrapped around this technology and the investments you're making this space as well is be a user. That's the number one thing you can do to inform yourselves. Of course, risk and disclaimers, guys, none of this has been financial advice. Eat is risky. So is Defi. So is layer two. You could lose what you put in. But we're headed west. This is the frontier. It's not for everyone. But thanks for joining us in Bankless today.