Polygon’s Transition from MATIC to POL Token

Polygon, a prominent layer-2 scaling solution built on the Ethereum blockchain, is poised to implement a significant upgrade on Wednesday. This upgrade will replace its long-established MATIC token with a new token called POL, which is designed to offer enhanced flexibility in the issuance of new supply. The transition is set to commence at 4 a.m. ET (8 a.m. UTC). This change has been in the works for over a year, with the initial announcement made back in July 2023.

Despite the upgrade being well-communicated in advance, the change is being closely observed by the crypto community, as MATIC is widely held among investors. Currently, MATIC ranks as the 13th largest cryptocurrency by market capitalization within the CoinDesk 20 index, valued at approximately $3.8 billion. For many users, this migration will occur automatically, requiring no action on their part.

This migration is a crucial part of Polygon’s extensive revamp, which was detailed in its “2.0” roadmap, aiming to establish POL as the native token for its primary chain, known as the Polygon PoS chain, and eventually for other chains within its ecosystem. Polygon’s overview states that in the initial phase of the migration, “POL will take the place of MATIC as the native gas and staking token for the Polygon PoS network. In later phases, POL will play an essential role in the AggLayer.” The AggLayer is a key component of the roadmap, designed as a system for aggregating affiliated blockchains that utilize Polygon’s innovative technology.

There are ongoing proposals for POL to fulfill broader functions within the Polygon staking hub, which is slated for release in 2025. These functions may include block generation, zero-knowledge proof generation, and participation in Data Availability Committees (DACs).

“This community-driven upgrade comes at a pivotal moment, as every facet of Polygon is evolving,” Polygon stated in a recent blog post. Migration Details for POL

The transition from MATIC to POL will also introduce changes to the tokenomics. Polygon has announced that the new token will feature a revised emission rate of 2% annually. This new structure allocates part of the supply to validators on Polygon PoS as rewards, while the remaining portion is directed to a community treasury, described as “a self-sustainable ecosystem fund that can support various initiatives.”

According to Marc Boiron, CEO of Polygon Labs, the need for this upgrade arose primarily from technical constraints associated with the MATIC token. “The MATIC upgrade keys were intentionally burned years ago, which means we cannot implement changes to that token,” Boiron explained in an interview with CoinDesk. “We wanted to introduce emissions to benefit the community and foster growth, but it was simply impossible to do so under the existing structure.”

Boiron emphasized that the introduction of emissions is intended to support the Polygon community ecosystem by establishing a grants program as part of the community treasury, thus granting the community some level of control over funds to facilitate ecosystem growth. “Furthermore, this will allow validators to receive emissions,” he added. “As new chains emerge and seek decentralization, they will require incentives for individuals to run decentralized groups or provers. The POL emissions can be leveraged to decentralize their networks, enabling POL holders to earn fees from those networks.”

Read more: Polygon Sets September Date for Migration to POL Token from MATIC

Polygon’s Transition from MATIC to POL Token: A New Era of Flexibility

Polygon, the prominent layer-2 network built on the Ethereum blockchain, is set to implement a significant upgrade on Wednesday, which involves the replacement of its long-standing MATIC token with a new POL token. This transition is expected to enhance the network’s flexibility regarding the issuance of new token supply. Given the widespread adoption of the MATIC token, this planned change is likely to attract considerable attention, especially since it ranks as the 13th largest cryptocurrency by market capitalization in the CoinDesk 20 index, valued at approximately $3.8 billion. For many users, the migration process will occur automatically, easing the transition.

This token swap is part of a comprehensive overhaul outlined last year in Polygon’s “Polygon 2.0” roadmap. The initiative aims to establish POL as the native token for its primary chain, the Polygon PoS (Proof of Stake) network, and will eventually extend to other chains within Polygon’s ecosystem.

As per Polygon’s announcement, in the initial phase of the migration, “POL will replace MATIC as the native gas and staking token for the Polygon PoS network.” Following this phase, POL is set to play a crucial role in the AggLayer, a pivotal component of the roadmap designed to aggregate various affiliated blockchains that utilize Polygon’s technology.

Moreover, the Polygon community has proposed that “POL will support broader roles in the Polygon staking hub, which is scheduled for release in 2025.” These roles include tasks such as block generation, zero-knowledge proof generation, and participation in Data Availability Committees (DACs).

Tokenomics Changes and Emission Rates

The migration from MATIC to POL will also introduce notable changes to the tokenomics. Polygon has indicated that the new token will feature an annual emission rate of 2%, with a portion of the total supply allocated to validators on the Polygon PoS for rewards, while the remainder will be directed to the community treasury. This treasury is envisioned as a self-sustaining ecosystem fund aimed at fostering community-driven activities.

Marc Boiron, CEO of Polygon Labs, elaborated on the necessity of the upgrade from a technical standpoint, stating, “The primary reason for this upgrade is that the MATIC upgrade keys were intentionally burned years ago. This effectively means that we can’t make any modifications to that token.” He emphasized that the introduction of emissions through POL is essential for community growth and engagement, enabling the Polygon ecosystem to flourish.

Boiron further explained, “By introducing emissions, we aim to facilitate a grants program as part of the community treasury, granting the community some level of control over the funds to foster ecosystem growth.” He also highlighted the importance of incentivizing decentralization within new chains that emerge, stating, “As these chains evolve, they will seek to decentralize. Rather than relying solely on a centralized sequencer, they will need to encourage participation from a decentralized group or prover. With the POL emissions, these new networks can leverage tokens to promote decentralization, allowing POL holders to benefit from fees generated by the network.”

Read more: Polygon Sets September Date for Migration to POL Token from MATIC

Penpie Exploit: A Major Security Breach in DeFi

On Wednesday, the decentralized finance (DeFi) protocol Penpie, which operates on the tokenized yield platform Pendle, fell victim to a significant exploit, as reported by various crypto observers. The attacker managed to siphon off approximately $27 million worth of cryptocurrency assets, which included a variety of staked ether (ETH), Ethena’s sUSDE, and the wrapped USDC stablecoin. This alarming breach was confirmed through blockchain data analysis.

Following the heist, the perpetrator exchanged the stolen assets for ETH, primarily utilizing the Li.fi platform, and subsequently transferred the converted funds to a new address, as detailed by Etherscan data. Interestingly, the exploiter’s wallet had been initially funded with 10 ETH, valued at around $25,000, through the crypto mixer Tornado Cash just hours prior to executing the exploit.

Pendle has since acknowledged the incident, confirming that they detected a security compromise within Penpie’s protocol. The team has assured users that their funds remain secure within Pendle’s ecosystem but has temporarily halted all contracts as a precautionary measure. This proactive approach aims to prevent further potential losses while they assess the situation.

In the aftermath of the exploit, Penpie’s native token (PNP) experienced a dramatic decline, plummeting by 40% throughout the day, according to CoinGecko data. Meanwhile, Pendle’s own token (PENDLE) saw a decrease of nearly 8% over the same 24-hour period, trailing behind the more modest declines of bitcoin (BTC) and ETH, which fell between 1% to 3%.

This incident highlights the ongoing vulnerabilities within DeFi protocols, which have become frequent targets for malicious activities. In fact, digital asset users have reportedly lost around $2 billion due to scams, hacks, and exploits throughout 2023, as noted by De.fi. This latest attack on Penpie serves as a stark reminder of the risks associated with decentralized finance.