Polygon Upgrades from MATIC to POL Token: Key Details and Implications

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