Polygon, a layer-2 network atop the Ethereum blockchain, was on track to activate an upgrade on Wednesday that swaps out its longstanding MATIC token for a new POL token, allowing for more flexibility on issuance of new supply.
The swap was due to start at 4 a.m. ET (8 a.m. UTC). The planned switch was originally disclosed more than a year ago, in July 2023.
While the planned switchover was well-telegraphed, the changeover is being closely monitored, since the token is widely held across crypto investor portfolios. MATIC is the 13th biggest cryptocurrency by market capitalization in the CoinDesk 20 index, at about $3.8 billion. For many users, the swap will take place automatically, without any action on their part.
The migration comes as a part of Polygon’s planned revamp laid out last year in its “2.0” roadmap, to make POL the native token of its main chain – known as the Polygon PoS chain – and eventually other chains in the ecosystem.
According to Polygon, in the initial phase of the migration, “POL replaces MATIC as the native gas and staking token for the Polygon PoS network. In subsequent phases, POL will serve a crucial role in the AggLayer.” The AggLayer is another element of the roadmap, essentially a system for aggregating affiliated blockchains built using Polygon technology.
There are proposals for POL to support broader roles in the Polygon staking hub – to be released in 2025 – including block generation, zero-knowledge proof generation and participation in Data Availability Committees (DACs).
“This community-driven upgrade comes at a crucial moment when every aspect of Polygon is changing,” according to a blog post.
The migration from POL to MATIC will also bring some tokenomics changes. Polygon shared that the token will have a new emission rate of 2% annually, where part of the supply goes to validators on Polygon PoS for rewards, and the other part to the community treasury, “a self-sustainable ecosystem fund that can support the above activities.”
“The biggest reason why the upgrade was needed from a technical perspective, is that the MATIC upgrade keys were burned very intentionally years ago. Which basically means that we can’t make changes to that token,” said Marc Boiron, CEO of Polygon Labs, in an interview with CoinDesk. “So one of the things that we wanted was to introduce emissions that way. We could use it for the community, we could use it for growth. It was literally impossible to do that otherwise.”
Boiron reiterated that introducing emissions is supposed to help the Polygon community ecosystem by introducing a grants program as part of the community treasury, allowing them “some form of control by the community over the funds so that you can grow the ecosystem.”
“And then the second one is a means for, effectively, validators to receive emissions,” Boiron added. “Effectively, if you think of these new chains that pop up, what’s going to happen is that with time, they’re going to want to decentralize. And so instead of just having a centralized sequencer, they’re going to need to incentivize people to actually run a decentralized group or a decentralized prover. And if they don’t have a token, or if they don’t want to launch a token yet, how do they do that? Well, effectively, what this does is that a portion of that POL emissions can actually be used to decentralize their network, and then POL holders will then receive fees from that network.”
