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

Transcript

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 2 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 uh te te 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. Uh and so, you know, the the the um the MAD team and and Polygon has been uh I would say a

little bit under the radar or at least under my radar, you know, heads down building. Uh and now they are exploding onto the scene. Um, and so that we're bringing the co-founders on to talk about the specific implementation details of this specific flavor of L2. I think uh going into 2021 and definitely in the second half of 2020, it was all about people picking out their favorite flavors of L2 and Madic now now known as Polygon is another flavor of L2 that we 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 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? Uh, 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 Banklist Nation. Um, you had a fantastic conversation with Hugh Karp, who is the founder of the the Nexus Mutual Project, insurance protocol for DeFi. 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, uh, an unfortunate part of DeFi history. Now, Hugh Karp is the founder of Nexus Mutual, and he was the, uh, the owner of a bunch of NXM tokens, as the founder would be. This is normal. uh and uh and so he was playing with 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 meant to approve. And what happened was that a 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 I make I don't know every single day at least a couple transactions on my ledger and I never like view the little like little like display that's going to tell me what to do and so you know I don't think anyone really does. Um, and so you know, Hugh pressed send to claim his farming rewards or whatever. But what actually happened was that this hacker had geared up this uh transaction to send all of his NXM tokens to the hacker's address, which then the hacker then just, you know, cleaned up through like Ren BTC, Tornado Cash, and then exited. Uh, 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 um how he got attacked by this hacker. Uh and so if you are worried about uh 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. Uh the attack on Hugh Car postmortem. Uh thanks Hugh for coming out and and sharing all this information and I think DeFi it's 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 uh 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 DeFi power user super user, you've got to tune in to this.

When I heard about Hughes hack, I think it happened in December. Uh he lost $8 million this way. Uh so it's a massive, you know, attack and it's scary that this came through MetaMask. So if you're a DeFi power user, super user, make sure you tune into this and glean some some of those lessons from Hugh's experience. That's why he's making it public to help the DeFi community. So, take a look at the article and check out the uh the YouTube video that comes out tomorrow. Uh by the way, David, we should mention that we we are teaming up with Lattis Wallet as well over the next uh two weeks because we're really excited.

They've got some new Lattis wallets in stock. So, think Oh, David's showing his right here. Okay. So, see that? 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 it's much more human readable. So, uh, we're we're teaming up with Lattis. They wanted to give bankless readers, bankless, uh, watchers first dibs on some new stock that they have on lattises. So, we'll include a link to the Lattis and, uh, we're going to be publishing some more about the Lattis. Kind of a hands-on experience from from David and I u here shortly.

But that is a tool for DeFi power users to prevent the Hue hack um actually reading your transaction details before you click send. So stay tuned for that. We've got liquidity 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 with Brent Johnson, a podcast that came out on Monday. Um so so take a look at that, but maybe just give us a give us a quick high level of your conversation with Liquidity. 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. Liquidity is a governance minimized stable coin. It's a similar protocol to maker DAO but with less governance features and it's also much more much similar to uh Rye uh which is also a governance minimized stablecoin project. But Ry importantly is not making a dollar peg stable coin. They're making their own peg. yet um maker or DAO is making a govern a a dollar stable coin uh in DI 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 Ry where they're pegging it to the dollar but they're having governance minimization. Uh 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 uh we're going to see all the things attempted in DeFi. 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. Uh 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? Uh, ever since uh, Hib Keshi came on the podcast and he gave out that metaphor of how like DeFi 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. Um, I made my first uh, Loop Ring wallet this week and so I now have a plot of land on the Loop Ring L2. Uh, and so that's my new plot of land. there's not as many inhabitants there and so gas uh gas fees are really really inexpensive and really really uh instant. Uh and so people are try are flowing out of like uh you know 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. Uh yeah, I I think that's a a great articulation of what's going on right now. So, uh David, before we get into this conversation with the Polygon folks, let's take a minute to tell the Bankless uh visitors about our fantastic sponsors who made this episode possible. If you are looking for a product that connects your fiat bank account with DeFi tokens and products, you need to download the Dharma mobile app. Dharma is a non-custodial smart contract wallet and comes with a bridge that connects you right into your bank account. Dharma is the fastest and most efficient wallet between your fiat in your bank account

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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 Madic and Mahalo 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 Madic which is Ethereum's internet of chains. A quick disclaimer before we get in. Um, I'm actually an adviser on this project because I think uh so much of it. So, uh, 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. Let's I'm not an adviser, so I get to be the bad guy.

It's not. Um, so le let's start here I if we could, guys. um this narrative if you go to the Polygon website and 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. Uh first of all, thanks thanks Ryan and David for inviting us even though David you're not an adviser and it's amazing that you actually still invited us really on here and uh yeah um thanks for the the question Ryan uh I

guess Ethereum blockchains is a concept that appeared a couple of years ago and it's um it's a I say I would say a belief or or a bet that uh in when this whole crypto ecosystem matures uh there cannot be one chain to rule them all as as as some like to say and the reality will necessarily be a multi-chain reality uh uh as I said once the ecosystem matures and I would say there are two prim primary reasons for that uh one is that blockchains uh are hard to scale as we I guess all know by this point they are um very uh um sophisticated machines built with security and resilience and

decentralization in mind but they are hard to scale as I said so uh um as we are as more and more people are joining the bankless nation and uh there's more users basically competing for the 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 sandep and I through various roles have worked with probably definitely 100 plus blockchain projects and if there's something that we realized is that different projects have different requirements basically when it comes to uh technology and the features their 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 um any single blockchain if we assume the existence of uh that single blockchain that rules them all h it you cannot tune those parameters basically to to get to those uh specific requirements. So that's I guess I would say that's probably the second major agreement that uh um explains why the future as we believe it have to be a multi-chain future.

Okay. Um if we agree on that that there is sorry sorry sorry sorry sorry sorry sorry sorry sorry sorry sorry sorry sorry sorry sorry sorry sorry sorry sorry sorry sorry Ryan is there is a m multitude of blockchains it becomes uh relatively obvious that we definitely should connect them we don't want them to exist as isolated islands and that's where the whole now we I guess have the whole picture I mean internet of blockchain is a concept of uh multi-chain uh reality where chains are connected uh among each other and can communicate and exchange messages collaborate if you want.

So, so definitely the polygon thesis is believes that there is going to be some internet of blockchains but polygon wasn't 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 uh a project called Cosmos was talking about the internet of blockchains. So that's one approach and uh another has been the polka dot network which is uh talking very much about uh an internet of blockchains. Maybe sound deep could you build on what Mahalo was saying about the internet of blockchains and talk about these uh these two attempts cosmos and also polka dot and how they're kind of similar or distinct from what polygon is building.

Yeah sure. So uh I think one of the biggest thing that we know we also keep discussing among amongst ourselves is that both of these attempts uh like first thing is very clear that 99% of I would say like I don't have exact number but 95 to 90 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 uh you know ecosystem systems don't like try to create a separate uh you know environment than Ethereum right so they don't kind of utilize those network effects Ethereum already has secondly uh you know the one more important part is

both of the platforms are uh you know sort of opinionated in their in their in their sense right so like they have particular kind of solutions that they are looking to build right like uh you know like an opinionated approach like for example in Cosmos you like each of the separate or the the chains actually uh they have their own you know 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 how do they trust the you know the things that are coming from the other chain similarly with pola dot uh you know polka dot 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 uh you know validate on parach chains which would be like shared security chains again like that is also one flavor of uh you know kind of applications. So you know what when we teamed up like you know one of the biggest parts of our synergies was that we uh you know after talking to so many developers uh is like you know like the the eventual solution that will end up winning the overall like the scalability or or winning the infrastructure side of thing would be something that is unopenated. that means like that caters to the requirements of the developers uh you know as per their their projects right so those those two are I I would say are the are the are the most

important things in my mind that how we differentiate from that and like first I already mentioned that you know being being closer to Ethereum and then you know building on top of Ethereum and providing the scalability to like you know the the the projects which are already there on Ethereum by providing EVM compatible chains and then you connecting them via 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 of you know uh you know like execution environments be it like you know standalone chains be it sec shared security chains or L2 chains which derive uh their security from

Ethereum. So that would be like you know so that's that's the main idea around it. Sandep why do you think that why do you think uh Ethereum will be the settlement layer for this entire internet of chain yeah so I think like the uh the Ethereum's primary uh you know this thing like a decentralized and secure programmable money uh you know part is 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 D5 environment is in is already having now right so and then you know previously apart from D5 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 and there is no shortcut to that like that's organic uh you know moment that Ethereum has has has has has you know evolved in the last uh you know like six seven years right so for any other blockchain platform to reach that uh 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 uh you know how how you you are you're trying to build your developer community uh those tooling you know your your wallets uh your 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 u 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 with a huge amount of decentralization and security uh I think that will that will control the you know central AL sort of uh network effects in order to become the uh or in order to remain the

settlement layer and the business activity that can happen uh you know on the side chains when side chain means like you know other kind of execution environments. Ryan you're muted. Ah thank you. So, let me kind of summarize Sandeep for 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. Um there's a lot of fear, uncertainty, and doubt going on about Ethereum given high gas fees. So, um Ethereum kind of quote unquote killers are coming in and saying, "Hey, we've 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."

um a chain like uh the Binance uh smart contract chain comes to mind or or a chain like uh like the Polka Dot network comes to mind. All of these kind of Ethereum killers and I I think what you're saying is the difference between sort of an Ethereum killer or a competitor and what you're doing with with Polygon is that that basically um you're 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 but secondly, um the the plan for for Polygon or any layer 2 is also to use

Ethereum as a settlement layer and also to use Ethereum's uh security. Uh so all of Ethereum's economic security, if you guys were building out sort of an optimistic rollup or a ZK rollup or something, uh the Polygon chains would essentially be backed by Ethereum's economic security. If you're an ETH killer competing as another layer 1, a Cosmos for instance, you have to bring your own security to the table. You're not bootstrapping that on the uh the value of Ether, the token, and its economic security. If you're Polka Dot, it's the same thing. you're sort of so a layer 2 is something that uses Ethereum as a settlement and it uses Ethereum for for security and uses some of the

Ethereum tooling like the EVM. Is that an accurate representation of the difference between a layer 2 and an ETH killer? Yeah, largely largely and I think Mihallo can expand on that like you know multiple like one part like Mihallo has you know very nicely articulated is the various degrees of you know connectivity to Ethereum. So there is there there's like you know there's various kind of tethering. So one is a like a very strongly coupled tethering into uh you know tethering into the uh ethereum layer which will be like a layer 2 uh you know trading like for example ZK roll-ups optimistic roll-ups then you have another layer of or kind of connectivity which is like let's say in the form of bridges right so 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 ofstake uh you know side chain uh But then it actually the whole of POSOS logic actually stays inside of Ethereum. So all the validators actually have to register on Ethereum. They you know they they make periodic checkpoints onto Ethereum whatever is happening on the side chain. They put a proof of even on and I'm I'm talking about the you know polygon possum uh this thing and their rewards staking rewards are actually given out basis the checkpoints that they've given. So like there's a there's a lot of like you know

the 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 they have 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 just something like what we what everybody is trying to do with Cororum and you know uh 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 is is so yeah like you summarize it nicely.

Yeah. Mho before I cut in can I add anything to that? Yeah maybe just a few few uh lines but I think Sandy articulated it pretty pretty well. Uh f first of all I guess the most prominent um internet of uh chains projects out there are Cosmos and Polka Dot and maybe Avalanche and um 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 um that being said I think that the I would say the fundamental from our point of view fundamental mistake when when the these projects were initiated

or started is the decision to build a separate ecosystem or some people would like to say Ethereum killers. We we believe our bet is that uh and we are I would say pretty sure of that that that was a strategic mistake like uh and uh internet we strongly believe internet of chain is the future but internet of chain done right if you will is ethereum's internet of of of chains that's the only thing that in our opinion makes sense because of everything that you mentioned networking effects the maturity of the tech stack and and uh all the other things Um and that's what we basically decided to do.

That's I would say that is I would say the major difference between us and these other projects that we mentioned. And that major difference actually when you when you go a little bit deeper and you start really thinking about it, 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 um uh how uh um 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 uh um Cosmos be it Cosmos or Polocalot or whatever like for example Polado has the relay chain as the let's say settlement

layer or their source of security it is still of course I'm really not saying trying to say anything bad and I won't um I would never say anything bad about those those projects but you have a chain that is still not better battle tested that is just basically starting to run and you are using it as source of security for the whole ecosystem of chains and that can can can be tricky and can introduce some challenges. Here you have the most battle tested and the most secure programmable blockchain in the world as your set settlement layer layer and source of security. I mean it's like a a very huge difference you we have to admit. The the second thing

is all the text tech like when you're building an ecosystem from scratch Ethereum was I would say some sort of perfect storm happened and as Sandep said no matter how much money you have it is going to be in my opinion extremely hard to to replicate the success of Ethereum and all that organic interest and uh like the whole digital nation that gathered and formed around Ethereum it's like really really impressive. Um so yes I mean that's I think that's like a really a major difference and um once you start building such a such a multi-chain system with Ethereum in mind like there are I guess two again major impacts one

is uh or aspects one is strictly technological and I would say pretty obvious you get to inherit all the tooling all the I mean the for example EVM as a global standard for programmer blockchains and uh all the ancillary tools and whatnot. Uh and the it for any competitor it will take years to to reach to that point where it is now. And the the second thing is I would say a little less obvious and it's kind of abstract or maybe sociological if you will is uh uh that um I think the community understands if something is built. I think community

understands and will understand that that Polygon is built as an integral part of the Ethereum ecosystem both technologically and uh from the point of view I mean from the cultural point of view if you will I think community is a very much able to recognize these things. So these two aspects I believe are putting polygon in a very good I say position. So so here's my my takeaway so far. Um uh sorry one moment while I adjust the screen. Um so so my takeaway is that uh 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 deploy it wherever. You know Cosmos has it deployed as its own kind of like internet interchain. Polka dot has it has it deployed as this you know L1 ecosystem. uh and then you guys have it deployed as as strictly an extension of uh the Ethereum base protocol as an L2, but it's the same con it's more or less the same construct depending on um with maybe some tweaks and parameters adjusted. But what you guys are saying is that when you 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 I and correct me if I'm wrong, but any ERC 721 token uh can also be uh work with Madic natively with with Madic, right? And and I guess the whole point of Cosmos and Polka Dot is to also be able to make an interchain world. So in theory I should be able to take my assets to Cosmos as well. Um but the difference there is that you know Cosmos isn't as natively integrated with the security of Ethereum and having that native integration in the same way that

like Loop Ring offers you the same asurances that the Ethereum L1 offers you. So does Maddx Polygon Polygon now now known as Polygon. And I think uh Mihilo what you were just finishing up with 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 um Avagotchis 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. uh as you said assets can be indeed transferred to Cosmos or to Polka Dot in similar manner relatively similar manner at least on a high level but it just comes when from that if 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 uh another design decision that says I'm building a separate ecosystem and then I'm going to build bridges too it has to reflect along the way it will reflect Many times

it's like you and I decide to do this show from the your apartment or we decide to do it from the get-go from different environments and then think of a ways to connect it. It has to reflect in in all sorts of ways along the way. And the second part is as you said uh um we are uh um completely adopting Ethereum ethos and and ethos and the culture and we are I think uh already very much active uh members of the Ethereum community and supporters all these years and all that.

So yes, I I would say that's a great recap. Ryan, you're muted. David, I want to go back to something you said, right? Because um it and 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 uh if you are a base layer one chain, like you're a Bitcoin or an Ethereum or even a Polka Dot, um 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 uh Ether when

it's used as collateral, as a store of value, when it's used inside of the economic parameters of Ethereum is competing as a money. Um, and this has been always my 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 the folks on the Cosmos project will tell you explicitly, no, atoms are not money. they're some sort of a a token, a capital asset, but they're not money. Um, the folks on Polka Dot with with dots, they're not quite as clear. But the challenge with treating DOTs as a money is that there's onchain governance. So essentially, you have issuance that's ruled by coin vote and and by plutoaucracy. And the reason I think it's important that layer ones compete for money is because um 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 uh Ethereum's 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 completing competing as a monetary asset, they they don't have a credibly neutral plan to compete as as a money, they can't possibly be the uh the chain that offers the highest security. And at the end of the day, it seems to me that DeFi will all move to the settlement layer uh of the chain that offers the the highest

security. So, I wanted to just throw that idea out there um you know 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's a network effect in in being a money uh that can't easily be replicated by a and we've been calling them ETH killers but like you know that that's just a term that the industry uses you know to your point guys these are uh these are good projects these are good teams everybody has you know the be the best uh intent I suppose but I 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 as a money. Any comments on that from Sandep or Mahalo? I I I think that's of absolutely a great point and uh um definitely uh positioning Ethereum as as money has has been very valuable in terms of increasing the security of the whole ecosystem primarily Ethereum mainet and then and indirectly the whole the whole Ethereum ecosystem and that's something

that that uh I think everyone it should be an obvious thing to to to understand and admit And that being said, of course, for us, um that's that synergy basically between Polygon and Ethereum. Like once you build this integral integral part of the system, uh our best interests very much align with your best interest and Ethereum Ether being strong or hard money and uh having I mean providing or enabling high security to us. So, so it's like a very nice incentive alignment between um in this case, this particular case, Polygon and

Ethereum or any other basically Ethereum ecosystem project and Ethereum want to go. Yeah. Yes. Just just to confirm it ether is money. I just want to say oh well you know you won't get any disagreement here on that. So uh c can we talk a little bit the uh the types of of change that polygon has? So it's it's not just one solution, right? Uh and actually I'm going to share my screen here.

This is a way to great way to look at it. There are multiple types of toic rollup. It's not just zk rollup. It's not just a a plasma proof ofstake chain. You guys are kind of like this list of different chains kind of encapsulates all of the different approaches m maybe besides uh state channels or that sort of thing, but all of the different uh internet of chain types approaches that are being attempted on Ethereum today and you guys are are doing them all at once. Maybe could you go over each of these uh

solutions and kind of talk about their advantages and disadvantages and how far you are in the in the process of actually bringing them to market. Sure. So, do you want me to take this one or Yeah. So, maybe I can start with the the first two. Sure. Please. If you if you see the uh current uh like the MATIC POSOS, hybrid POSOS and plasma chain that is is very interesting which is not very talked about is that on a single chain you have an option of two different uh kind of right so you can either choose a pure POSOS uh you know solution for you and then you can actually choose uh 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 uh I mean a lot over there. For example, like with with with uh you know like with simple POSOS uh you know the solutions which only want to rely on the uh you know security of the of the of the proof ofstake layer they uh you know end up using that more like for example some sort of NFTs and you know like uh you know like some some DAO votings and all that where they don't need like that hard level of security like you know as I think I think that uh that analogy of having a Manhattan versus a you know suburb. So you know the per per uh square you know

mile number of policemen uh in a 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 if the projects like for example uh you know as far as we know like for example Augur wants like more Ethereum based onchain security like which is which comes with plasma using fraud proofs and things like that. So then you know you can use you 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 uh you know specific developer as into it and things like that. So similarly you have other different different other

solutions and you know maybe Mihalo can take uh from there uh and I think he has a very nice uh you know this thing of categorization of uh you know the the larger piece of solutions into two different two main ones. one one are the standalone chains and other one is the secured chains. So yeah may like if you want to take take over from there. Yeah sure thanks. Um yes, as Sandep said, basically uh we like to categorize because the the Ethereum scaling and infrastructure uh um uh ecosystem is is very vibrant and there's a lot of fra uh flavors and lot of projects offering different solutions and and the the whole ecosystem is really amazing. I

would say um what we what Polygon introduces here is basically some sort of we we are trying to introduce structure for the first time maybe for the first time in this in this uh fantastic and vibrant and organic ecosystem. Ethereum's Ethereum is developing organically by default and that's a wonderful thing and and very powerful uh uh um but the organic things often lack structure. So, so um speaking with different projects, we kind of realized that there's there is awareness about different scaling solutions, but it's kind of hard to navigate that ecosystem and uh understand the tradeoffs and deal with some implementation complexities, I would

say. And Polygon is I would say a communitydriven effort to introduce some structure in that beautiful organic a bit chaotic uh um scaling ecosystem. um to to introduce structure we can start first by defining let's say two major categories of of Ethereum or polygon chains uh first one are these standalone chains I would say uh that's how we call them standalone chains are chains that do not necessarily uh um inherit security from Ethereum they by default have their own validator set and they are in in simplest terms you can think of them as some sort of side chains or enterprise chains And uh it is

I would like uh to say first of all I guess to understand if if some people are generally into internet of blockchains uh uh projects um those chains would be something similar to Cosmos zones I think it's fair to compare them with Cosmos because also have their own validator sets and they are by default responsible for their own security. Um, in Ethereum, we already have, I would like to say, a 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 uh Ethereum compatible 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 of these chains are in that group standalone chains and they are alive they are running they are like um fulfilling their purpose and I think um they're to be honest I think they're not getting enough attention or at least as much as um attention as they deserved. Um we are the community tends to focus on layer 2 solutions uh strictly layer 2 solutions in 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 they're bridging uh to Ethereum to transfer assets back and forth. They are using Ethereum for checkpoints for um all sorts of of uh activities and they are in my at least humble opinion uh significantly contributing to the Ethereum network effect and the ecosystem overall and I think we're kind of doing them bit of an injustice but uh because let's say we have hundreds of such chains in production today and layer 2 solutions we unfortunately still have maybe dozens

alive but like a layer two strictly layer two solutions um get probably like 90% of of the attention. So that's just something I wanted to um briefly say. So Polygon uh uh and the Polygon SDK that we'll be releasing soon supports by default building these standalone chains. Uh 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 MATIC POS chain which is one example of such standalone chains etc. So I would say it's like it's a really really important component of the Ethereum multi-chain.

Um so that's the first group of chains. The second group of chains are what we called secure chains. These are the chains that derive security from Ethereum and these would be a layer two solutions in the narrow sense like and there I really like your analogy Ryan that when you said that we are actually like an ice cream shop or uh instead of providing any specific flavor we are actually like an ice cream shop where you uh developers or project uh uh founders can come and pick their basically pick the flavor that fits their requirements and needs uh the best. Um yeah uh and that being said um we are kind of um we spend a lot of time also working and me personally and

Sandep and the whole team uh uh spend a lot of time analyzing different layer 2 solutions uh working with specific projects to to help them find the optimal scaling solution and and uh 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 um 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 of any specific solution. We we have like of course also

enormous respect for all the teams out there like huge shout out for teams like to teams like I don't know metal labs uh optimism and all these teams doing fantastic work and we will be working with those teams hopefully closely in future and already working with many of them uh uh but um they are u by default also focused on one specific solution one specific implementation so once you're in that position also you cannot um you have no other option but to um 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 uh um scaling ecosystem is still developing

the whole industry is 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 um and because of there is no one-sizefits-all solution. These were the reasons that made us basically introduced something that the community already likes to call layer 2 aggregator like you have dex aggregators that came along and aggregated multiple dexes.

That's how uh Poly One is basically aiming to aggregate or offer a multitude of layer 2 solutions to projects and teams out there. So I want to ask about h how that works and so on on polygon we just went through a couple examples of the chains that we that we found like um you said shared security uh blockchain standalone blockchains and I think if people are familiar with cosmos uh terminology this would be application specific blockchains I think would be how they would have called it um but then we also have other polygon chains which are things like you know just a plasma chain zk rollups 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 rollup 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 and then how does that get communicated to Ethereum because we have the 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 that's a that's a fantastic question. Uh, basically there is in in Polygon in the 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 to achieve on on a like a global scale like in in let's say in traditional systems be it financial systems traditional financial systems or web two systems you always have some um either autonomous systems or some systems that are functioning dependently and can fail independently and uh uh by allowing that you are actually making the system more resilient. That's what we believe. So

there is no such thing as a global consistency because um let's say I think polka dot is an example of a project that that strives to achieve global consistency and on the other side Cosmos is a project that aims to uh um isolate uh security and avoids global consistency as as as a goal and we believe this this Cosmos approach the approach that Cosmos took is is a better one um because it this global consist Consistency approaches number one never can scale uh unlimitedly that's simply I would say not possible by design because you always have some sort set of validators that at the end of the day

has to validate this proof so it there's always an upper limit to how much you can scale and um the second thing is that it actually really hard to achieve right once you have a multitude of chains all of them in the end of the day can produce some there can malicious activities or even mistakes unintentional non-malicious mistakes that can uh cause um 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 uh the question is what happens then and I I say it it has to happen sooner or later in in any

such multi-chain system so yes that's the approach uh when it comes to security and we are 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 this security is absolutely critical for them I would probably at this point at least advise using something like ZK uh uh rollups or validium implementations if possible because they provide like high level of assurance and all the transactions of that uh um implementation get validated

on Ethereum directly. Uh 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 uh own enterprise uh uh network and interact with Ethereum mainet as they all generally want to. So so um the approach to security is I would say absolutely unopinionated and and uh uh flexible I would say speaking of in Yeah. Go ahead please. I mean I mean just uh one like 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 like all the assets and everything like the inter you know communication let's say between two enterprise chains so we are already working with a 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 uh like you know a cryptographic proof on the on the Ethereum engine. So basically everything converges back to Ethereum. That's the whole point but yeah sorry absolutely absolutely no no no thanks for that's a great point. Everything

converges on Ethereum like Ethereum is the nexus. We envision Ethereum as the one and only nexus of all this activity, especially economic activity in this multi-chain uh reality. Okay guys, we're going to we're going to pause for for some sponsors and when we get back, we'd love to talk to you some more about some of the DeFi projects using Polygon today, the the the full landscape of Ethereum layer 2 and the projects out there and then hopefully we can get to the Madak token and the token economics. So guys, stay tuned and uh let's we want to tell you about these sponsors first.

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got really expensive and there was a frenzy. Oh, we got to get to layer 2 and then they cool down, right? But now we're back into this frenzy. Gas fees are high again. It seems like there's, you know, an uptick, massive uptick in conversation about migrating, maybe even starting uh D5 projects on layer 2. Can you talk about some of the projects that are using Polygon today? Um, I want to maybe bring attention to uh two things that that I found were sort of interesting. Maybe reflect on that. The first is this this tweet. There's now $200 million in total locked value on the Polygon plasma chain in the POS bridge. So on Polygon, 200 million in total locked value. So where's all of

that coming from and what projects are using Polygon today? Yeah. So, uh you know large part of it is actually and which is a good news is that uh you know is is stable coins. Uh so like one of the like in the D5 side of things like prediction markets like you know you know like I think the the the the polygon pchain is like really doing well over there with poly market uh you know like some of the bigger uh you know friction markets for example in the space. Poly market is on uh is on on on you know the is on polygon. Then you have this uh uh sportex which is doing a Canada based team very very doing very very well. Their sportex token is doing very well. Um similarly like you know

augur team has multiple times said that you know they are integrating their uh this parts uh you know UI and all that and then you have other ones like plotex and you know the upcoming upcoming months some of the upcoming months they are doing so uh you know the prediction markets things are going very things are going very well and due to these prediction markets a lot of stable coin come to madic so uh like the the the polygon uh you know PS chain so the previously like out of like when when the TVL used to hover around I think 50 to $60 million like 40 to 40 to50 uh million dollar was uh was in stable coin but now I think some of the because of quick swap so basically quick swap is a unis swap clone on uh you know on on the

on the on polygon so that is also attracting a lot of liquidity and uh now I think you have a free you have a few tokens like aoti token is there then you have uh you know sportex token which are which are like available in pretty uh large numbers uh you know in terms of their USD amounts. Uh so so yeah those are there. Then you have a lot of other protocols like you know easy 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 for the larger kind of like multi-billion dollar uh 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 veil defy for a lack of a term right so for that like Ethereum remains to be the the biggest this one 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 on this chain which is now like guarded by more than 100$und00 million dollars of uh like stake like on the proof ofstake side of thing so uh like so easy is basically into microi case you know this thing so they are now uh 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 uh you know like synthetics kind of applications like like Oro pocket is there which is issuing uh let's say gold and silver actual like you know backed by custody. So it's not purely DeFi 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 on the on the PSN. So similarly like you know there are multiple multiple these like B5 plus NFT is also becoming pretty hot. So Aotchi is is is one of them. So s sand deepep all these projects right that that you mentioned uh you know one you mentioned was was poly market which we're familiar with we've done a tactic on before it's a prediction market and I remember when we when we first started using uh poly

market the first tactic bankless tactic we did on poly market was on mainchain right um but now this is all on polygon today is that correct so if I am using poly market I can use my same meta mask instance so same user experience I've I've had previously But it's going to be faster and no gas fees because 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 uh for you.

So it's like it's like kind of the web two model. So you know if you 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 $100 worth of you know MAC tokens uh and then you know they can pay the the gas and so poly market 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 they're just moving to the suburbs you get the same user experience and because their numbers are smaller than something like a unis swap. So they're not doing billions in total locked value. They

might be doing millions today. Well, the the economic security I don't know if they're using your proof ofstake chain or what, but let's say they are. There they are. Okay. So the the economic security offered by the Polygon proof of stake chain. Well, that's good enough. That's all you need in the suburbs when you're doing lower amounts of 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. Uh, so that's kind of what's going on here. C, can we talk about this other post, too? So, I saw this this was super interesting. The question in my mind for Polygon in all of these Ethereum layer 2 solutions

because Polygon isn't the only one of course and I know our listeners know that there's all sorts of layer 2 projects in Ethereum's internet of chains but Avagotchi went through this is a NFT project they went through why they picked um Polygon and it was for these reasons one sufficient decentralization like you guys had enough decentralization for their needs um and enough economic security EVM compatibible ility right out of 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 you know some suburbs might do better than others, right? Like

Brooklyn might do better than the Bronx for whatever reason. Um developer ecosystem and interoperability with other NFT projects. Those are some of the reasons they mentioned going with uh with with Polygon. Is this kind of common? How do you attract D5 projects to your specific layer 2? Like what are they looking for and how does Polygon differentiate itself? Yeah. So before I hand it over to Sandep uh sorry Sandep, I just want to one small thing to to add or a small correction that the user experience is actually far better once you move from the Ethereum uh mainet to to to Polygon. it's far better and you're uh able to to allow your end users the 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 a system or 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 having to learn about gas and acquire E and all these things that are like huge huge barriers to to entry and these things are pretty much uh gone once you uh in the case for example of a poly market once they moved to to to

Polygon. Yeah. So sorry handing it over to you. Hold on. You're muted. Yeah. Yeah. So with with D5 kind of projects like you know now that the the the the stake on the network is like growing growing like you know like now I think it's like around 100 million plus uh proof of stake is guarding the the network and we have like 90 plus validators to give you a context like I think uh Miho correct me if I'm wrong but like you know Cosmos has primarily 100 uh validators or something like that right so like I I don't have an exact number but roughly like like that number right so you know imagine you have a you know Ethereum side chain or layer 2

chain which is guarded by almost like equal number of validators that are you know like a very uh high-profile uh you know layer project like that is there so that you know that's why like uh ai mentioned that sufficient decentralization is there uh and then you know the the stake is also pretty high so for uh you know some of these D5 use cases as you mentioned like for poly markets poly market which are which are handling let's say 40 to$50 million for now Right. So they are pretty happy uh having having uh you know the the the the assets over there and and also like you know they all the all 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 uh so that's why like you know D5 projects are now getting more and more attracted attracted towards the uh to towards Polygon. Uh but you know like D5 plus NFT because NFTs like you know as you can already you know realize that you know a $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 Aigotchi you know even mentioned article even mentions that you know uh there is like a you know like even open C uh is is looking to have NFD store uh you know on the 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 NFT projects you will find that you know six seven eight of them would be on on on polygon. So because of the you know obvious benefits that lowcost uh you know uh transactions and and all that and even like I think for NFTs even whenever like you know the other solutions like optimistic roll-ups and more secure solutions will come in but they will definitely have more you know the gas footprint will still be pretty high because optimistic roll-ups 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 M

works very very well. So that is attracting now NFT plus D5 use cases which is kind of you know you you must already be seeing that a lot of projects are exploding in that direction. Yeah. And that's going to be huge. I think Dave and I have talked about so much in the roll-ups and otherwise like like NFTs are going to be a gateway for people to discover crypto. uh 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 which is going to be a fascinating inroad. Another question about in general Ethereum's layer 2s because um you polygon is not the only layer 2 of course there's

optimistic rollup there's zk rollup starkware is doing some stuff uh Dave and I are going to be doing a lot more on layer 2 on bankless in in the coming months in fact we're talking to a panel um you know recording tomorrow with a panel of uh DeFi applications who are talking about selecting their layer 2 and the criteria they use to select it and that'll be on the podcast coming next Monday guys but I I I guess a question for you. Is it is it like a a battle to the death kind of competitive landscape? Is are all of these Ethereum projects really uh fighting each other? Like kind of is there a layer 2 wars going on or are the projects all friendly and working together to solve this as a community? What's what's the feeling right now?

I I would say definitely not. I would say that definitely there's a a lot of room for all all these fantastic projects to to work and grow and uh gain traction and uh we will definitely act in the same manner and so far like I 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 I would definitely say Ethereum uh uh there's no such thing as Ethereum scaling wars. What you might see

actually on Twitter, which is uh or elsewhere, it's probably like healthy debate between researchers because each of these scaling solutions, every scaling solution has tradeoffs like any any other technology in the world, every technology has trade-offs. So when you see some sometimes some uh uh conversations uh around that, it's just basically mainly researchers discussing the the those trade-offs and and u that's about it I would say.

So as as far as it goes for us and and I would say all the other projects, there's no such thing as Ethereum scaling wars. there's like a lot of room for for for everyone and especially for us like you know where we are looking to aggregate and provide a better de you know developer experience for the for the users and you know kind of making it easier to navigate through this whole you know layer 2 space uh I think you know especially for us like it's not like that so speaking about tradeoffs um since 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 what is uh what's the cost of doing this? It's it's um not always it differs from a case to case but for example with optimistic roll-ups we uh our optimistic roll-ups uh uh technology is not ready yet. It will be ready in months to come. uh we cannot I cannot share any more details at this point but we'll be hopefully able to share uh very soon with the with the whole community but thing is sometimes for some solutions we will have partnerships with specific uh um specific project that is working on that specific type of scaling for

example for example like partnership with star just giving an example here um with other solutions we will have our own implementations the I guess the major difference would be that we are really trying to make it easy to use for other projects to to to implement their own uh rollups or validiums or or uh ZK implementation and uh 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 and your project maybe matures and your community becomes stronger you might decide that you actually want to change uh the specific speific implementation

and move from let's say from let's say ZK you maybe even 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 uh incentives for your community members and for your let's say projects native token and whatnot so all kinds of possibilities are possible so uh I think polygon can evol can allow any project to evolve evolve or to follow the evolution of every project tech from in terms of infrastructure and technology that we that we support. We're like your like 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 and uh its adoption. The last thing I'd love to Yeah, it does. And the So, the last thing I'd like to cover, and you guys may not be willing or uh want to kind of weigh on on this too much, but I think it's an interesting it's a super important point for uh bankless listeners to 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 it's kind of curious because uh what we what we see here on like the you know the token market cap top 10 list is a number of um alternative non-ET layer ones that are

in the top 10 list. Right? So we've talked about this before. So Polka Dot right now is valued at a fully diluted valuation of 28 billion. That's billion with a B. We've got um Binance Chain which is uh 19 billion. We've got Cosmos somewhere here with uh their their Atom token that's at six billion right now. What's interesting I think is if you're evaluating uh things using sort of the the bankless lens which is there are you know asset superasses and you're either competing as a 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, uh, and maybe they're competing partially as a commodity, uh, they're mostly competing as a a capital asset. So um what's interesting to me is to observe the relative market cap difference between like the polka dots and the Binance chains of the world and the uh the the atoms cosmos of the world versus like the like loop ring for instance right um loop ring is a Ethereum layer 2 it's 859 million in terms of market cap or even like polygon is you know 517 yeah half a billion So I 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 of market cap uh or the the ETH layer twos are way underpriced or it could be the case that these ETH killers are basically these alternative layer ones are just sort of being assumed that they will acrue some monetary premium in the way that that Ether does and being priced based on the value of Ether. So, I think if if you if you guys are thinking about like alpha leaks and opportunities, um 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, uh who knows what retail will will will buy as they're entering the market. But I'm talking about like 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 twos. And if that's the case why is polka dot 28 billion in market cap versus some of the Ethereum twos layer twos which are in the you know still the hundreds of millions. It doesn't make sense to me. Uh and it seems like there you know one of us is going to be right I guess on on these bets. I don't know, maybe that maybe the Polygon folks don't

want to to weigh in on this because it's, you know, talking about like, you know, tokens and that sort of thing, but David, I'd at least like like to hear what's your take on this. I mean, how do you see things? Yeah, I I I would say that I think if you are a token on an L2, you are uh not bothering to compete as like a native trustless uh money, right? You are you are giving up that um that value acrruel mechanism to the native L1, right? you are 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 MA of the Madic and I'm probably I'm assuming there's going to be a rebranding in the future of the Madic 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 uh the the the theatic token is essentially a proof ofstake token uh which is used for uh used by the validators to kind of you know to stake uh uh and and you know and basically earn the rights to become or kind of validate the transactions and

then transactions uh have the same you know gas model as Ethereum. So if you are a validator uh and you uh 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 uh you know that will depend on the kind of solution but then essentially it's like the proof ofstake uh you mechanism uh you know basically the validators actually uh earn the right earn the transaction fees right so the value approval mechanism is is

actually directly dependent upon the adoption. So if the large amount of adoption comes in and then the like the network starts generating hundreds of millions in transaction fees uh then you know if you are a validator in this network you get a piece of that pie right and then you know let's say a 10% return for you yearly is a good enough return and then the network is let's say generating 100 million per year in the uh you know transaction cost then let's say a billion dollar worth of tokens can be st and that that amount of tokens are out of the supply. So that's Sandep this is this is essentially the same role that uh 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 Madic token. I've got my validator. I'm staking my Madic to my to my Mad uh I'm taking staking my tokens to my validator processing transactions on the Madic L2. What and I'm getting fees. Uh how are those fees measured and what are what is the denomination of those fees? How how do the fees happen? So the current poss 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 you know I and mihalo have been discussing that you know we can very easily make let's say ETH as the uh as the gas fees in that and that actually

increases the user experience. We kind of realized that you know that like later on in the cycle that you know we should have like with this chains also ETH could have been the the gas piece so that people also have a mental model easy easier mental model that okay on Ethereum I am paying 350 or like whatever guay as the gas fees and here I'm paying like you know maybe one to five guay as a gas fees. So you know that could be a default option. So but in terms of like uh you know currently it's MATIC and then in future it can be again like as Mihalo said that you know we want to make it like completely unopinated. So like the default option might be ETH 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 as a validator you earn the fees in whatever token the the relative like the chain you are validating on uh you know denominates it fees on. So, and so with with Ethereum gas fees, the gas the amount of fees that is paid by the user to the miners or in the in future the validator is determined by how much demand there is for blockspace. How what how is the fee size determined on polygon? So it's exactly the same model the the the the free market model for the for the gas uh gas fees and you know we are also exploring like the newer like you know like ERC159 uh kind of uh scenarios. Uh so so yeah like currently but the the model is

exactly like Ethereum when the when the when the demand goes up and there are larger number of transactions then validators choose the higher gas fees uh paying transactions. Yeah. But the but the scalability of the current chain is pretty high like you know it's around like uh you know 7200 TPS in some of our measure uh you know measurements. So like network is right now far from uh you know that stage. So and then plus there are staking rewards. So the validator is also subsidized some sort of piece right now and and top of that just to to to add to that now we are introducing a multitude of chains. So it's not like met even though it's not it's nowhere near the peak capacity but we we will have a multitude of chains hopefully in the future that will all have significant uh

uh capacity and just guess that's the that's the general intention. Will all of those uh will all those chains malo be um if they're proof of stake in Polygon will they all be backed by Maddox's economic security in some way? Not not necessarily not necessarily we we also think it's like a kind of a slippery slope or or a double-edged sword. It's always like um I guess it's always um tempting to tokens are a very powerful mechanism I would say like and token powered systems are really amazing to 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 that that's like a very very interesting paradigm and it's tempting to um try to use that powerful uh uh tool as as much as possible but it also can introduce friction. So we want to uh uh like for developers that are building end user apps on polygon for them the primary concern should be the user experience of their end users for us primary our primary concern is the developer experience the experience for people who are building on polygon. So we 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 stake ether or their native token or our native token to secure their their system. So we just want to um there's that famous misquote let thousand flowers bloom. We just want to allow uh uh all sorts of architectures setups whatever basically works the best for any specific project or the community. We think some some projects made that mistake previously. And if you're forcing someone to stake uh um let's say $100,000 of your native token which is by default volatile because this is a very volatile I mean market and uh uh by

in its nature I mean you are kind of um instantly rejecting uh uh 90% of developers I would say out there and um that's definitely something to to consider. So yes, I hope that answered the question. We just want to be we just want to allow people to to pick their favorite or optimal setup for their specific project. And we believe uh like that will that will uh provide in the long term the best value to to all the participants including token holders, mantic 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 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 road map for Polygon. Um what's what's on the road map? 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 timelined uh road map. Uh but then we like the next uh upon release is our uh polygon SDK which is like equivalent of uh polar dot

substrate uh which you you know you you can use to launch your own chains uh like you know parach chains in in in polka dot. So that is very close. Uh but then you know beyond that like all the all the things uh you know a timed road map is 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 a month at most. Well actually before we get we close out I would like to squeeze one last question in here because I've seen this asked a couple times in in the chat box is Sandeep. This one's for you. uh we re uh 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 on the government uh stance towards our industry. Yeah. So uh you know the like India has a like when when people see India's crypto regulations they actually don't see the the background India is coming from like as as near as like you know 10 years back uh there used there used to be a saying even though India is like you know fourth or fifth you know largest uh 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 in the white markets you have two billion worth of uh you two trillion dollar worth of economy in the black markets. So government is actually

this the current government has been trying to put a lot of like you know curbs 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 bring you introduce crypto and boom everything is gone right so their discomfort is you know their discomfort you know is pretty understandable uh and they are like you know generally the tendency is to scare away the retail uh because you know there there are like some pretty large countries 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 buying 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 a outright blanket ban and all that like it's 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 uh you know as you have in the US 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 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 in the sense itself like you know we are working for the ethereum ecosystem in 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 had built for these eventualities right. So we have like an our our token entities in British Virgin

Virgin Islands and then you know our you know the other token interfacing entities are in Singapore Indian entities absolutely free from any sort of relation to crypto. So you know like no need to worry especially related to uh you know uh to the to the team and the the protocol and then now it's a very diversified team with with our entities in you know uh in Europe and uh you know and in multiple other uh areas of the world so no need to worry on that and the team is also pretty distributed also. Yeah. Well, guys, I think Oh, go ahead me.

No, just one sentence. Basically, Polygon is a I I want to stress again, we consider it a community-driven project and um it is not owned by anyone. It's not located in any specific country or anything like that. It belongs to the whole community, belongs to the world. And uh um everyone is very much free and welcome to contribute. And it has as I think we all can see it is a um quite powerful but quite ambitious vision. So we will definitely need all the help we can get uh um to to build this to make this all happen. So yes we inviting everyone to to join us whether you're technical or not. If you I don't know if you heard about polygon if you

understand what we're building and if you like it if you see it might be a good fit for you please reach out to us. We are welcoming you. open. Well, fantastic guys. Uh, Mihalo Sandep, thanks for spending some time with us and describing Polygon. Uh, 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 in making that happen. Thank you so much, Dan. Thanks, David, for having us here. Thank you guys. It was pleasure to be here. All right. Uh, bankless community, there there are a number of ways to get involved. If you're a developer, of course, Mihilo 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.market application is one way to do that. Um, you can experience too. Um, 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 number one thing you can do to inform yourselves. Of course, risk and disclaimers, guys. None of this has been financial advice. ETH is risky. So is DeFi. So is layer 2. 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. Hey, we hope you enjoyed the video. If you did, head over to Bankless HQ right now to develop your crypto investing skills and learn how to free yourself from banks

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