Polygon’s Endgame: Polygon 2.0 with Sandeep Nailwal & Mihailo Bjelic

Today on the show we welcome back Sandeep and Mihalo, the Co-Founders of Polygon. Polygon is one of the most used chains in crypto. That in itself is a massive accomplishment. However, there’s been criticism of Polygon in the past, that it’s “just a sidechain.” That it’s not “Ethereum aligned.” The release of Polygon 2.0 will silence these critics. Tune in to understand why. ------ 🚀Join Ryan & David at Permissionless in September. Bankless Citizens get 30% off https://bankless.cc/GoToPermissionless ------ 📣 STADER LABS | ETHX LIQUID STAKING https://bankless.cc/Stader ------ BANKLESS SPONSOR TOOLS: 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE ⁠https://k.xyz/bankless-pod-q2 https://feeds.flightcast.com/%E2%81%A0https:/k.xyz/bankless-pod-q2 ⁠ 🦊METAMASK PORTFOLIO | TRACK & MANAGE YOUR WEB3 EVERYTHING ⁠https://bankless.cc/MetaMask ⚖️ ARBITRUM | SCALING ETHEREUM ⁠https://bankless.cc/Arbitrum https://feeds.flightcast.com/%E2%81%A0https:/bankless.cc/Arbitrum%C2%A0%20%E2%81%A0 🛞MANTLE | MODULAR LAYER 2 NETWORK https://bankless.cc/Mantle ⁠ 👾POLYGON | VALUE LAYER OF THE INTERNET https://polygon.technology/roadmap 🗣️TOKU | CRYPTO EMPLOYMENT SOLUTION https://bankless.cc/Toku ------ TIMESTAMPS 0:00 Intro 6:35 EthCC 11:35 Polygon 2.0 20:00 PoS to zkEVM 33:50 What Will Users Have To Do? 37:10 Validiums & Wen Upgrade? 43:00 How $MATIC is Evolving? 47:00 The Evolution of Crypto Networks 48:50 $MATIC to $POL 50:27 Work Token 53:14 Why $POL Naming? 54:20 The Governance Framework 59:50 Is This Polygon’s Endgame? 1:08:48 zkSupernets ----- RESOURCES Polygon Roadmap https://polygon.technology/roadmap Polygon PoS to a zkEVM - https://twitter.com/0xPolygonLabs/status/1671208777784209441 The Stack https://twitter.com/0xPolygonLabs/status/1668312616459030528 The Token https://twitter.com/0xPolygonLabs/status/1679427540790681600 ------ Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://www.bankless.com/disclosures ⁠

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:04Ryan Sean Adams?

  Bankless Nation, today we've got an episode for you with the founders of Polygon. We are talking about the Polygon end game, this release, this software release, this upgrade that Polygon is doing. They call it Polygon 2.0. Why is this important? Well, Polygon is one of the most used chains in crypto, and I think that in itself is a massive accomplishment. There's also been some criticism of Polygon in the past, some critiques that it's just a sidechain, and maybe it doesn't have the Ethereum alignment that the marketing says it does. I think the release of Polygon 2.0 will silence the critics. There's a lot of decentralization going on in today's conversation, including a path forward for the Polygon proof-of-stake chain. A few things we talk about. Number

• 0:47Ryan Sean Adams?

  one, how Polygon is scaling Ethereum using ZK technology. Number two, a promise Polygon made to the community to upgrade the Polygon proof-of-stake chain and change it to a rollup, more specifically, a Validium. We'll talk about what they're doing there. Number three, we'll talk about Polygon's big token upgrade, what they're doing with the Matic token. They're converting it to even more of a work token. Interesting discussion follows there. They don't see Matic being a money token. And number four, we conclude with what is going on with Layer 2, the infrastructure wars, as they were called in today's episode. David, what were your takes on this episode?

• 1:22David Hoffman?

  Well, we all know that we are in the middle of the Layer 2 wars. So the Layer 2 wars are definitely heating up, especially here at ETH CC. And Polygon's transition to Polygon 2 also enters into the game their strategy for going from a single chain to many, many, many chains. We of course have the OP stack, the ZK stack. Arbitrum recently has now Orbits. Now Polygon has their fully fledged ecosystem to have what they call supernets, to also fit into the world of all of these Layer 2 platforms that want to turn into standards for horizontal scaling, so we can all have infinite block space, especially by the time this next bull market comes around, which lately seems to be coming

• 2:04David Hoffman?

  a little bit closer than, and a little bit sooner than I think we all anticipated. So I think listeners are going to learn a ton In this episode about Polygon, about one of the most used networks that we have on Ethereum. Before we get into the episode, quick disclosures. Polygon is a sponsor to Bankless. Ryan here is also an advisor to Polygon. I also have some small amount of Poly tokens as well. Polygon's been around for a while and we're big fans. And so those are our disclosures. You can see all of our disclosures at bankless.com/disclosures. All right, let's go and hear from Sandeep and Mihalo, the two co-founders of Polygon. But first, I'm going to talk about some of these fantastic sponsors that make this show possible, especially Kraken, our preferred exchange for crypto in 2023. If you are not prepared for a bull market, you better get prepared. You can get prepared by getting an account with Kraken right now. There is a link in the show notes to get started.

• 2:49David Hoffman?

  Kraken Pro has easily become the best crypto trading platform in the industry. The place I use to check the charts and the crypto prices, even when I'm not looking to place a trade. On Kraken Pro, you'll have access to advanced charting tools, real-time market data, and lightning-fast trade execution, all inside their spiffy new modular interface. Kraken's new customizable modular layout lets you tailor your trading experience to suit your needs. Pick and choose your favorite modules and place them anywhere you want in your screen. With Kraken Pro, you have that power. Whether you are a seasoned pro or just starting out, join thousands of traders who trust Kraken Pro for their crypto trading needs. Visit pro.kraken.com to get started today. Introducing Polygon 2.0, the value layer for the internet. For too long, the limitations of blockchains have held back app development and stifled user adoption.

• 3:34David Hoffman?

  The internet allows anyone to create and exchange information. What's missing is a value layer that lets anyone exchange, store, and program value. That's where Polygon 2.0 comes in. Polygon Labs has unveiled a series of innovations that will radically alter the Polygon ecosystem and Web3 as a whole. By leveraging groundbreaking ZK innovations such as Polygon ZK EVM, the next iteration of the best-in-class Plancky2 proving system, and a first-of-its-kind ZK-powered interoperability layer, Polygon 2.0 will give users and devs unlimited scalability and unified liquidity. Right now, there is a Polygon improvement proposal regarding a potential ZK-powered upgrade of Polygon proof-of-stake. If approved, Polygon proof-of-stake would become a Layer 2 ZK EVM, Vilidium. So make your voice heard on this proposal by joining the Polygon Discord today.

• 4:20David Hoffman?

  Chance to help the Polygon community give the internet the value layer it deserves. Mantle, formerly known as BitDAO, is the first DAO-led Web3 ecosystem, all built on top of Mantle's first core product, the Mantle Network, a brand-new, high-performance Ethereum Layer 2 built using the OP stack, but uses Eigenlayer's data availability solution instead of the expensive Ethereum Layer 1. Not only does this reduce Mantle Network's gas fees by 80%, but it also reduces gas fee volatility, providing a more stable foundation for Mantle's applications. The Mantle Treasury is one of the biggest DAO-owned treasuries, which is seeding an ecosystem of projects from all around the Web3 space for Mantle. Mantle already has sub-communities from around Web3 on-boarded, like Game7 for Web3 gaming and Bybit for TVL and liquidity and on-ramps. So if you want to build on the Mantle Network,

• 5:05David Hoffman?

  Mantle is offering a grants program that provides milestone-based funding to promising projects to help expand, secure, and decentralize Mantle. If you want to get started working with the first DAO-led Layer 2 ecosystem, check out Mantle at mantle.xyz and follow them on Twitter at @zeroxmantle.

• 5:21Ryan Sean Adams?

  Bankless Nation, we are super excited to introduce you once again to Sandeep and Mahalo. They are the co-founders of Polygon. They are beaming in from ETHCC, the conference. So we're all in hotel rooms, well, except for me, of course. I'm always at home, never on the conference scene. Sandeep, Mahalo, how are you guys doing?

• 5:38Speaker 02

  Great, doing great. Doing great, doing great. Just taking note of the Sandeep's tattoo.

• 5:42Ryan Sean Adams?

  What are you showing us? Wait, what's that?

• 5:44Speaker 02

  I'm showing you Polygon tattoos.

• 5:46Ryan Sean Adams?

  You got a Polygon tattoo? Oh, it's temporary.

• 5:50Speaker 02

  But soon I should get one. And yeah, like just hustling through the ETHCC. It's like arguably the best event in that sense, like very high quality. Really great event. Less crazy.

• 6:03Ryan Sean Adams?

  I'm glad it's been good for you guys. David's been filling me in and we've got a whole bunch of conversations coming out of that. But that tattoo, I'm a little concerned, Sandeep, that it's temporary because, you know, we're all about immutability in crypto here. So I'm waiting for the immutable Polygon tattoo that is inked and cannot be removed.

• 6:21Speaker 02

  It's a testnet.

• 6:24David Hoffman?

  So in this episode, we're going to get into all of Polygon 2.0 because there's a big update. We're getting some changes to the Polygon token. We're going to talk about the technology transition from the proof of stake to the ZK EVM. But before, just a little bit more on ECC. I've had a fantastic ECC, but I want to get your guys' perceptions as to who is asking you guys about what? About Polygon? What's been the response? Because this announcement went out earlier than ECC. So when people come up to talk to you guys and ask you guys questions, what are they poking around about? Like, what's the hype about Polygon when they come to talk to you?

• 7:00Speaker 02

  I think generally, like, the Polygon 2.0 has been received very, very well in the industry, like, much beyond the expectations that we were thinking. And everybody is like, you know, this is like, I actually met like some of the researchers, which, you know, including, you know, I mean, a lot of researchers from Ethereum Foundation to Cosmos, to like various different ecosystems. And, you know, many of them said that, you know, the Polygon 2.0 architecture that they see, it feels like the most, you know, kind of practical and probable architecture. Like, whether Polygon builds that or somebody else builds that, that's a separate thing. But point being that using the power of ZK, this looks to be the architecture

• 7:44Speaker 02

  which can actually provide this infinitely scaling Web3, you know, trustless computation. And, you know, also while, even though you are scaling infinitely, while providing a level of like, you know, proven composability or cross-chain, as we say, unified liquidity across this value layer of Internet, we say. So I think that has been, that has been the highlight for us. And definitely a lot, a lot of discussion around ZK because, you know, arguably now our, you know, Polygon ZK stuff is like absolutely state of the art. So Jordi is like a rock star, you know, here. So, yeah, a lot of ZK-related discussions and developers coming up to us.

• 8:26Speaker 03

  Yeah, I can just echo what Sandeep said. I think in addition to that, I think it's kind of becoming obvious. We at some point became not really irritated, but we felt a little bit sad that we were not really able to communicate all the great development that's happening on the ZK front within Polygon now. And I think now finally, community understands how strong Polygon's ZK team is and how exciting everything that we're working on is. So that was my maybe second biggest kind of impression, that people are starting to kind of realize that. And with Polygon 2.0, the feedback has been really, really great.

• 9:07Speaker 03

  And we are very excited to move forward with the whole concept.

• 9:14David Hoffman?

  One of my favorite memories of ECC Mahalo was in 2021, it was you, me and Mariano Conti. And it was the last day of ECC, a lot of people had already left and it was just us three left, it felt like.

• 9:25Speaker 03

  I remember exactly where it was.

• 9:27David Hoffman?

  Yeah, and we were just grabbing some beers and I remember you get a phone call and you jump up from the table and go take this phone call for five to 10 minutes and just me and Mariano just like chatting, just chatting, drinking our beers. And then you come back and you sit down and it goes, "Oh, really good news, guys, really good news." And me and Mariano were like, "Oh, great, what is it? Tell us." And you go, "I can't say, I can't say." I'm like, "Mahalo, come on, bro, what? You gotta say it." It's like, "No, I can't say, guys, I can't say." And then like six weeks, eight weeks later, Polygon announces the acquisition of Hermes, which later turned into Polygon Hermes, which is of course Jordy's project. And then next ECC, a year later, was the announcement of Polygon ZK EVM. And then now here we are at the ZK EVM Polygon 2.0 stack.

• 10:10David Hoffman?

  So it's just a nice little like quick story about like ECC and the progression of these systems over the years. And you know, the players that stick around through the years and relentlessly build forward.

• 10:20Speaker 03

  Totally, totally. And then at that point, I, I, as you know, and as you understood later, I had that kind of out of, of NDA type of out there, because Hermes had a token, right? And we could not have publicly said anything in order to avoid any sort of speculation and whatnot. That was the only reason, otherwise, of course, I would have shared with you with pleasure. But yeah, Paris is very significant kind of for, for development of Polygon and this short but very exciting history. And yeah, we also announced ZKVM here in Paris. And now we were kind of wrapping up the whole Polygon 2.0 thing here as well.

• 10:56Speaker 02

  Yeah. And I think for Jordi, it's even, even more historical, like, you know, he actually presented the first time, the idea of a ZK-based rollup, like he's the, many people don't know that he's the one who came up with this idea. Originally presented it here, next year, presented like the, the Hermes 1.0, which was only a payment thing, launched that, then next year, we announced the Polygon, you know, working together. And they announced last year, they had announced Testnet, I think, right, in the, in the ETC.

• 11:27Speaker 03

  This year was the mainnet. Last year was the completion of the code. It was feature complete. Here, we released the whole, the codebase completely. And yeah, now the mainnet.

• 11:37Ryan Sean Adams?

  It's incredible how crypto has, has kind of grown. I, I remember a time where I could keep track of all of the major projects. You, you just see even all of the major projects that we're building on Ethereum, right? It's just like I had them in my brain. And now it's getting difficult to even keep up with all of the major projects on top of Polygon, right? Like, the Polygon ecosystem is probably bigger than the entire Ethereum ecosystem circa 2019, 2020, right? That, that's how fast it's grown. And so where, where I think we want to start this conversation, because this is a conversation to really unpack this thing called Polygon 2.0. And I want to make sure that listeners understand what Polygon 2.0 is and what it contains.

• 12:19Ryan Sean Adams?

  Because there's a lot going on here, right? It just inside of the Polygon ecosystem. And I think the way I understand this is maybe divided into, into three parts that we want to touch. On today, the first part is Polygon proof of stake, moving to a ZK EVM and what that means. So that's the first thread we'll pull on. Secondly, I think we want to talk about the holistic stack here, the tech stack, you know, the layers and what you're doing here, because this will give people a sense for what the capabilities of the Polygon ecosystem and architecture are. And then thirdly, I think we want to talk about token economics, the token economics of Matic and where this is moving, moving forward. So those are the three kind of pillars we're going to touch. Does that sound good?

• 13:04Speaker 03

  Yep. And there's a fourth one, which is the governance, the release of the new governance framework that you're proposing for the whole ecosystem, for governing three important or three pillars, as we define them of Polygon ecosystem and Polygon governance.

• 13:20Ryan Sean Adams?

  Lovely. Okay, so we got three pillars and then we got this governance wrapper around those three pillars that we're going to talk about. So.

• 13:28Speaker 02

  So I mean, the Polygon 2.2, like I'll first take a stab at it like at a high level.

• 13:33Ryan Sean Adams?

  Yeah, yeah, give us the high level.

• 13:34Speaker 02

  A stab of it and then Mihailo can, you know, go more deep into technical stuff. But basically, the whole design of Polygon 2.0 is the philosophy is exactly how or is derived from the current web two internet, right? Like, you know, this is web three and we want to say that if web three is going to achieve or is, is, you know, we want web three to achieve that level of scale of web two, then it needs to have two key characteristics that web two has. The first key characteristics as web two, web two has is practically infinitely scalable. More websites, more apps, more, you know, softwares are going, you know, need to be created.

• 14:16Speaker 02

  You, you create more and more servers and, you know, it keeps on growing. Like, you know, every year we have like millions of millions of apps join the system. So it needs to be infinitely scalable. Second, the second part is even more important is that this is, this web two is basically this internet of information, internet of data where the information can seamlessly flow from like, it doesn't matter whether I am, you know. Sitting in Paris and you guys in U S and the the website that we are accessing in between is from some other part of the of the world. And uh you know, we can seamlessly, you you know, use this or share and create and exchange that information with each other, right? Whether it's video content, this content, that content, it's seamless, basically.

• 15:01Speaker 02

  It it wasn't like that, uh you know, thirty forty years back when the internet actually came, it was named internet because it was a network of networks. Previous to that, there was a lot of networks, but they were like DARPA net and and things like that, they were die separate networks. And previously, you know, if you wanted to have some information or data moving from one kind of network to another network, it almost felt like that, like it feels today, when you have to bridge your U S D T into other chain and things like that, right? So the information also was not seamless, but today it's seamless. So these two should be the characteristics, like infinitely scalable and unified liquidity that we say, we because it's a internet of value, we say unified liquidity means value can

• 15:44Speaker 02

  move from one layer to another layer seamlessly. And how we achieve that is basically, uh you know, we have a very nice diagram also, very simply, which says that which shows that, you know, Polygon is is is basically is going to become this multi-chain network of layer twos secured by Z K. So everything needs to be secured by Z K and we will discuss about like our Polygon P O S converting into Z K and all that. All that combines and aligns into this vision, that all the chains here, whether it's supernets, supernets previously used to be like individual side chains and eventually they were going to have Z K proofs, so that moment has arrived now. That where all you you can have like Polygon P O S chain, like chain, public chains, Z K A V M chain or these supernets, everything

• 16:29Speaker 02

  uh you know, acts as a layer two, uh you know, proven on Ethereum on top of Ethereum using the power of Z K. And then we have an aggregator layer, which actually combines the Z K proofs in one recursively and puts one single proof on Ethereum. What happens with these recursive combination in this aggregator layer is that one chain, like let's say you are on a chain number hundred. And you are you want to swap some value from chain number ten to chain number hundred, right? What you do essentially there is simply the moment the chain number ten has put some put the Z K proof on the aggregator layer. The chain number hundred can easily see that that Z K proof. And knows that the X Y Z transaction that is coming on chain number hundred is a part of this Z K proof that has been submitted.

• 17:12Speaker 02

  That means you can allow that cross chain transaction to happen so. And imagine like how big this concept is that you don't care whether that chain has one validator, two validator, hundred validator, doesn't matter. It's a private chain, doesn't matter for you. As far as the transaction can be proven that this transaction is a part of this Z K proof. The other chains in the ecosystem will be able to simply, you know, take that, right? So essentially, what is being solved here? First, you can have as much as much block space if you want, like as many chains can be seen, so it's infinitely scalable. Second, because of the power of these Z K proofs, all the all the value is seamlessly able to move across these chains, right? So unified liquidity.

• 17:55Speaker 02

  And this is the architecture using this power of Z K and recursion, what we have figured out in last two years. With these multiple Z K teams, this brings us to this culmination of this Polygon two point O, which is like infinitely scalable. And you know unified liquidity. And and yeah, like, you know, that's why, you know, some of these interoperability features and and these features like. This all aligns into whatever next things we said, like Polygon P O S becoming Z K and and things like that. May hello, or do I?

• 18:26Speaker 03

  Not much to add, I guess, maybe I can just say that we are very, very kind of.

• 18:34Speaker 03

  Happy and confident about this tech stack that you're proposing now. And it is the result of this practically two years long period of, I would say, divergence that we have had in Polygon. So we understood that we shouldn't really try to predict the future to to from the get go propose one single approach, one single. Tech stack and and that has played out pretty badly for for some of the projects projects out there in the in the past, right? And and.

• 19:06Speaker 03

  Proposing or creating the architecture that is indeed that can support mainstream adoption, that can support practically unlimited scalability and seamless interoperability is not an easy task, obviously. And we have intentionally encouraged this period of experimentation. And as I said, it has lasted for almost two years. And we have had multiple client development efforts, multiple ZK projects, experimenting even with data availability and whatnot. And we have really learned a lot during that period. And we slowly, some time ago, started converging, so to say, towards a more concrete architecture. And now we are,

• 19:45Speaker 03

  I would say, very confident that this is the way to go. And yeah, by leveraging, as Sandeep said, the power of ZK and advanced implementations like ZKVM that we have been able to ship. And this advanced, and in my, to the best of my knowledge, the only interoperability protocol that allows scalability and global consistency across the whole ecosystem. I have never seen such approach. We are very confident that this is the optimal architecture to build basically the value layer of the internet.

• 20:25Ryan Sean Adams?

  This is very cool. There's two themes I'm kind of drawing upon, maybe for the listener and what you're describing for Polygon 2.0 here. You know, the first is what you were just talking about, Mahalo, is this journey for Polygon from divergence to convergence. And I'll just say, one of the strengths of Polygon has always been, I think, its practicality in that you guys didn't just test one approach. You tested like all of the approaches at once. Like even, I remember for a while when kind of Matic, you know, was doing like the plasma based approach as well. And so you had sidechains, you had plasma, you had proof of stake, you have rollups, you're doing all of the approaches at once. And the concern about that, the benefit of that kind of divergence is you get to test all of the experiments,

• 21:07Ryan Sean Adams?

  you don't have to bet on a single experiment. The concern about that is, well, what if it fractures? What if we're not able to create a unified experience? What if we're not able to scale? What if it's brittle? And so now the next move and why this is a 1.0 to a 2.0 is because this is a move towards convergence, where you can unify all of these approaches. And I've heard you say it so many times that I want to emphasize, it feels like ZK, this term, zero knowledge, these ZK proofs have been kind of the unlock that allows for that convergence. And I don't know that I sufficiently understand how that works. I'm hopeful I get a better understanding by the end of this episode. But that, if we can unlock ZK,

• 21:52Ryan Sean Adams?

  that gives us scalability and the unified one-network type of user experience that we're all looking for. So let's talk about that. And I think a lot of listeners will be familiar with or will have used Polygon's proof-of-stake network at some point in time, you know, with Matic Tokens and doing all sorts of DeFi types of things on top of Polygon proof-of-stake chain. That is moving to ZK-EVM type of technology. Or actually, why don't you guys describe what this proof-of-stake chain to ZK transition is going to look like? So the before state and the after state and the increased unification security guarantees

• 22:35Ryan Sean Adams?

  that we get after this change is in place. Do you want to start, Sandeep?

• 22:41Speaker 02

  Yeah. So basically, first, I want to give a very, you know, kind of layman definition of ZK. Like, what exactly, like, why are we able to use ZK for the zero-knowledge technology, which was used to be a privacy technology, like, which was initially popular for privacy technology? How it is used for scaling? Essentially, in ZK, what you are doing is that, what you do is that you prove to someone that you have something or you did something, right? It's a very simple way, especially in the case of computation. Like, it might sound simple, but let's say today, if, let's say, Ryan, like you said, that, Sandeep, I'm going to pay for your, if I was a student, you say, I'm going to pay for your, all your education bill for next one year, right?

• 23:26Speaker 02

  And at the end of the year, I came to you and I gave you 1,000 bills and I said that, Ryan, like, total was, a total expense was $20,000, right? The only way you can actually verify that this is actually twenty thousand dollars is you have to go through all the bills. And then you have to do the total yourself, right? If it's plotted in Excel, you have to total, total it yourself. There is no other way. Now, imagine if, if my whole billing process was a bigger, uh, you know, computational process, like I was doing a lot of things, right? And I wanted to prove to you, there is only one way, I have to give you all the data, you have to run the whole program yourself and then prove something, right? And when we are trying to scale Ethereum, now think of it from, from Ethereum's part of you, we are trying to scale the execution power on Ethereum, right?

• 24:09Speaker 02

  The only way, like for example, how it works in, let's say, in case of, uh, the, previously like, you know, ZK or the Solidity, uh, SolVM and all those attempts were there and kind of like optimistic rollups also, they don't execute the whole transaction, whole data. But what they do is in optimistic rollups, you put all the data and all the, you know, state root and everything on Ethereum. And then you expect that somebody will run the whole chain. And if there is something wrong is found, you will raise, you will raise the fraud proof, right? This is why there is a limit to the scalability optimistic rollups can provide. And that's why you have a seven day withdrawal period. Because it's inherently optimistic in nature. You are assuming everything is correct. But with the power of ZK, I can prove you a full blown computation.

• 24:54Speaker 02

  Like in the same example, I was, if I was a student and you paid twenty thousand, I had thousand bills. But we can agree on a simple, you know, kind of a proof in between or a proof layer in between. And I will just give you a proof like Ryan, I need twenty thousand, I will need twenty thousand dollars because this was my bill. I give you that succinct proof, you put it on that validity proof layer and you are hundred percent sure that Sandeep is saying correct, he's not fudging the bills. The same case goes i- in this situation, like if I am a layer two. And I am doing a lot of computation, like you know, the smart contracts are happening and billions of dollars are, are being transacted. But on Ethereum, Ethereum doesn't need to run all those, you know, source code on Ethereum to be sure that this layer two is working fine. That's the whole point of layer two, right?

• 25:36Speaker 02

  You want Ethereum's final guarantee that everything that layer two is doing is correct, right? So instead of that, instead of giving the whole transaction, like what happens with optimistic rollups, they're giving the whole data and the state root and everything to Ethereum. And then assume somebody will run and, you know, run the fraud proof. With ZK, you simply provide the whole proof of the computation. You say, this is a succinct proof, this proves that whatever I have done. Is correct and as per the rules of the of the EVM like virtual machine, I am not changing values from my side and all that. And Ethereum just needs to run that small proof and is hundred percent sure that the sequencer, whether it's one single sequencer or it's ten sequencer, no matter what, everything was executed correctly. That is the power of ZK.

• 26:20Speaker 02

  And imagine how big this concept is now, you can do huge amount of computations off chain and just bring back small proofs on Ethereum. The final guarantee is provided by Ethereum, but you can do huge amount of compute. This can provide you that level of scalability. That's the simple magic of ZK, right? And and then it it it's only about how much you can optimize those ZK proofs, how the cost of those creating those proofs can be simpler, lower and all that. And that's where it's it's like, you know, the differentiation comes where Polygon and especially Polygon ZKVM and Polygon Zero Teams and and Mind and Deef, they have combined like completely like smashed it in terms of the uh performance of how fast you can prove and how

• 27:01Speaker 02

  low costly, in a low cost manner, you can prove on or or validate on Ethereum. That's why ZK proofs are called validity proofs. The another benefit of ZK is that since it's a validity proof, the moment you put the proof on Ethereum and Ethereum accepts the proof, that means everything was correct. So you don't need a seven day withdrawal period compared to what you need in optimistic loads. If you are putting a proof every five minutes, you can withdraw your funds every five minutes uh using the power of ZK. And this actually like this is why I am saying that this again, let's revisit the Polygon two point division. All these chains, layer twos on top of Ethereum using the using ZK proofs. So it doesn't matter, there are five chains, ten chains, hundred chains. And who is running those chains? If it's a college dorm room guy running the chain,

• 27:46Speaker 02

  uh you know that this proof is coming on on this on this uh you know aggregator layer and each chain knows that the execution is done, correct? And once the proof is submitted to Ethereum, Ethereum also verifies that all these hundreds or thousands of chains, they all are executing correctly. So now you can have millions and millions of users individually running those chains and the interconnectivity between those chains is there. So it feels like one single large chain infinitely growing. Block space because there is interoperability between them and the chain you can add more and more change to add more and more capacity. That is the whole concept of uh later and you said you said absolutely correctly that Z K is the unlock like these fast.

• 28:24Speaker 02

  Z K proving and these recursive proofs is the unlock that you know are these three four teams working together were able to crack. And that's where we are at polygon two point O.

• 28:35Speaker 03

  Yeah, and going back to to polygon P O S chain and the the upgrade that you that you that you mentioned. So uh currently, as as I guess a lot of people know, polygon P O S chain is one of the most used uh uh chains in in in the industry, basically. It has uh currently way more transactions than than Ethereum, uh pretty mature or quite mature ecosystem, etc. Three hundred million plus end user wallets or addresses, whatever you want to call them. And um we definitely don't want polygon P O S chain to be left out with this polygon two point O vision, right? And and this proposed upgrade has two main uh consequences, I would say. One consequence is currently polygon P O S chain is operated by a set of validators.

• 29:19Speaker 03

  There are one hundred plus uh uh metallic stakes validators and they are providing the security for the chain. And theoretically, there is this bridge that uh uh connects polygon P O S chain to Ethereum. And there uh and these validators practically and factually control this bridge. So theoretically, they could try if they collude, if they gain a lot of uh uh or enough or super majority of the stake. They could try to uh attack the chain and maybe uh withdraw funds from from from the bridge itself. And now with this proposed upgrade and and Z K A V M that is showing great performance uh uh already.

• 29:57Speaker 03

  Uh as a as a reference, we have latest benchmarks, which are uh uh the proving costs for E transfers are zero point zero zero zero. Eight five, so four zeros, eight five for for uh a need transfer in Z K A V M. These are the actual proving costs. So practically, these costs are negligible and and to be honest, orders of magnitude lower. than what we were initially expected when we when we started working on ZKAVM. So and that's for the type two that that is already uh um in in production on on mainnet.

• 30:34Speaker 03

  Uh we are making great progress with type one and basically we will have opportunity to choose whichever approach is is better for for the community and for for the POS chain specifically. But uh long story short, the our ZKAVM tech is definitely mature enough now so it can support uh the level of activity that POS chain has. Uh hence why we decided to to put forward this proposal to upgrade it to ZK Validium. So as I described described, the the chain itself and the bridge is currently controlled by this set of validators. After the upgrade, we can continue to have these validators, but but in a form of decentralized sequencers.

• 31:13Speaker 03

  And use the power of ZKAVM to turn this uh POS chain, which is uh practically a sidechain at the moment, uh into a full blown layer two. Uh we are proposing the Validium solution because we currently have Rollup already live on on mainnet, the ZKAVM Rollup that is already active. And ZKAVM Validium and ZKAVM Rollup would become kind of like a nice product mix where you have this trade-offs between Validium and Rollup. Rollup has full blown security of Ethereum because it uses Ethereum also for data availability, but it has lower throughput and higher costs. Uh whereas the this Validium has much higher throughput, much lower footprint on Ethereum and hence can offer much lower transaction fees.

• 31:57Speaker 03

  So basically, any application can can uh pick uh one of these two solutions. So that's currently what we are proposing. We're also in discussions with the with people from the the Ethereum Foundation in Denkrad. We just discussed here in in Paris and Justin Drake. We are practically not even against turning this POS chain into a full-blown rollup. But for that, we would at the very least need 4844 EIP, 4844 active on mainnet. We will have some sort of working group in the following weeks to just basically explore even that as an option. But the current proposal is to turn POS chain into Validium, and we have this rollup already on mainnet. So that would be, as I said, kind of like a nice product mix.

• 32:43Speaker 03

  That would increase significantly. There are two, as I said, major consequences of that. One major consequence is that the security of the POS chain would be dramatically, I would say, improved in a sense that all transactions on Polygon POS chain would be proven back on Ethereum. And it would become the first decentralized Layer 2 in the Ethereum ecosystem, to the best of my knowledge, at least. And by far the most used one. So we're very excited about this proposal because of that. And the second major consequence is that Polygon POS chain would become compatible, so to say, with the wider Polygon 2.0 vision that we are proposing now.

• 33:26Speaker 03

  Given that it's going to use, or it will use, ZK EVM, it can plug into this kind of interoperability protocol and seamlessly exchange value with any other chain in the Polygon ecosystem. So there are these two major consequences of this upgrade. And yeah, it's a very big event for the Polygon ecosystem, and we are very excited about it.

• 33:49David Hoffman?

  So we've seen Layer 2s upgrade themselves, both Arbitrum and Optimism. They've had their Nitro and Bedrock upgrades. But that's going from one optimistic rollup upgrade to just a better optimistic rollup upgrade. We haven't seen an optimistic rollup proof-of-stake chain upgrade to a ZK EVM. Can you, you talked about the actual details of that transition. What will people have to do? What will users have to do? What will node operators have to do? What, what are, how, how should we think about that actual upgrade event?

• 34:18Speaker 03

  Yeah, for sure. So, so it's going to be pretty seamless upgrade and it's generally pretty straightforward. The building the tech components for, that will enable the upgrade was the hard part.

• 34:31Speaker 03

  So practically, what we have to do currently, Polygon POS chain runs the block, the validators are producing blocks and extending the chain. And every half an hour, there is a checkpoint on Ethereum. The checkpoint, in order for a checkpoint to be accepted on Ethereum, there has to be a signature or a set of signatures from the super majority of the stake in the, in the Polygon POS chain. We're only, and that's the only way the checkpoint can get accepted on Ethereum. What we practically need to do is to modify smart contracts for checkpoints on Ethereum. Instead of, or in addition to these validator signatures, it will also require the ZKVM proof.

• 35:13Speaker 03

  So that's more or less the only thing you need to do on a, on a high level to upgrade this POS chain to ZKVM and Validium. And obviously there has to be a client upgrade and all validators will have to upgrade their clients. But that is pretty similar basically to any other upgrade or hard fork that, as you said, other layer twos or Ethereum or our ZKVM or POS chain, all of these chains are doing generally regular upgrades, i.e. hard forks. And that's going to be just another one for the validators. There is one additional component is now this unified liquidity and this interoperability. This bridge that is already holding some assets, basically billions of dollars of, of different types of assets.

• 35:57Speaker 03

  We'll just have to merge with this, with this interoperability.

• 36:02Speaker 03

  Pool or bridge that we are proposing now and that Sandeep kind of described. But that is a separate process, so to say, of the upgrade itself. So, long story short.

• 36:13Speaker 02

  And that has to be done also, you know, community has to be involved. Like only on that part, like Polygon community has to get involved. Where they have to vote and there has to be a governance process and how this bridge moves into this ZK secured secured bridge. But otherwise, like for end users, it will be just like Ethereum much like we actually wanted to call it like at one point in time, I was a you know, proponent of calling it Polygon much because it's that unprecedented kind of thing, as you David rightly said, that it has never happened before. So it's kind of a very big event and and you know, if when if and when the Polygon team pulls pulls through it, I think it's going to be a technological feat like the way Ethereum much was.

• 36:57Speaker 02

  And you know, it will look like and feel like exactly almost like the same event that happened.

• 37:04Ryan Sean Adams?

  Yeah, I will tell you for me personally, the the movement in this direction is kind of like a promises made, promises kept moment for me. Because it could have been easier and it probably would have been easier for you guys to keep Polygon as a side chain and not pursue this whole ZK path. It would have it would have been easier, probably less expensive. You wouldn't have to kind of make the investments that you're making. And so for me, and I just want to be clear in kind of the summary of what's happening for for listeners who aren't in the weeds here. But the Polygon proof of stake chain moving to be more secured by Ethereum and settled on Ethereum is a really big move and a really big moment.

• 37:47Ryan Sean Adams?

  And David called it unprecedented for kind of a side chain to do this. And what's happening, it sounds like to me, is the Polygon proof of stake chain is converting to what's called a validity. And if Bankless listeners aren't familiar with that, the term validity means, it means basically like the consensus layer settles on Ethereum. The data layer settles not on Ethereum, somewhere. Else for now, that's what a Validium is. And there are other Validium examples that, you know, on Layer 2 beat, you can see immutable X is one such example. Arbitrum has some, you know, Validium types of architecture. So that's where the proof of stake chain is going.

• 38:29Ryan Sean Adams?

  And Polygon also has a chain that is fully fledged ZK EVM that the data layer and consensus layer completely settles down to an Ethereum. And these are kind of two chains that are working in parallel right now and two different options.

• 38:45Ryan Sean Adams?

  When about is this change going to happen? Will the Polygon merge actually occur? Is this sort of up to the community? Are we talking weeks, months, something longer?

• 38:56Speaker 03

  Definitely up to the community. We have this governance process for currently for the Polygon PS chain, which is coordinated through the concept of PIPs, Polygon Improvement Proposals, which are kind of equivalent to Ethereum Improvement Proposals. So we will put an actual PIP out there for the community to discuss very soon. I believe in a matter of weeks even.

• 39:24Speaker 03

  After that, it depends on the feedback. There is a set of public discussions on forums, on Polygon Protocol Governance Calls, etc. But so far, we have proposed this upgrade as what we call a pre-PIP. It's like a document, official document meant for kind of temperature check of the community and whatnot. And the responses have been extremely positive so far, which means that the governance process can, we can go through it pretty fast. I would say after we post the actual PIP, I believe maybe one to two months to kind of gather the community consensus. And then it's a matter of actually implementation.

• 40:07Speaker 03

  And implementation will happen in several phases, but I believe.

• 40:12Speaker 03

  Definitely, end of year should be realistic, at least for the first phase, in my opinion, given the great kind of community feedback we have received so far.

• 40:22David Hoffman?

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• 41:06David Hoffman?

  Arbitrum is accelerating the Web3 landscape with a suite of secure Ethereum scaling solutions. Hundreds of projects have already deployed onto Arbitrum 1. With a flourishing DeFi and NFT ecosystem, Arbitrum Nova is quickly becoming a Web3 gaming hub, and social dApps like Reddit are also calling Arbitrum home. And now, Arbitrum Orbit allows you to use Arbitrum's secure scaling technology to build your own Layer 3, giving you access to interoperable, customizable permissions with dedicated throughput. All of these technologies leverage the security and decentralization of Ethereum and provide a builder experience that's intuitive, familiar, and fully EVM-compatible. Faster transaction speeds and significantly lower gas fees. Are you a dev, but you don't know Solidity? With Stylus, Arbitrum's upcoming proposal for a programming environment upgrade,

• 41:49David Hoffman?

  developers can write smart contracts in Rust, C, C++ and many more coding languages. Arbitrum empowers you to explore and build without compromise. Visit arbitrum.io, where you can join the community, dive into the developer docs, bridge your assets, and start building your first app on Arbitrum. Are you planning to launch a token? Is your token already live? And are you granting your employees and contractors vesting token awards? And are you trying to figure out how to take care of taxable events for your team? Toku makes implementing a global token incentive award simple. With Toku, you will get unmatched legal and tax support to grant and administer your global team's token awards. Tokens. Toku will help you navigate across the lifecycle of your token from easy to use pre-launch token grant award templates to managing post cliff taxable events with payroll.

• 42:31David Hoffman?

  For legal, finance and HR teams, it's a huge, complex task to have to comply with labor laws, payroll and tax obligations, tax reporting and crypto regulations in every country that you employ someone. It's difficult, time consuming, manual and costly, and it's drawing more attention from global regulators and governments. Toku makes it simple for leading companies in the space. Protocol Labs, Hedera, Gitcoin and many more. So if you want some help navigating the complex world of token compliance, go to toku.com/banklist or click the link in the description below. One very big component of this upgrade is of course, the upgrade to the Matic token. And governance, of course, implies we have to govern with something, you need a tool to govern with. That's the token. Can you guys walk us through how the Matic token is evolving here? Because this is a very big part of the story, correct?

• 43:16Speaker 02

  Yeah. So the Matic token, like again, this is as Ryan said, you know, promises kept, you know, is basically-

• 43:26David Hoffman?

  Promises made, promises kept.

• 43:27Speaker 02

  Promises made, promises kept. So basically this also, when we actually rebranded from Matic Network to Polygon, that was the same, you know, again, we had promised that, you know, eventually Matic Network, which is, which was a single chain kind of an ecosystem at that point in time, will migrate into this multi-chain on top of Ethereum. Even we initially called it, called it like Ethereum's internet of blockchain. So, you know, that, this will move from one single blockchain ecosystem into this token, which can support this multi-chain, you know, ecosystem. And also this token is like a very different in the sense that, you know, as, as

• 44:12Speaker 02

  we call it, like this third generation, you know, token. Why we say third generation is that first generation was BTC, right? And BTC essentially as a, as a token of the network, you can't, it doesn't have any utility for you as a holder in the network. Like you can't participate in the network using the BTC in order to participate. You have to buy hardware and do the proof of work. Then Ethereum, especially after this proof of stake merge that happened. Now every Ethereum holder can participate in Ethereum main blockchain and stake it and participate in securing the network, right? And but then this happens natively, this can only happen on Ethereum network itself.

• 44:54Speaker 02

  And there are like some protocols have been proposed that we can, which can, you know, on the top of the protocol, they can do it separately, but natively it happens only on Ethereum. Whereas in case of Polygon, and that's why we call it a third generation token is basically with one single token, you can actually validate on hundreds and hundreds of chains, right? So, and that's why we call it hyper productive token that, you know, with you have Matic Pole token, you can stake it on hundreds of chains and validate, provide your services of that. Not only you can validate on multiple chains, but you also have multiple roles to play in the chains because these layer two chains, you can actually play a role of a plain Manila validator, validator or sequencer, which is only just plugging the transaction and creating blocks.

• 45:39Speaker 02

  You can also participate as a, you know, in the aggregator layer as the interoperability layer that we just described. You can also participate as a local data availability cluster provider, like many of the chains which will act as Validiums, eventually like the the the super net chains that are launching, app chains, basically Polygon app chains that are launching. Those, many of those app chains need low cost data availability for them. Many of them will not be able to afford Ethereum data availability even after four eight four four, because the moment if four eight four four launches, you will have a lot of like, you know, people doing NFTs and all that stuff. So it will, the cost will grow, only few, in my analysis, like few rollups will be able to top rollups which have high value in them, they will be able to afford that data availability,

• 46:24Speaker 02

  but that has to be seen. But you can play the role technically if you wanted to play to provide this small level data availability. Once a chain grows, then you will need a global data availability like Ethereum four eight four four and all that. Then fourth, you can also, you know, provide the the role of

• 46:42Speaker 02

  I said sequence of data providers and then the aggregator layer and then finally the provers because the way that that now we are doing the proofs, the proofs are like single transaction based proof. So we have the technology basically eventually it's not the high priority right now, but in one, one, one and a half years, we'll be able to or maybe two years, we'll be able to create a decentralized layer of provers where you stake your magic network, magic token or Paul token and then participate in the network by providing the proofs for the chains. So essentially you have multiple chains and multiple roles for the users. That's why we call it the hyper productive token and you participate in the network, provide the security of the network and earn the return, the returns like which we call return on work, R O W.

• 47:28David Hoffman?

  I really like that progression because I think it gives us a short history of the evolution of crypto networks. So you have, you have Bitcoin, which is you have zero networks to participate in. You just have the asset. You can't participate in the network. Then you have Ethereum, which you have one network you can participate in, one proof of stake Ethereum chain. And then you have Polygon, which true to its name, has a poly number of networks to participate in. And so you have zero progresses to one, which progresses to N, N chains, poly chains to validate the and also like not just that, but also like not just chains, but also like data availability and other services as

• 48:08David Hoffman?

  well. And I'm just reminded by the early strategy that was Polygon. I'm sure this was formerly like emphasized as part of the strategy with the naming of Polygon is the early strategy was to try all the chains, try all the strategies, all the combination of chains. And now it looks like everything has, like Brian said, and one of the themes of this is that the convergence of the stuff that worked to conversion the right way. And then all of a sudden you have one token to validate them all. I think you guys should have called it a hyper sound money, but that's just me. One thing I will say is the upgrade of.

• 48:45Speaker 02

  Want to be, actually, we don't see that except Bitcoin and Ethereum. I don't think all the other tokens should have to do anything related to money.

• 48:53David Hoffman?

  Yeah, that's okay. That's a hundred percent.

• 48:57Ryan Sean Adams?

  Yeah, it's interesting. Okay, so a few things maybe to draw out of this too. So just so listeners get this in their mind. Sandeep mentioned a Paul token, P O L token. Okay, so the Matic token becomes the Paul token. Is that correct? We're not talking about two tokens at the same time. Matic becomes Paul. It's kind of a rebrand, if you will.

• 49:19Speaker 03

  It's an upgrade, basically, upgrade of the token. One is to one, two. Yeah.

• 49:23Ryan Sean Adams?

  And it's a one.

• 49:24David Hoffman?

  There is a new token because their token itself does need to evolve and become imbued with new features, correct?

• 49:31Speaker 03

  Yes, yes.

• 49:31Ryan Sean Adams?

  But it's a one to one. So if you have one Matic token, you get one Paul token. Is that correct?

• 49:38Speaker 03

  Yes, yes. But for all practical kind of purposes, it's an upgrade of a token. It's just that you have to, due to the nature of Matic ERC 20 contract, which is not upgradable, you technically have to deploy a new ERC 20 contract, which is a Paul. But there has to be, the Paul proposal is a part of the wider proposal for the new Polygon architecture, right? It's literally integral part and it ties together and secures the whole architecture that we're proposing. And it's, as such, it has to be accepted by the community. And if it is to be accepted by the community, Matic will, for practical purposes, cease to exist.

• 50:20Speaker 03

  It will have no role in the Polygon ecosystem. So for practical purposes, it's an upgrade.

• 50:27Ryan Sean Adams?

  David, you know what this reminds me of? It's kind of interesting. I guess a few things. You mentioned poly networks, polychains that you can validate with. It's also poly in terms of the functions, it sounds like. So it's not just being a validator. You could be a sequencer. You can be a data availability provider. And it brings me back to, you know, 2018, 2019, when we were talking about the value of tokens in general. And this is right on the back of ICOs, right? Where we had this run up in all of these tokens. And on the back of that, we realized there was no such thing really as a utility token. It was a whole bunch of futility tokens. And we had these ideas that, well, what if we Create imbue our tokens with the ability to service a network.

• 51:11Ryan Sean Adams?

  Create work tokens, if you will, similar to maybe a taxi cab medallion in New York City, where you have to have, in order to be part of the taxi network, you have to have your taxi cab medallion, and that's worth a certain amount of assets. And if you have that medallion, then you can service the New York City taxi network. Okay. Well, it's so interesting to me that like, This is a throwback. It took us a while to get there, but here we are. This is a work token, and Sandeep called this thing a return on work. Right? So if you if you have the Matic token and later the Pull token, then it gives you the license to serve some function in the network, to be a worker bee, essentially. And what do you get for that? You get paid. Workers get paid in this type of a network. And that's effectively what we've created here.

• 51:53Ryan Sean Adams?

  So sometimes I'm just struck by it's taken a few years, but like the original promises of crypto and the ideas that we've had just like take a while to play out, but they eventually play out. And now we have another example of a work token to service the Polygon ecosystem. It's pretty exciting.

• 52:15Speaker 02

  Absolutely. And I think this is because this stems from from the roots of crypto. Roots of crypto, we started all started with BTC. And BTC was a currency or money, striving to be a money and currency. And every token in 2017, 18, I used to see like, oh, we will have this this healthcare ecosystem, and our token will be the token of payment.

• 52:34Ryan Sean Adams?

  Do you remember DentaCoin? It was a day you pay for your dental appointment in DentaCoin?

• 52:40Speaker 02

  Bitcoin for dentistry. So that doesn't work like only there can be only one or maximum two global currencies or monies, and everything else, every other token needs to have an actual, you know, stream of revenue for the end, you know, holders who are actually using that token to participate in the economic activity of the network. And then as per their work, they are rewarded with the or given the incentive in form of the transaction fees, whatever service they are providing for that. And that's that's very straightforward and clean, like actually.

• 53:14Ryan Sean Adams?

  Sandeep, mahalo. I've got a I've got a bone to pick with you guys.

• 53:18David Hoffman?

  It's called Polygon, but you called it the Paul token. Why didn't you call it the Poly token?

• 53:27Speaker 02

  I mean, the Poly, first of all, there was like, there is an existing token called Polymath or something.

• 53:33David Hoffman?

  Yeah, it's a 2017 ICO that's forgotten. Who cares? Just name it Poly.

• 53:40Speaker 02

  And you know, we actually thought about it and then some people actually were making fun. It can be polyamorous, poly this, poly.

• 53:47David Hoffman?

  Yeah, Poly, Poly Networks, right? It's Poly, it should be Poly.

• 53:51Speaker 02

  We thought about that, but we thought that, you know, let's keep this like again, like high quality, only three character. We don't want to have like.

• 54:01Ryan Sean Adams?

  You got Bitcoin, you got Paul.

• 54:03Speaker 02

  Exactly, exactly, something like that. So yeah, that was also either, but we hello.

• 54:07Speaker 03

  Nothing, but that's pretty much it. There is, I believe that there is, there is some trading volume like that. So we didn't want to just get involved with it.

• 54:18David Hoffman?

  Okay, well, walk us through the third pillar of this big upgrade, the governance framework, because I would like to submit a governance proposal to change it to.

• 54:27Speaker 03

  Of course, you can do that and you might get some decent, decent support for that.

• 54:32Speaker 03

  Yeah, so Polygon is obviously envisioned and is a community owned network. But with this proposal, we believe this is like with Polygon 2.0, we feel like Polygon is maturing and going to the next stage or next chapter in every aspect, right? With the, with the architecture, with the native asset of the protocol and with the way we really kind of facilitate that community ownership, which is the governance framework itself, right? So there are, there are three components of governance that we kind of identified of working together with the community on this framework. And they are, first of all, protocol governance.

• 55:12Speaker 03

  And that is, the process is comparable to, to interior improvement proposals. We have this process of PIPs, which is currently active on the POS chain. We are just expanding it to the entirety of the Polygon 2.0 stack, basically. So it's a. It's a framework similar to also, as I said, EIPs, Bitcoin Improvement Proposals, Python Improvement Proposals, etc., IETF. So, anyone is encouraged to propose an upgrade to any of the Polygon protocols. There is a process of public discussion, rough consensus gathering, and if there is rough consensus that the protocol is, that the upgrade is useful for the protocol, it's

• 55:57Speaker 03

  going to be included in one of the upcoming upgrades. So, pretty standard things, similar to what Ethereum, for example, is already doing. So, that is protocol development. The second component or aspect of governance is what we call system smart contract governance. System smart contracts are smart contracts that are necessary for the Polygon protocols to operate, like bridging protocols, staking smart contracts, bridging smart contracts, validation smart contracts for ZK proofs, etc. So, any type of smart contracts that lives on Ethereum and have to be governed in some way. So, if you want to upgrade these contracts, the difference with Ethereum governance is

• 56:42Speaker 03

  that someone has to actually execute the upgrade of the smart contract. Ethereum doesn't have that, so to say, issue, because there are no system smart contracts in such way. Here, we have this kind of concept of multi-sigs or a group of entities or individuals that can actually execute these upgrades. There, as most of the people know, significant concerns with these multi-sigs. So, we just want to upgrade this process and make it more community-involved, make it more secure, increase the standards there, and that's kind of the second aspect of the governance. We are on all these aspects, including this one.

• 57:27Speaker 03

  We are working quite a lot with the community, and today, we published a report, actually Alto Bit worked on it, and we just supported it and proudly kind of funded it. On on system smart contract governance across the layer two ecosystem, right? So we want to establish kind of the standards here to work with the community to improve these standards and to increase transparency with this kind of delicate component of layer two governance, because we need a way, we will need a way to in years to come to upgrade this system smart contracts. So we just want to make an effort to make this process as secure and community involved as possible.

• 58:09Speaker 03

  And the third component is this community treasury governance. So the pole proposal introduces what we call the the community treasury and community treasury is protocol funded, so self sustainable, basically support vehicle, if you if you will, for for the polygon ecosystem. So we propose this one percent yearly emission of of the pole token that will go directly to that treasury and the treasury is community controlled, community governed. And we just with this governance framework and proposal, we propose how the the community treasury should be governed, how are we thinking about this governance? And we're also very excited about that because it further increases the decentralization

• 58:54Speaker 03

  of the project, gives more kind of more power to the community and introduces kind of a perpetual support vehicle for for the polygon ecosystem. As we know, both web three and and polygon are in this early kind of phase of intense development and early adoption. And in years to come, the ecosystem will definitely require ongoing support. And we believe this is the probably the optimal way to to provide that support. So these are three components of of the governance, as you can, I guess, see, it's a pretty comprehensive framework. We have worked with the community quite a lot on it.

• 59:38Speaker 03

  And yeah, we are very happy to to to see initial very nice, very good reactions to it. We've just published it basically here at ICC the day before yesterday.

• 59:49David Hoffman?

  So this is, of course, Polygon's biggest upgrade ever. And it comes with the actual upgrade of the token itself. And I think the upgrading of the token, along with all of the details that we've gone through on this podcast, with the unlocking of the token to be more intimately a part of this network, complete with governance abilities. It feels like the logical conclusion of Polygon. It feels like the culmination, the completion of the projects from the original vision. Maybe there's additional steps and additional upgrades and improvements, but as far as, maybe to use Ethereum as an example, we are now post proof of stake with Ethereum, post EIP 1559.

• 1:00:32David Hoffman?

  We have like dank sharding, but like really left to do, left to include. But really, it feels like Ethereum, from its core vision, is basically complete. Is that about where you would say Polygon will be post upgrade with the upgrade from the Matic to Pol and upgrade from the proof of stake change to the ZK EVM? It feels like we're like, you know, done-ish.

• 1:00:54Speaker 02

  Absolutely. Like, I think the Polygon 2.0 vision actually is the, like, we believe is the end game for any infrastructure provider. Like, I was saying that, you know, whether Polygon implements it or somebody else implements it, but this looks to be an infrastructure or architecture which can actually, you know, resolve the infrastructure era of blockchain, not only for Polygon, but that's actually, like, you know, what we always believed, as you rightly said, David, that is the culmination of Polygon. Like, we always started with this thing that eventually the end of the infrastructure era of Web3 would be where you have a network which is, you know, infinitely scalable and is composable across the network, right?

• 1:01:36Speaker 02

  And that way, it definitely feels like, you know, a kind of the ultimate consolidated architecture, not only for Polygon 2.0. I am obviously biased, but I feel for the whole of Web3, like, you know, this kind of architecture, this kind of architecture will eventually, you know, feels like end up becoming the end game of the infrastructure era. And So it's like I I always keep saying that you know in these crypto conferences and all that. Like we will not succeed till the time like on the stage it's people like me and Mihail who are still building infrastructure. And all that and all the other protocols like you know are building infrastructure. They are on stage or they are the front faces of this of this ecosystem, right?

• 1:02:18Speaker 02

  Whereas actually it should be the apps which are actually building useful applications for the users. They should be the heroes of this and this will only happen when this infrastructure wars and infrastructure era is. At least this stage one of this infrastructure era era is over. And you know, we have a decent enough infrastructure which can, you know, scale Web three. Uh two hundred million users or even like billion users. And this definitely from our side like Mihailo, as you guys know, he's been very active in the Ethereum ecosystem. And he has actually evaluated the uh like multi-sharded approach of Ethereum versus like, you know, all the other kind of multi-chain approaches and. Uh you know, scaling approaches.

• 1:02:57Speaker 02

  And I think Mihailo also, I I you know, that day felt confident like, you know, when Mihailo also said that to me also without any bias, even if I remove. Like this feels like something which doesn't look to have like any kind of, there's no dream in the Polygon two point O like there is. It's not like this will happen and that will happen and this kind of sequencer will come and that. It's not like it's basically pure engineering part from here. There's no research angle involved in this now. It's all engineering optimization of these things and you know, productionization of these things and then we have that system ready. So that's there. And then second part like which is also very close to both of our hearts is. That we always told Ethereum community that you know, all the not only Polygon viewers.

• 1:03:40Speaker 02

  Whatever this decentralized or these infinitely scaling, uh you know, block space. Uh that we will build, they all will be secured by Ethereum. And this was whole a process of last two years to reach that place where we have the. The viable technology which can actually prove and secure it on Ethereum, which we never believed in like, you know, it's going to be optimistic. Uh you know, approach, it has to be ZK approach and you see already few optimistic. Projects already talking about the ZK proofs and all that because it is. The the end game and you know, I think for us like for me also personally also and for Mihalo also that's a like a very great is going to be a great satisfaction.

• 1:04:18Speaker 02

  That we delivered on that promise that you know this whole we are not Ethereum aligned for the for the sake of saying because Polygon P S is not secured by by Ethereum. We are actually we what we committed, we are going to deliver and with Polygon two point O also what we what we have committed. We are going to deliver that. There is absolutely no doubts about that. Like the way we have shown it before, we will keep doing it in the coming days.

• 1:04:42Speaker 03

  Yeah, definitely. I I would agree. Polygon two point O seems to be kind of kind of the end game both for Polygon and for the for the. Um infrastructure, web free infrastructure overall, obviously we're biased, but but um. Yeah, I I don't know if you have time to maybe run through, but I have been always very, very interested in multi-chain systems, in cross-chain communication. In obviously layer twos and scaling infrastructure and and there have if you really want to uh design. Uh uh um this mainstream uh uh uh capable, so to say, web free infrastructure. You have this free com you have to have basically these three components, strongest possible security, which is Ethereum security.

• 1:05:26Speaker 03

  Unlimited practically scalability and seamless interoperability. There there has not been a a solution that or architecture that provides all free and and we have. We cannot identify any major concern with regards to these three properties. Uh in the architecture that we are proposing and and that's something that I I really needed basically as a as as um I really needed. Such an architecture so I can stand behind it. Uh Sandeep and I have had Sandeep is very focused on shipping and and is. Pushing for for acceleration of development cycles, which I completely understand and it's super important. But I have always been the one who kind of.

• 1:06:10Speaker 03

  Who who has been prolonging this divergence process, right? An experimentation process. I just really needed that confidence that, okay, I can stand behind this. We I'm very confident that we should, as a as a community, push towards this North Star. And we are at this point now, and and I am personally very, very happy and very confident uh uh that this is the the the right approach. And after that, there I I don't see practically any major upgrades kind of being required. I think, as as Sandeep said, in in years to come, we will, in ideal case, just become that boring infrastructure layer that is available, scalable, and everyone's using it.

• 1:06:49Speaker 02

  Yeah.

• 1:06:51David Hoffman?

  I think one of the most impressive things about the story of Polygon is it seems the vision was articulated so early. And I it was articulated, I think, before you guys even knew how you were going to get there. It was like the destination was known, but the path there wasn't totally clear yet.

• 1:07:07Speaker 03

  Exactly.

• 1:07:08David Hoffman?

  And you guys just started throwing stuff at the wall to see what it worked. And fast forward three, four years later, and now we're now we're finally here. And so I know Polygon has gotten its fair share of flack, as as we all do in the crypto space over the years. And yet, you guys have committed to the vision that you set forth for yourselves very, very early. And now we are finally here. And I'm sure that is a that is a just, you know, a huge weight off of your shoulders because we're here. And also just, I'm sure you guys are quite proud of the the work that you guys have laid down. So, congrats.

• 1:07:37Speaker 03

  Thank you so much. To be fair, this all has to be built, but at least like, like there's a I I believe out of Polygon two-point architecture, I would say at least forty percent is full-blown built and in production. Maybe additional thirty percent is being built and will be basically the staking layer. It's pretty much built, uh uh interoperability layer is at least halfway built because aggregator is already on the way.

• 1:08:02Speaker 02

  I would say, actually, I would say it's actually seventy, eighty percent built out.

• 1:08:05Speaker 03

  Probably even more.

• 1:08:06Speaker 02

  It's the productionization that we are doing.

• 1:08:08Speaker 03

  Probably even more, but yeah.

• 1:08:09Speaker 02

  This cross-chain, also, we were just talking about it, that is already there in production in the form of LXLY bridge, but it just needs to be speedened up with this aggregator layer. So that that's the part, and that is also in build. We have to de-settle. It's actually seventy, eighty percent.

• 1:08:22Speaker 03

  It's probably fair to say, at least, yeah, let's say. You're speculating a little bit, but let's say at least 60% is built in production. I think that's fair to say because execution layer is fully commoditized basically already. And yeah, but there is still, we need to tie everything together and deploy everything in production. But it's indeed a huge weight of my shoulder personally, because I have full confidence in this, in this approach.

• 1:08:49David Hoffman?

  Yeah, every time we seem to hit a finish line here in crypto, it actually appears to just be another starting line. But this is, this is the journey, right? This is what we signed up for. This is why this is so much fun. I want to ask you guys about how Polygon fits into the, the layer two meta that we know it today. So of course we have the OP stack for optimism is their scaling strategy for producing many, many, many chains. The ZK sync team has the ZK stack, which is of the same vein. Arbitrum now has Orbitz. What's, what's the Polygon chain? What's the, what are the poly chains? What, what can we call these things?

• 1:09:22Speaker 02

  Yeah. So we actually have that super net program already like

• 1:09:26David Hoffman?

  Supernets?

• 1:09:26Speaker 02

  At some time, but that super nets originally till the time ZK proofs are not there. These were all like, you know, side chains and there are already like quite a large number of people who have developed that. Now we have the ZK proofs and like, you know, they all will be upgraded into the ZK. So we just, we are just calling them just for a different differentiation as ZK supernets. But we still have to package that. But I think already by the number of chains, if you see, I think it already be, it would already be, you know, I think probably the number one or equal number one or number two with the number of people that are already building on them. And it's just that we have not like combined and branded that as yet, like, you know, we are approaching that in, in next maybe couple of weeks, we will announce that.

• 1:10:12Speaker 02

  But like on the sidelines already people like some OG projects like idex recently announced a ZK supernet. And Nosis, Nosis pay has announced a ZK supernet and multiple more like Avicachi and this and that like

• 1:10:26David Hoffman?

  An immutable already has one, correct?

• 1:10:28Speaker 02

  Oh yeah. Immutable is like, you know, the biggest one. And I think in, you know, if you know gaming, that's the gaming, like immutable. And Polygon together, uh, you know, are like eighty five to ninety percent of the whole like, uh, you know, high quality double, triple A gaming market. And, uh, you know, immutable also completely moving from Starkware to, uh, this architecture. Um, and yeah, like, you know, there, there are like just too many i- in that sense. And we are just, we just have to cu- combine and market that. Like, you know, we have not marketed that yet because this whole, uh, stack and deployment and everything, uh, you know, was separated out in the last, uh, four or five weeks only. But people could use RZKVM code to launch their own chains already for quite some time.

• 1:11:12Speaker 03

  Yes, yes. The supernet program itself has more than one hundred, basically, projects either in some phase of building or already deployed or whatnot. And now they just need to kind of a- a- align with this two-point-o vision that, that, that we have. And that's like for the better of each of these supernets. So we're very excited and we believe we will see more and more of these dedicated, so to, so to say, chains. Equivalent to what we have seen in Web two point O, right? In the earlier days of Web two, uh, this kind of shared hosting, which is basically Ethereum or Polygon POS chain, where multiple applications are just deploying and using it as a shared infra was much more common. And as, as Web two matured, dedicated, uh, hosting or dedicated servers become kind of the norm, right?

• 1:11:56Speaker 03

  Because of increased number of users and, and traffic and everything. So we believe this is kind of equivalent to what we have seen there. And as applications are maturing, we are, uh, as an industry, Web three is getting more and more users. We will see more and more of these kind of dedicated servers in Web three terms, which are basically Polygon supernets. And all of them will be secured by ZK, uh, plugged into the same source of liquidity and seamlessly interoperable. And yeah, that's how we view that.

• 1:12:24Ryan Sean Adams?

  Well, Sandeep and Mahalo, it's been great to have you on Bankless to explain what Polygon's end game is. Uh, it looks like it's within sight here and you guys have clearly laid out the vision today and are building that vision. So thank you so much for joining us.

• 1:12:40Speaker 02

  Pleasure to be here always.

• 1:12:42Ryan Sean Adams?

  Bankless Nation, the wider context for this is we are in the infrastructure buildout season where all of our Layer 2s are getting massive upgrades. So I hope this conversation was helpful for you to learn about what's coming down the pike. A lot of ZK magic in store that is making our Layer 2s and our chains more decentralized. It's a very exciting time to be in crypto, although we're still in the infrastructure phase. And I'm excited to get to the future phases where we talk even more about the apps being built on top of these things. We've got some resources for you in the show notes. One is the Polygon roadmap that we talked about today and some tweets about the stack, about the token,

• 1:13:22Ryan Sean Adams?

  about Polygon POS and its move to ZK. But I gotta end with this as we always do. None of this has been financial advice, of course. Crypto is risky, DeFi is. Layer 2s are. You could lose what you put in, but we are headed west. Layer 2s are the new frontier. It's not for everyone, but we're glad you're with us on the Bankless journey. Thank you.