The Polygon ecosystem is facing scrutiny as an activist investor is advocating for a significant overhaul of its tokenomics amid a slump in the price of its POL token. This call for change comes after Polygon Labs introduced POL as a potential successor to MATIC, the network's native cryptocurrency since its inception in 2020.
The investor is urging Polygon to scrap its current 2% inflation rate and initiate token buybacks to restore investor confidence and boost POL's price. The existing Polygon architecture uses MATIC tokens for payment services and as settlement currency within its ecosystem. Validators on the network stake their MATIC tokens as collateral to participate in the proof-of-stake (PoS) consensus mechanism and receive MATIC tokens as a reward.
In July 2023, Polygon Labs announced "Polygon 2.0," which included the introduction of POL, a new token intended to replace MATIC at a 1:1 ratio. This transition aims to improve Polygon's infrastructure and transform it into the Value Layer of the Internet. Holders of MATIC can exchange their tokens for POL through a smart contract. The redemption window for this exchange is set for four years or longer.
POL is designed to be a "hyperproductive" token with the ability to validate numerous blockchains. Stakers can earn rewards from staking and also accumulate rewards from multiple Polygon chains. Some Polygon chains may also introduce additional rewards in various tokens, including POL, stablecoins, or native tokens of those chains, to attract more validators.
The shift to POL also involves changes to the token supply. With the launch of POL, the 10 billion native token supply cap will be over. Polygon Labs intends to use regular POL emissions to finance a community treasury. The purpose of this treasury is to encourage protocol development, promote research, distribute ecosystem grants, and foster adoption. The Polygon community will govern the treasury.
The Polygon network has expanded to include multiple scaling solutions, such as Polygon zkEVM and Supernets. The MATIC token plays several roles in keeping the network running smoothly, including securing the network through staking and providing voting rights on network decisions.
