How will the token economics change after MATIC upgrades to POL? Are there any potential airdrop opportunities?
Written by: hitesh.eth
Compiled by Alex Liu, Foresight News
Token Upgrade
Polygon announced two major initiatives on its roadmap last year.
The first is to upgrade the Polygon PoS chain to a ZkEVM Validum chain for higher scalability, faster finality, and connect it to the AggLayer.
Another plan is to launch the POL token through a 1:1 upgrade between MATIC and POL tokens.
Starting yesterday, MATIC holders have been allowed to migrate their MATIC to the new POL token at a 1:1 ratio. CEXs such as Binance, OKX, etc. will handle the migration on behalf of users. You just need to follow their announcements and cancel any open orders, and if you hold MATIC, you will receive POL tokens.
Some DEXs and DEX aggregators will provide their own UI for migrating from MATIC to POL, or you can do the migration yourself using the Polygon migration portal or smart contract address.
Token Economics Update
Interestingly, the token upgrade also came with a strong token economics revamp, designed with future roadmap and value capture in mind.
What has changed?
The token inflation reward for validators ended last year when Polygon completed its inflation cycle. It is very difficult to maintain network growth without token rewards, so they need to solve this problem to keep the network orderly and ensure that validators are actively involved.
To reward validators for the next 10 years, they will introduce 200 million new tokens into circulation every year, which is worth about $100 million if we assume 1 POL = $0.5.
The above are the standard salaries that validators will receive, but Polygon also offers some bonuses as additional rewards for performing other roles in support of other chains.
In addition to building a technology stack to create L2, Polygon also built a unified liquidity layer called AggLayer, which will help L2 ensure sufficient liquidity for its ecosystem through the Polygon network.
The idea here is pretty simple, as a staker you will delegate your tokens to validators who will earn tokens through token inflation cycles, fee income from the AggLayer, and additional token rewards from the CDK chains — which are part of the Polygon network.
There are currently two additional rewards:
Providing CDK chain token rewards to stakers
Share AggLayer fee income with stakers
More rewards are in the works:
Shared Sequencing Revenue
ZK Proof of Income and More
It’s like a network that pays validators to play multiple roles at different times.
The basics of the new token economics have been discussed above.
Token demanders:
I think it’s pretty straightforward — this will be a staking-driven demand.
MATIC has less than 33,000 stakers, and the overall staking rate has been low recently due to a lack of rewards.
The current staking yield is around 5.65%, which is better than ETH but lower than Solana and Avalanche. After the POL migration and the activation of the new inflation policy, the yield should rise to the 7-8% range, and with more adoption on the AggLayer and CDK side, the yield may continue to increase.
Ecological Airdrop
Of course, the best case scenario is that people who stake POL start receiving additional token incentives in the form of airdrops, similar to the Celestia playbook... and the chances of this happening are pretty high.
There are over 10 large funded projects that are already part of AggLayer and they may do some airdrops when the timing is favorable.
Such behavior will trigger FOMO and could increase the number of stakers from 33k to at least 100k. Celestia has 400k stakers, which gives you an idea of the upside potential of staking demand and its alignment with price movements.
Overall, I think now is a good time for this token upgrade, and as the overall technical aspects of Polygon land, they can drive more demand for the token by establishing more partnerships on the key infrastructure product AggLayer.