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MATIC migrates to POL, how will the new token economic model affect the coin price?

BlockBeatsBlockBeats2024/09/05 08:13
By:BlockBeats

The pledge rate of POL may increase significantly.

Original author: hitesh.eth
Original translation: Alex Liu, Foresight News


Token Upgrade


Polygon announced two major plans in 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.


The other plan is to launch the POL token through a 1:1 upgrade between MATIC and POL tokens.



As of yesterday, MATIC holders have been allowed to migrate their MATIC to the new POL token at a 1:1 ratio. CEXs such as Binance and OKX 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 to migrate from MATIC to POL, or you can do it yourself using the Polygon migration portal or smart contract address.


Token Economics Update


Interestingly, the token upgrade also comes with a strong token economics overhaul, designed with future roadmaps and value capture in mind.


What’s Changed?


Token inflation rewards for validators ended last year when Polygon completed its inflation cycle. It’s very difficult to maintain network growth without token rewards, so they need to address this issue to keep the network organized and validators engaged.


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 is the standard salary that validators will receive, but Polygon also provides some bonuses as additional rewards for performing other roles to support other chains.


In addition to building a technology stack to create L2, Polygon has 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 AggLayer, and additional token rewards from CDK chains - which are part of the Polygon network.



There are currently two additional rewards:


· CDK chain token rewards for stakers

· Sharing AggLayer fee income with stakers


More rewards are in the works:


· Shared Sequencing income

· ZK proof income and more


It's like a network that pays validators for playing multiple roles at different times.



The basics of the new token economics have been discussed above.


Token Demand Side:


I think this is pretty straightforward - it will be a staking driven demand.


MATIC has less than 33,000 stakers and the overall staking rate has been low in the near term due to lack of rewards.



Currently the staking yield is around 5.65%, better than ETH but lower than Solana and Avalanche. After the POL migration and activation of the new inflation policy, the yield should rise to the 7-8% range and will likely continue to increase with more adoption on the AggLayer and CDK sides.



Ecosystem Airdrops


Of course, the best case scenario is that people staking POL start getting 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 have become part of AggLayer and they may do some airdrops when the timing is favorable.



Such behavior would 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.


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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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