Polygon, the popular layer-2 scaling solution for Ethereum, is set to implement a significant upgrade on Wednesday that will replace its existing MATIC token with a new POL token. This transition is designed to offer greater flexibility in the issuance of new supply, aligning with the broader goals of Polygon’s “Polygon 2.0” roadmap unveiled last year. The upgrade will affect a substantial number of crypto investors, as MATIC is the 13th largest asset by market capitalization on the CoinDesk 20 index, valued at approximately $3.8 billion. For most users, the migration to POL will happen automatically.

The initial phase of this upgrade will see POL replacing MATIC as the native gas and staking token on the Polygon PoS network. In later phases, POL will play a pivotal role in the AggLayer, a key component of the roadmap designed to aggregate affiliated blockchains built on Polygon technology. Further, the Polygon community has proposed that POL will eventually take on broader responsibilities within the ecosystem, including roles in block generation, zero-knowledge proof generation, and participation in Data Availability Committees (DACs) as part of the Polygon staking hub, slated for release in 2025.

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POL Migration and Tokenomics Changes

The shift from MATIC to POL will introduce new tokenomics, including an annual emission rate of 2%. This emission will be split between rewarding validators on the Polygon PoS network and funding a community treasury—a sustainable ecosystem fund intended to support the network's ongoing activities. Marc Boiron, CEO of Polygon Labs, explained that one of the primary technical reasons for the upgrade was the intentional burning of MATIC’s upgrade keys, which prevented any further changes to the token. “We wanted to introduce emissions to support community growth and other initiatives, which was impossible with MATIC,” Boiron stated in an interview with CoinDesk.

Boiron emphasized that the introduction of emissions is designed to strengthen the Polygon community by funding grants and giving the community some control over ecosystem funds. He also highlighted that emissions will provide a mechanism for validators to receive rewards, particularly as new chains within the Polygon ecosystem seek to decentralize over time. “As these new chains emerge, they will need to decentralize beyond a centralized sequencer,” Boiron explained. “POL emissions can be used to support this decentralization, allowing POL holders to receive fees from these networks, fostering a more robust and interconnected ecosystem.”