What is the issuance and circulation of POL (ex-MATIC) coins?

The genesis block of the Polygon blockchain, launched in December 2017, distributed a total of 6 billion POL coins among early investors, the founding team, and the community through a public launchpad sale.

Dec 09, 2024 at 09:28 pm

Understanding the Issuance and Circulation of POL (ex-MATIC) Coins

The emergence of Proof-of-Stake (PoS) consensus mechanisms has revolutionized the blockchain industry, introducing a more energy-efficient and environmentally friendly alternative to Proof-of-Work (PoW). Among the frontrunners in the PoS domain is Polygon, a Layer 2 scaling solution built on the Ethereum blockchain. Polygon's native token, POL (formerly known as MATIC), plays a crucial role within the ecosystem, facilitating various operations and serving as a store of value.

1. Genesis and Early Distribution of POL Coins

The genesis block of the Polygon blockchain was launched on December 18, 2017, with an initial total supply of 10 billion POL coins. Out of this, approximately 6 billion POL coins were created during the genesis block and distributed as follows:

• 16%: Sold in a private sale to early investors
• 12%: Allocated to the founding team and advisors
• 10%: Reserved for user adoption and marketing
• 24%: Released through a public launchpad sale
• 8%: Held as a strategic reserve

2. Vesting and Unlock Schedule for POL Coins

To ensure long-term stability and prevent excessive market fluctuations, a vesting schedule was implemented for the distribution of POL coins allocated to the founding team, advisors, and private sale participants.

• Founding Team and Advisors: Their allocated POL coins were subject to a three-year vesting period, with a six-month cliff. This means that they received 25% of their POL coins upon the launch of the mainnet, followed by quarterly increments of 12.5%.
• Private Sale Participants: Their POL coins were subject to a one-year vesting period, with a three-month cliff. This resulted in the release of 50% of their POL coins upon the completion of the public launchpad sale, followed by quarterly increments of 25%.

3. Introduction of Staking and POL Issuance

Polygon's PoS consensus mechanism relies on staking, a process where users deposit their POL coins to participate in the validation and security of the network. Stakers receive rewards in the form of newly minted POL coins, which are released at a controlled issuance rate.

• Issuance Rate: The initial issuance rate for POL coins was set at approximately 2.5% per year. This rate is intended to balance the need for inflation to support staking rewards while maintaining the long-term value proposition of the coin.
• Validator Requirements: To become a validator on the Polygon network, users must stake a minimum of 25,000 POL coins. Validators are responsible for proposing new blocks and validating transactions, and they earn rewards based on their stake size and contribution to the network.

4. Circulation of POL Coins: Supply Dynamics

The circulating supply of POL coins is a dynamic figure that constantly changes due to issuance through staking rewards and removal through coin burns.

• Coin Burns: Polygon has implemented a coin burn mechanism to reduce the overall supply and increase the value of the remaining coins. Coin burns involve sending a portion of POL coins to an inaccessible address, effectively removing them from circulation.
• Influence of Market Conditions: The circulating supply of POL coins is also influenced by market dynamics, including buying and selling pressure. When the demand for POL increases, the price rises, attracting buyers and reducing the circulating supply. Conversely, a decrease in demand leads to a price drop, encouraging selling and increasing the circulating supply.

5. Role of POL Coins in the Polygon Ecosystem

POL coins serve multiple essential roles within the Polygon ecosystem:

• Network Fees: POL is used to pay for transaction fees on the Polygon blockchain. These fees incentivize validators to process transactions and maintain the security of the network.
• Staking Rewards: POL coin holders can stake their coins to participate in the PoS consensus mechanism and earn rewards for securing the network.
• Governance: POL coin holders can participate in governance and decision-making processes within the Polygon ecosystem through voting on proposals and electing validators.