Angie Lau: To layer-2 or not layer-2? That is the question. What is Polygon, how is it helping Ethereum and does it have what it takes to remain one of the world’s most popular networks?
Welcome to Word on the Block, the series that takes a deeper dive into blockchain and the emerging technologies that shape our world at the intersection of business, politics and economy. It’s what we cover right here on Forkast.News. I’m Forkast Editor-in-Chief Angie Lau.
Well, some in crypto will say Bitcoin is the most important innovation in modern history. On the other side of the coin, you can also hear the case of the original smart contract blockchain, Ethereum. Ethereum has brought decentralized finance, NFTs, metaverses and so many other imaginations into reality.
But not even the mighty Ethereum can build a whole world on its own. Good thing it has some friends.
Projects from all around the world are gathering to scale Ethereum. But as stated by Vitalik Buterin’s scalability trilemma, scaling must come at a sacrifice.
And today, we learn more about this world. We’re joined by the co-founder and COO of Ethereum scaling solution and aggregator Polygon, one of the fastest-growing layer-2 platforms to date, Sandeep Nailwal.
Sandeep, welcome to the show.
Sandeep Nailwal: Thanks for having me here, Angie. We’re excited for this talk.
Lau: It is great to have you. Now, where are you talking to us from?
Nailwal: I’m currently in Dubai, UAE.
Lau: You guys came out of nowhere, really took the blockchain industry by storm and it really seemed like it was an overnight sensation. But I know that it took years of hard work. Tell us about those early days when you were building Polygon, a few hundred hackathons, probably a lot more nos than that. And how did it all happen?
Nailwal: Lionel Messi had said that it took me 10 years to become an overnight success. With Polygon also, it has been the same story. We have been around since the end of 2017, and we have been building heads down for quite some time.
Just take a step back. If you go back to 2017 and even now — only now the Ethereum ecosystem, the products have kind of started rolling out. But ’till 2018 also or even 2019, many of the projects in the blockchain space, which used to raise tens of millions of dollars in funding, they actually were more of research, white papers done by some sort of scientist and all that. Nobody really had a focus on delivering and building [what] really can be used. Like it was more of, oh yeah, we are building this consensus, that consensus. This will be better finality, better this, better that.
But then they were not focused on building a product [that] actually gets used. That has been our thesis. Our thesis did not start from that we want to build this kind of blockchain. Our thesis started from: “How can we build a blockchain for structure which can bring hundreds and hundreds of applications, even thousands of applications building on top of it and millions of users using it?”
That’s where our journey started. Even right from the start, the solution design or the product that we wanted to build was basically based on not only building this layer-2 for payments only — which everyone was doing at that point in time, and many had raised like tens of millions of dollars on white papers — but we were looking to build and deliver something which is actually useful for the developer. So we started building that. “Let’s not only do payments on layer-2, but build smart contracts on layer 2, because that’s actual scalability.”
Again, taking a side step on that, why exactly smart contracts [are] on layer-2. If you see blockchains, Bitcoin is the first blockchain. But if you see from the angle of business logic, Bitcoin blockchain executes one business logic or maybe a couple or two or three more, but primarily the logic is currency. I pay you US$50. My balance equals to my balance minus 50 and your balance equals to your balance plus 50 — in a very rough sense. This is one kind of business logic. What Ethereum came and brought to this world is that: “How about I create a general business logic execution layer, which is decentralized, like Bitcoin, uncontrollable, whatever, they are not dictated by one single party?” And then you can do it. We all know that Ethereum is very decentralized, secure but has scalability issues.
So what Polygon started to do is that we wanted to provide this entire Ethereum development capability on this layer-2, basically. So that’s where we started. And we also were very much focused on building something that gets used and all that. There were a lot of nuances in between. Like it took us a lot of time. We were not from Silicon Valley. We did not have like fancy big [venture capitalists] supporting us.
That actually worked in our favor. Because the blockchains that are built by or supported by VCs, they actually go from top-down. They will talk to top projects, top applications and convince them to build on them. And then they will start from here. But we do not have that choice. We had to go from the very bottom layer of the developers, individual developers, developers who are working on hackathons, developers, which are two-people-deep teams, not only from the U.S., I mean all across the world, especially on the Southeast Asia side and all that, and help them to build, and we converted it into like some sort of opportunity in adversity As a saying goes, that we actually started working with these people, these people provided a lot of feedback, a lot of tooling-related comments, which we realized that, “developers need this, okay, let’s build this, let’s build this, let’s build this.” Slowly and steadily, after like one-and-a-half years of alpha mainnet and beta mainnet that we launched that mainnet. Even on mainnet, we did like three to six months of iterations of this tooling and all that.
And then, like a little bit of luck that by that time, Ethereum was seeing a second or third wave of these high gas prices. The first time it happened and then it dipped, people were like, “Okay, it was a one-time phenomenon.” But then it happened the second time, the third time, and people realized something needs to be done. By that time, because of this bottom-up approach, we were fully production-ready. And if you ask me what is the reason for Polygon’s success, because we are production-ready. We are getting more and more production-ready for building applications today, all the major wallets in the industry are supporting Polygon. All the infrastructure providers, middleware providers are supporting Polygon. Exchanges have integrated into Polygon. Now, if you, as a developer, want to really build an application, Polygon is by far the obvious choice to build on.
Lau: You were production-ready, and it perfectly coincided with the issues that Ethereum was facing in DeFi, and all of these dApps coming and trying to build in DeFi. And what ended up happening was, as you noted and as we’ve been noting here at Forkast, that gas fees were just getting to astronomical levels. It just became so enormously expensive and there were lags in the system.
So for developers, this was a problem. For dApps, this was a problem. Because you were able to have production ready. You already had projects working with Polygon that was production-ready. And all of a sudden you’re in this beautiful eye of the storm and you had the right answers.
When did you start realizing that, “Wow, we’re really onto something here and it’s coming and this is real, this is really happening. I’m going to pinch myself. Is this really happening? It’s really happening.” At what moment did you realize that?
Nailwal: I would not say that that happened in that sense, because even when we had not exploded, we still had 100-plus applications. We had a hunch. We, in fact, had this reverse feeling: “Why is this not happening to us? This should happen. This should happen three months back. Why is this not happening?” It’s like exactly what you said: “Pinch me. Is it not happening? Why?” And we realized that the reason is because we are not from Silicon Valley and then the Western audience did not take us that seriously also, to be honest.
For a long time, like six months or so, it was a big meme on crypto Twitter that people are just sleeping on Polygon. Like every other day, some big application is…
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