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Polygon’s Sandeep Nailwal on making decentralized apps with layer 2 scaling

Polygon’s Sandeep Nailwal on making decentralized apps with layer 2 scaling
Sandeep Nailwal, the COO and co-founder of Polygon
3 Aug, 2021

Mark Cuban-backed Polygon network has emerged as one of the most intriguing players in the Indian crypto space. Its MATIC token recently surpassed $13 billion market cap, becoming one of the top 20 cryptocurrencies worldwide.  

In this conversation with TechCircle, Sandeep Nailwal, the COO and co-founder of Polygon, details the impact of his network and how it will be the future of blockchain technology. The platform, in simple terms, is a layer 2 scaling solution that functions as an alternative to Ethereum, allowing developers to build and run decentralized apps (dapps) with higher transaction speeds and lower costs.  

Edited excerpts:  

Tell us about the origins of Polygon?

I come from a computer science background. I was into various startups before starting with MATIC Network, which became Polygon early this year. I was working on a B2B services startup which was called Scope Weaver. That business was doing well but was not scaling as much as I would have liked. So, what I realized is that I want to do something in the deep-tech space.  

I started learning more about artificial intelligence but there was a lot of mathematics involved and I was not cut out to go deep into it. So, I started exploring blockchain around that time and I read the Bible of Bitcoin, a book called Mastering Bitcoin. It's like the first book that you read when you get into the space, and a few chapters in, I got the gist of the blockchain technology and it felt like my calling. That was the time when I fell into the rabbit hole, and from there on, I have never looked back.   

After I got involved and very heavily engrossed in the overall community, I met my other co-founder Jayanti Kanani who was a blockchain developer. Jayanti, a former housing.com developer, was building something cool on the blockchain side. He was working on an application on blockchains, which helped him realize that blockchains have a big scaling problem, like you can’t build a large number of applications over there. So, he started working on some scaling technologies and he came in contact with the Plasma research group. From there, he made a proof-of-concept and showed it to me.

I was doing some sort of blockchain technology consulting by that time and I realized that this is the need of the hour. And, that was the time when we really started working on MATIC Network.  

Then, our third co-founder, Anurag Arjun, came onboard. He comes from the fintech space and was working for a company called Iris. Before that, he had an analytics startup. He heads the product side of things at Polygon. We also onboarded Mihailo Bjelic as our fourth co-founder while expanding Polygon this year. He's from Belgrade Europe and a very well known researcher in the Ethereum space.  

Why decentralized apps on blockchain?

When you interact with any technology on the internet, like you and me joining this zoom call, clicking on a button executes some business logic in the background. Some logic that says when the user clicks this button, they get to start/end a meeting. That business logic today in Web 2.0 is executed by some central party. In this case, Zoom.   

When you’re banking, it could be ICICI.  

Now, the problem is, in the last few years we have seen several instances of data breaches and what not. We are always trusting a third party whenever we use an application or service.  

With blockchains, that same logic is being executed by multiple decentralized third parties. For instance, if I had to ask a question or business logic of 1 + 1? Now, with blockchain, instead of the central party handling the query, thousands and thousands of people will solve it, verifying and telling me that the answer is 2. This is called consensus, and it increases trust, security, transparency, and the traceability of data.  

How Polygon fits into this picture?

When thousands of people have to execute the same particular part of the business logic, a thing where only one person or one CPU could have been used, there is a scaling problem at the architecture level. You need more capacity and faster processing to match or replace those high-performance legacy systems This is what Polygon is trying to solve with a second layer blockchain.  

Think of it as a double decker bus where instead of congesting the ground floor, people (transactions) are travelling using the upper deck and only a proof of who all are there is put on the lower deck, which, obviously, has a constrained capacity.   

Apart from scalability, what kind of benefits can a developer expect from Polygon?

If you’re building a blockchain application, say on Ethereum network, it is very costly per transaction for end-users of the product.   

For instance, in case you want to develop a Twitter like application -- I am just giving an example for understanding; it is still not possible to create an application of Twitter’s scale on blockchain -- the spending per tweet today would come around $4-$5. That’s like Rs 350 for sending out a single tweet.  

However, with Polygon network, this gas fee is reduced to 1/10th or even 1/50th of the cost.  

So, basically, the developers get to build the applications which are very easy to use and affordable for the end users. Not to mention, the developer experience is also like Ethereum.  

Currently, 95% of all developers in the blockchain space are Ethereum developers.  

So, this second layer, what kind of applications can it support?

It could be anything. You could run like decentralized finance related applications, like those for lending, borrowing, options, derivatives, anything related to financial sites, or even games. In fact, a huge part of our users are building games. People are building games which have these digital assets that are natively owned by the users. The blockchain gaming industry is just becoming bigger and bigger.  

DAOs or decentralized autonomous organizations are also becoming big on blockchain. In these, a decentralized set of people come together and they create an organization, just like setting up a company in the real world. In another case, the government of Maharashtra has even explored trying to put the data of who all have been vaccinated on blockchain.   

There is also a company called Guhar in the Bastar area of Chattisgarh. They have built a blockchain-based grievance redressal platform which people could use to file their complaints via SMS. Sometimes, the police could deny filing FIRs but since blockchains are immutable and transparent, no one could deny the complaints, which results in some sort of action.  

So, yes, there are various kind of use-cases possible. All these are real world examples which people are looking into.  

Since starting in 2017, how far have you come in this journey? What is the scale of users on the network?

After Ethereum main chain, we are the most adopted platform in the world with more than 500 plus applications that have been created.    

The number of users per day fluctuates between 100,000 to 500,000. For some perspective, Ethereum blockchain has a market cap of about $250 billion but the daily average users there would also be somewhere around 400,000 to 500,000.  

It must be noted that this kind of field is still at a nascent stage compared to a mobile app store, where you will have probably a million applications. So, these are still very early days for blockchain adoption, I would say.  

Does the network make money? Is there some sort of fee from developers?

There is no fee. As a decentralized network, Polygon does not make any money. It’s run by public participants. Even today you can launch a polygon node and become a participant in running the network.  

Now, those who run the network they have to stake MATIC tokens. This essentially means they have to put a security deposit in our publicly available token. People generally put the stake to get transaction fees.  

So, as a developer, when you are building an application, it's free to build. But, when your users use the application, they would have to pay a small transaction fees. This fee goes to the miners/participants in the network. They put some stakes -- the security deposit -- and in return, they get to validate the transactions. For all valid transactions, they get the transaction fees, which makes their earnings.  

If there are larger and larger number of transactions on the blockchain then the network becomes bigger and the value of the network tokens keeps going up. We, as co-founders, also hold a small chunk of the tokens so those tokens also go up in value.   

Other than that, there's no revenue that we charge from anyone. It's a free network, anybody can come and use it.  

What is the current market cap of MATIC token and the share of the co-founders?

The current market cap of Polygon is around $9 billion and the founders from the day zero, including myself, hold around 16% of that supply.  

How has the backing from Mark Cuban been? Are there more investors in the pipeline?

Mark Cuban is a phenomenal guy and he has been very keenly involved in the blockchain field. He was already using quite a few applications on Polygon, like minting NFTs and playing games, when he realized that this platform can be very successful and decided to reach out for possible investment.  

I can’t share the value but can confirm that he did a small investment by buying tokens from the MATIC treasury. It was not direct funding. We are speaking to some of the topmost investors in the world while trying to build a new product range for community, but right now, it’s in fairly early stage.  

Could you tell about the product range planned for the community?

Polygon is a second-layer Ethereum scaling solution. But, it’s a multi-chain product. This means we are not building one kind of chain. There are multiple trade-offs and multiple different technologies which can be built on the second layer.   

So, what we are doing is that we are building more such second layer solutions. We have currently one solution live. We recently launched a data availability solution and then we also launched the polygon SDK with which companies can launch their own side chains to Ethereum.  

Similarly, we will be launching zero-knowledge optimistic roll ups and multiple other chains. For the rest of this year, our focus is on fully launching the data availabiity chain and some of our roll-up solutions.   

In terms of users, we want to reach 5 million in the next 12 to 15 months.   

In the Indian context, what would you say is the future of blockchain?

In India, blockchain could prove really beneficial in promoting transparency around public goods availability and public information. But, until now, it has seemed like the government is still trying to understand this space.  

One of the biggest problems with crypto is people think that it is cryptocurrency, which is not true. Crypto actually means cryptographic technology.   

All this revolution started with Bitcoin, which was built as a currency. So, everything looks like speculation and governments only understand about the market side of things. They don't understand the things like what we are doing. This is called the next-level internet or web 3.0, where applications and all these things are being built.   

It's very important that our government understands more and more about it and provides regulatory clarity because it has huge potential to add value to India’s public infrastructure, the transparency of our governance, and everything.  

Could any future regulation from the Indian government affect Polygon, in any way?

No, because of regulatory uncertainty, Polygon was never set up as an Indian entity. It was set up in Singapore. And, now, it is already a very decentralized company.  

A large number of our workforce is out of India, in the US, in Belgrade, Europe, and Philippines. There is a team in India, but it's not a direct entity of Polygon. It's basically a research entity which employees some people.   

There is nothing that is related to crypto in the Indian division of Polygon.