EXCLUSIVE with Sandeep Nailwal: Polygon Aspires to be the AWS of Web 3

Interview with Sandeep Nailwal, Co-Founder of Polygon, on scaling to meet the demands of a mainstream world. 

In 2022, with consumers’ appetite for NFTs, the ever-growing gaming industry, and the U.S. With The Federal Reserve signaling a rise in interest rates, the need for DeFi solutions provided at scale to meet the needs of a global audience with enterprise-level applications is stronger than ever.

There are several major players in blockchain looking to fix Ethereum’s (ETH) limitations in transaction speed and Gas costs. Solano (SOL), Cardano (ADA), and Polkadot (DOT) have all been called “Ethereum Killers” in 2021 – this is a misnomer, of course. The intent is to augment the capabilities of Ethereum (and the incrementally emerging Eth2), to make it work as was always intended and meet the needs of the global audience.

But out of the cohort of Ethereum “killers” and secondary DeFi networks, Polygon (MATIC) stands out in terms of approach, accomplishments, and even potential.

In a 2021 review, Polygon published a laudable list of achievements – among them the rebranding from Matic to Polygon, Decentraland choosing Polygon, Uniswap coming to Polygon, integrations with Sandbox and OpenSea, Polygon PoS surpassing 100 million unique addresses, and daily transactions surpassing 9 million. Polygon has been in lockstep with the trajectory of the growth of blockchain itself in a way that is certainly far-seeing, aligning itself more closely with NFTs and Metaverse and establishing Polygon Studios to keep up with gaming as another growth driver. 

In December 2021, Polygon announced a $400 million deal with Zero-Knowledge startup Mir and the creation of Polygon Zero. Zero-Knowledge (ZK) Proofs may not have the same obvious appeal of NFTs, metaverse, and gaming, but anyone who cares about the viability of DeFi should be paying attention to the development of the technology. ZK Proofs or rollups allow the bundling of multiple transactions which serves as a panacea to both the cost and transaction speed issues endemic on Ethereum. 

This week Polygon launched the Ethereum Improvement Proposal (EIP-1559) Upgrade their Mainnet, creating more predictability in fees and adding deflationary value for MATIC holders.

We had the opportunity to interview Polygon co-founder Sandeep Nailwal to talk about the keys to their success and their plan for scaling a truly global, enterprise-class blockchain. 

Sandeep Nailwal, Co-Founder of Polygon

With Polygon – what is the vision ultimately to you?

“We want to become the Amazon Web Service (AWS) of web 3. There are several things happening in Web 3, but the most important thing in the context of a smart contracting platform is that you are having verified computing – when you interact with a smart contract, you know how it is going to be computed. 

If you are using DeFi, you know how the overall protocol will work. Whereas, with banks or platforms like Facebook or Twitter all the computations on how the platform is functioning are completely defined by the bank or the application you are using. 

In Web 3, you are absolutely sure how the smart contracts are done. And the community knows that this is what is being promised in terms of how the execution will happen when you interact with those applications. 

So today, if there's a developer who's building something in web 2 and he wants to deploy his application, he goes to AWS and sets up a server, and whatever database he needs to set up the application. 

Similarly, the vision of Polygon is to become the AWS of Web 3, where a developer can come to Polygon and choose what they need.

Developers can say, I need this level of decentralization for the application. Or they can say I need low fees. Or I'm okay with high gas fees, but I want more decentralization, or I'm okay with low decentralization, but I need very fast and very low-cost transactions, then the developer chooses the platform of their choice. 

And that's why you would have seen that Polygon has a multitude of solutions. Polygon has Polygon POS, Polygon SDK, with which you can create your own chains, you have ZK roll-ups, you have a data availability solution coming and the developer chooses whatever is best for his application, and his or her application, and then deploys the application. And that's why we want to become the AWS of Web 3, basically, the computation layer of Web 3.

AWS provides cloud-based scalable computation, right at the end, when you interact with a website or application... Same way in Web 3, it is being done. The business logic, you know, is there, everything remains the same, but the computation is happening in a decentralized way instead of happening on some particular application servers. And that's what Polygon is trying to provide–  scalable, decentralized computation. AWS is scalable, centralized computation. Polygon is a scalable, decentralized competition,” Nailwal said.

When you launched Matic (now Polygon) in 2017 did you expect it to grow at the level that it has grown and have this level of demand?

“There was always a hope that someday it would pick up amazing traction. But then the road was paved with a bit of hardship when we started in 2017. Nobody expected a protocol for global products from India to become this big globally. While in Silicon Valley, the situation is very, very different. So, we had a very, very long journey building this large developer community helping developers one by one, building this brick by brick. Only starting this year, people started realizing that something big is happening here. It used to be a meme on Twitter that the whole crypto world is sleeping on Polygon, but then at the start of this year, people realized the kind of traction Polygon is getting. 

Solana has 50% or 60% fewer users than Polygon, and the number of developers on Polygon is probably 10x the number of developers that are there on Solana or Avalanche, but since they are dignitaries in Silicon Valley, there is institutional money backing them and they get much more attention than Polygon,” Nailwal said.

Does Polygon have significant institutional investment?

“Polygon will be soon made public. But as of now, Polygon has raised less than a million dollars in VC funding. We never had any VCs backing us which makes us a pure community-built protocol. Now, VCs are first flocking to Polygon and want to invest money. 

Previously, Polygon never raised any venture capitalist money…  Nobody believed that a project from India, especially at the protocol level, would become this big,” Nailwal said.

Having gone this far without it, why accept VC money now?

“Not because we need the money. But because we realize how much a difference institutional money makes in terms of the project's visibility. And I think that is one thing like Solana has been able to do, like, amazing institutional marketing, although their technology might not be proven… But since they have a lot of institutional backing, they get much more mind space than Polygon. And that's why we realized okay, this is something that we need to do. And that's what we are doing right now,” Nailwal said.

Is it a concern that VC money could threaten your level of decentralization?

“If they (VCs) dropped hundreds of millions of dollars in investment money, it would still constitute three 4% of the network. So VC money cannot control the project in that sense. 

When you take too much of VC money at an early stage, then the VC is getting in at a much lower valuation and retail gets in at a higher valuation. With Polygon, retail got in at a $20 to $25 million valuation. Today, Polygon is valued at one billion dollars...That's the beauty. I think, like, you know, when we say progressive decentralization… You allow institutional money when your community has reached a particular point. And a lot of good community-based projects create their communities, hustle hard to make the project big, and then VCs block it. And that's how you support the existing paradigm in terms of centralized money… And in the end, retail gets to buy in at a $10 billion valuation… That's the difference,” Nailwal said.

What is the key to being a very successful layer two solution? What is it that Polygon does so well?

“We have always been very developer-focused because we had a very clear vision that we are a platform company and we want to promote and bring developers on board. We actually deliberately did not go into a niche. I would say that speaking to the NFT and gaming people, you will realize that Polygon is the undisputed number one. Many people in Western media do not realize this, but I can guarantee if you speak to 150, gaming and NFT players you will realize that more than 60% of them more than 100 of them would be on Polygon,” Nailwal said.

Did you anticipate the incredible spike in the popularity of NFTs?

“I didn't. I am a big proponent of gaming and that's why gaming has always been the biggest focus of quality. But I never saw these NFTs coming up but then they opened up a huge market for NFTs and now everybody knows NFTs… they have reached a mass distribution. But, you know, I think that the real NFT revolution is yet to come, then there are some big games that are going to launch. And those NFTs with utility are going to rise… All these art NFTs are kind of like beauty is in the eye of the beholder, right? Most people don't understand the art behind it. 

Eventually, they are going to have integrations within gaming where NFTs will start having utility…,” Nailwal said.

Well, it’s been discussed for years – where is a mainstream blockchain gaming platform to rival Steam or Nintendo Connect?

“Before this year, there was a lack of precedent... I've also been saying for multiple years gaming is going to be big and all that. And then multiple times, I said, Axie Infinity is going to be the first breakout game – which actually happened this year. 

Now every gaming studio, everybody is doing NFTs and gaming stuff. Now, what is holding us back is two things…
First, we don't have an actual, enjoyable playable game, which is integrated with blockchain.  So having good games, which have good game economics, good user experience, and a good story is one big thing that is holding back this industry to get into the next mode. 

The second thing is scalability. Like even now, the daily average users of the entire blockchain space, including between Bitcoin users, including Ethereum users was hardly 1.5 million users.. That's like the daily average users of a failed gaming startup. 

Starting this year, the blockchain industry is at a place where probably all the blockchains together, can probably take, let's say, 10 million users. Somewhere between 3 to 10 million daily average users. And that will lead to a lot of network congestion... But we have reached that place where we just leapfrog from being able to support 1 million daily active users to somewhere between 3 to 10 million daily users. 

And the next wave, within the next 12 to 18 months, I expect blockchain scalability technology to reach a place where we'll be able to support between 10 million to 200 million daily users. And that will happen with Zero-Knowledge rollups…,” Nailwal said.

With the founding of Polygon Zero, you are clearly bullish on ZK proofs. What do you see as the potential?

“We think that the role of ZK technology is the endgame for the Internet-level scale of blockchain.  Right now, you have to put a lot of data into blockchain and that adds a lot of capacity constraints…

This revolution is about verifiable computation, but zero-knowledge technology makes it possible to prove that computation happened and that it happened correctly, without actually sharing all of the data… You just show the inputs and outputs and zero-knowledge can prove that the computation happened in the way it was committed to. That's where we bring massive scalability into blockchain,” Nailwal said.

Are ZK rollups the key to creating the scalability we need in blockchain?

“One of the reasons Polygon has experienced exponential growth is the limitations for small users and developers on Ethereum. Today on Polygon, the volume of all the DeFi applications equals more users than on the Ethereum blockchain. The reason is that they are able to transact on Polygon even if their volume is on the lower side. The ticket size of each transaction is less, but the number of transactions is higher… On Ethereum, only whales are able to trade and the same thing applies to NFTs. A game like Fortnight or a game like World of Warcraft needs millions and millions of transactions every day. 

If some other application, let's say farming protocol, launches on its chain, and suddenly the chain is clogged and all those users are not able to play, nobody would like that right? So eventually the game is going to lead that you know, you have zero apps which provide you proven computation.., And in this market, right now everybody's using shared blockchains. Sooner or later, even with zero-knowledge technology people will move the bigger applications into dedicated blockchains. And that's where these bigger gaming players are going to be,” Nailwal said.

Will all this growth in Polygon attract attention from security regulators?

“I think we are moving in a different direction entirely from the us-and-them picture embedded in your question. The crypto industry increasingly recognizes that regulation is necessary and is coming. 

However, the current situation is that most governments are well behind in their understanding and are possibly getting further behind. Ultimately, I don’t think regulators will base their decisions on roadmap milestones but rather the finished products that arise from them,” Nailwal said.

When will Polygon Zero reach retail?

“It’s too early to give a timeline, but what I can say is that Polygon Zero is making speedy progress. In December, we announced Polygon had bought the blockchain scaling development team Mir Protocol for $400 million, and the Mir team has since been rebranded to Polygon Zero. An early demonstration of Mir’s Plonky2 was just one of the reasons we made the deal.

Plonky2 is a recursive SNARK that is 100x faster than existing alternatives and natively compatible with Ethereum. We’ve had ZK-proofs for some time, but what we haven’t had is a way to prove Ethereum transactions -- until now,” Nailwal said.

How will moving assets between Polygon L2s work?

“Assets will be moved between Polygon L2s using a cross-chain bridge powered by decentralized liquidity pools. By using liquidity pools, we can bypass the need to funnel transactions across the Ethereum mainnet and avoid the high fees that would come from it. In December, Polygon and Wanchain combined to create the first L2 bridge using decentralized liquidity pools, a significant step forward in breaking down technical barriers between different networks,” Nailwal said.

Will MATIC be the native asset of all chains?

“Polygon’s MATIC token will form the base layer of all our solutions. It will be the core token used in our Proof-of-Stake protocols and will be the underlying asset that secures all of the chains on the network,” Nailwal said.

What is your philosophy on dealing with regulators in the US and globally?

“Our philosophy is to be open, honest, and transparent.  We want to forge a positive relationship with the regulators as their involvement is essential to the growth and acceptance of the market as a whole. 

Polygon advocates a regulatory sandbox model where several selected projects with potential use cases can be tested in one approach. That way, we can encourage innovation as the regulators take time to understand the benefits of blockchain

We need appropriate regulation to help the market mature and become mainstream. However, crypto regulations need to fit the industry they aim to serve in order to avoid stifling innovation,” Nailwal said.

Conclusion

It’s reaffirming to speak to a blockchain company not only about potential but about the progress they have made already and the solutions that are already in place. Polygon hasn’t had the same advantages in hype and backing of other alternative DeFi solutions and their close compatibility with Ethereum, make them a serious contender to solve problems with transaction speed and costs that have held DeFi back from reaching its full mainstream potential globally.

Of course, they are still dependent on an ecosystem that by necessity must grow in order to sustain their expansion, but they made significant inroads in 2021 and seem consciously ready to serve the high-growth areas in blockchain in 2022. 

This is definitely a project worth watching, not only for what they can do from a technical point of view but also for the projects they will help enable. Blockchain will continue to push the boundaries of mainstream consciousness in 2022 and when the right application comes along, Polygon will be there to help make it happen.