Polygon proposed to abandon MATIC amid SEC claims
Date: 2023-07-14 Author: Karina Ziganova Categories: CRYPTO PAYMENTS, IN WORLD
The developers of the Polygon sidechain believe that the token sensational due to the SEC does not fit into the new tokenomics of the project
Polygon Labs, the studio responsible for the development of the Polygon sidechain, has proposed to abandon MATIC. The developers announced this in their blog. In their opinion, the community should adopt a new token with the ticker POL. The developers proposed to abandon the old token for good.
As part of the new tokenomics, POL will perform two new functions: it can be used to validate various subnets of the sidechain, as well as to receive rewards in the form of individual tokens in subnets. Why MATIC cannot be used for the same purposes, Polygon Labs did not explain in any way.
It seems that the key technical difference between POL and MATIC will be the absence of emission restrictions. From the statements on the blog, it is not clear whether the results of the token upgrade will change the total supply of assets in the sidechain ecosystem. However, this is hinted at by the wording in the POL. The developers claim that "initially" POL will correspond to the MATIC proposal (that is, the number of tokens will be 10 billion POL).
However, shortly after the transition to POL, Polygon Labs will actually remove the emission limit. The first "ten years" after moving to POL, Polygon Labs proposes to increase the supply of tokens on an annual basis, issuing up to 1% of the total supply of tokens. The developers noted that the community will be able to vote on reducing the interest rate, but only after the stated time period. At the same time, it is unclear whether investors will be able to vote at all to refuse to increase supply. Endless emission should help sponsor subnet validators, Polygon Labs assures
More tokens to support the community
Moreover, the matter is not limited to validators alone. The developers propose to increase the supply by another 1% in the same way, but to support the "community fund". Here at Polygon Labs, similar conditions and time frames are put forward. The fund is needed to provide economic support for the ecosystem, according to Polygon Labs.
It is noteworthy that in the question-answer series, the developers allowed the question "why can't MATIC and POL exist separately?", but stated that this was impossible, refusing to explain the reason. It is unclear whether POL can be used to pay fees on Polygon subnets. The developers claim that they will clarify the technical details over time.
When and if the Polygon community approves the ticker change, users will be prompted to send MATIC to a special smart contract that will return the equivalent in POL. It is argued that the time window for the transition will be large enough for as many users as possible to exchange tokens. The developers admitted that the process of switching to POL could drag on for several years, but the final deadlines have not yet been set.
According to Polygon Labs, the proposal to replace the token has nothing to do with the claim of the US exchange regulator. According to the developers, the idea around the new ticker has been discussed at Polygon Labs since 2022. However, in fact, the technical documentation of the POL token is just fixated on the economic component of the project, and not on the technical one.
Recall that the US Securities and Exchange Commission (SEC) believes that MATIC falls under the definition of a security. Against the backdrop of these statements, trading platforms Robinhood, eToro and Bakkt removed MATIC from the listing. At the same time, Polygon Labs essentially did not respond to the SEC's claims. The developers only stated that their token is not focused on the American market, but admitted that MATIC is available to a "wide number of investors." The proposal to replace MATIC also comes amid large-scale losses for the project's investors. Earlier, the editors found out that over 85% of MATIC investors incur losses. Amid the news, the price of MATIC rose by 4.7%, according to CoinMarketCap.
