Polygon’s Ethereum Scaling Project Is Never Complete: Sandeep Nailwal

Crypto is a midwife for the next generation of finance: A simple set of tools built around a core idea of removing trusted intermediaries could form the foundation for a more secure, robust and innovative economy. Ethereum aims to be “the ultimate, fundamental settlement layer of this” new digital-first world, as Sandeep Nailwal, co-founder of ETH scaling solution Polygon, said.

Polygon, which was founded in India, itself was reborn this past year. Founded as the Matic Network in 2017, it was an early secondary layer to the Ethereum blockchain. It used an experimental solution called Plasma to shift transactions off the perennially clogged Ethereum base layer to a super-lightweight rail running parallel to it. 

“We were among the top Plasma teams in 2018, then the industry hype moved somewhere else,” Nailwal said in an interview. “It keeps on moving.” The Polygon team is now focused on building something of a scaling-solution aggregator for Ethereum. Instead of focusing on just one scaling technique, Polygon wants to incorporate them all.

Ethereum has been a victim of its own success. It’s the most used decentralized application blockchain, with the largest developer community. It is frequently the source of some of crypto’s most innovative and popular trends. But the project can’t scale. In order to disrupt legacy finance, crypto developers have become obsessed with hacking Ethereum – with layer 2s, sidechains and, the most ambitious blockchain upgrade to date, Ethereum 2.0. 

See also: Matic Network Now ‘Polygon’ as Platform Targets Ethereum’s L2 Woes

For a while, Plasma was the hot topic when discussing Ethereum’s chokepoints. It was the brainchild of Vitalik Buterin, Ethereum’s co-creator, and Joseph Poon, a co-founder of Bitcoin scaling startup Lightning Labs. They wrote a coolly worded white paper describing a framework with plenty of upside and “without significant limitations.” 

Published during the 2017 supercycle – a period of hyperbolic growth during which Ethereum’s inability to scale couldn’t be ignored – Plasma was soon billed as a way for Ethereum to match Visa’s transaction count (the yardstick for all blockchains, for some reason). 

In practice, Plasma may have had more significant limitations than advertised or expected. Although Matic found early success – Nailwal said they counted about 150 live protocols or applications before deciding to rebrand as Polygon – people’s attention began to shift elsewhere.

Other scaling solutions hit the market (or were proposed), and talk of Ethereum 2.0, a complete overhaul to the Ethereum blockchain, began to pick up. Instead of resisting this changing landscape, Polygon has decided to embrace it. 

This decision has paid off. Amid a booming market cycle, MATIC, the network’s native token is soaring. It’s a small vindication today for a project that will never be complete.

Over a late-night (for him) Zoom call, Nailwal and I discussed why his team decided to expand the scope of Matic’s original vision, what that work entails and when, if ever, the project of reinventing finance will be finished. 

See also: Buterin, Srinivasan Donate to COVID Relief Fund for India ‘Shaken’ by Second Wave

The following conversation has been lightly edited for clarity and brevity.

What was the drive to reinvent Polygon? 

So, basically, with Matic Network we were doing one particular scaling approach, which was Plasma. We were onboarding hundreds of dapps, working with small DeFi (decentralized finance) builders, NFT (non-fungible token) application builders, games, enterprises – a large number of teams – when we realized there was no one solution-fits-all. 

Secondly, we also definitely believe that Ethereum is going to be the ultimate, fundamental settlement layer of this Web3 internet. So instead of providing one type of scaling solution on top of Ethereum, we should provide a suite of scalability solutions for developers to choose what they really want. 

If you take AWS (Amazon Web Services), they allow developers to choose between Linux, Windows, other kinds of servers. You’re free to choose. We wanted to do the same for decentralized, execution platforms. 

We’re doing Optimistic Rollups, zk-rollups, data-availability chains, Polkadot-like substrates, standalone chains where teams can come and create their parachains that connect back to Ethereum. 

Why are you choosing one blockchain to focus on, but multiple scaling solutions? 

There are multiple aspects: First, Ethereum has network effects. We do a lot of hackathons, like 100 a year. 99.999% of all the developers we meet are breaking into blockchain development, and almost always, the first blockchain they work with is Ethereum. Once you come into Ethereum, the community, with its documentation, tooling, you kind of feel like a part of it. 

All these newbies fall in love. These days, funding is available in plenty, so they’re most likely to stay to build products. 

Second, the ethos of the Ethereum community. Think of Bitcoin. Bitcoin is the way it is because Satoshi built it that way, and at a very early stage anonymized himself. No normal leader would do that. Although Ethereum does have Vitalik and the Ethereum Foundation, who are still the biggest figures, the way they’ve been able to cultivate this fully decentralized community without dictating anything. As a person coming in, you feel as though you can propose any change to Ethereum, without taking orders from anyone. No one owns Ethereum. 

Now with layer 2, scalability is coming. That makes it difficult for me to understand how any other blockchain will, first, be able to get the same network effects and, second, how they will be able to cultivate an ethos, which depends on the OGs. Many competing chains are VC-driven. Network effects and community are intangible things you cannot buy with money. You have to do the grind. 

See also: Andrew Keys – 16 Ethereum Predictions From a Crypto Oracle

Then, Ethereum is not slowing down. If you compare 2020 to 2017, Ethereum has this DeFi wave. Previously, it had the ICO (initial coin offering) wave. Then you have NFT waves, there were DAOs (decentralized autonomous organizations) in between. These waves keep on coming, innovation keeps on coming. Do you see any particularly innovative product coming out of these other chains? I do not recall any project that was not already done on Ethereum. 

How much of Matic are you keeping in Polygon? 

Some people think that it’s a rebrand, that it’s a pivot. But actually, it’s an expansion. Matic stays the way it is. Think of it as a Venn diagram. Matic is a smaller circle within Polygon, while Polygon’s scope and vision has become much bigger. Polygon is now just launching. Matic has already launched. 

When do you expect to go fully live?

Polygon, actually, technically will never be fully live. Because it is a layer 2 aggregator, and there will always be new solutions. There are multiple mainnets expected. You have this current Poly Plasma, and PoS, and data availability. Later this year you might have Optimistic rollups going live, Zk-Rollups going live. These solutions will keep on coming and getting consolidated in Polygon. 

That’s a lot of specialized knowledge – does the Polygon team have to grow exponentially if the platform is, too?

That’s absolutely a valid question. The team has grown aggressively. The way we’ve built the Polygon ecosystem, we’ve never had a foundation or sold too many tokens. We’re holding tokens – maybe up to a billion dollars in treasury assets – and we intend to spend that money to grow this ecosystem. We already have people in Serbia, in Eastern Europe, building SDK (software development kits). We have a specialized team in India building data availability. Our previous team, the network team. We’re also collaborating with other specialized teams. 

These will be multiple, decentralized teams all working for scaling Ethereum. 

You’re building failure into the model. You’re willing to spend capital to build solutions that may not take off or fail, with the idea that it’s an ever growing, expanding universe.

That’s a nice articulation: We’re building failure into the model. The fundamental goal of Polygon is to not go all in on one particular approach. We learned that the hard way. We were among the top Plasma teams in 2018, then the industry hype moved somewhere else. It keeps on moving. We faced the brunt of that and decided we don’t want to be too specific. We want to be a multi-approach solution and provide these solutions to see which one picks up. 

The vision is adoption. We see where that adoption is and go deep on that. Ultimately, it’s a community thing. If one type of solution is adopted, automatically, we’ll start to provide support. 

Doesn’t Eth 2.0, an Ethereum that can scale on its own, reduce the need for Polygon?

Ethereum 2.0 is supposed to have 64 shards, each one is going to be similar to what Ethereum is today. Let’s say after you add proof-of-stake to the current, single Ethereum chain, it’s able to process 50 tps (transactions per second), up from 13 tps today. Multiply that 64 shards: 3,200 tps. 

Every week there is a DeFi hack. Just recently EasyFi was hacked. Don’t these exploits harm adoption?

We should think about it as free markets. In free markets, eventually you have a way to create the alpha in the market that emerges out of it. You have these solutions like Compound, Aave and others that are extensively audited. They have not been hacked that much. Even in some larger protocols, like MakerDAO that have gotten hacked, it did not deplete it completely. It was a few million dollars, which is nothing compared to the size of the whole ecosystem. And then the community learns something, and that’s how it evolves. That’s the power of the network, of Ethereum.

See also: Did Ethereum Learn Anything From the $55M DAO Attack?

If you think there will be a future of programmable money, then that programmable money is going to be hacked. There is no way that it wouldn’t be. There were big hacks in Web 2.0, and there will be in Web 3.0 also. But that’s how the industry evolves. They are not bad things. 

I was looking at your calendar, and it looks like you have calls after this. Do you ever get to sleep?

Yeah, yeah, yeah. I have one more call after this, then, after that, some internal calls. Generally, I end up doing 16-17 calls a day, so about 12 hours only on calls. Then I rest five-six hours and work to have things to discuss on those calls. My life is always spending. Personal life gets affected a lot. And this is not only for me. 

Everybody who is doing anything significant in crypto is going through the same situation. I think it’s the nature of the industry. The assets never sleep, there’s no holidays, no Christmas, no year-end holidays. People have said before there will be studies on mental health on the people in crypto. People in this industry are mentally  – I myself have had medical issues. I have had to be on constant medication, but then I can’t take a break, so I have to keep going with medication. 

This is such a huge topic, and I think it’s only gotten worse during the pandemic. 

When you are building your own token startup, basically you are a public company, you have similar obligations as being a public company because everything is on view. Plus, you have to handle all of the pressure of being a startup. You have to build your product, find your customers and all that. The pressure is multifold. You are working in the finance industry and you are working in a startup – both are extremely excruciating things, but together in one job. It has been very taxing. On a personal level, professional level I feel like I have aged a lot. 

I’ll be 34 this July. Kids call me ‘uncle’ already. 

It seems like the Indian ecosystem is poised to explode, but it’s also being hampered by regulatory uncertainty. Could you give a little insight into the legal situation?

The legal situation has been overly sensationalized by the media. And that was the object of the Indian government: to keep a shadow of uncertainty over crypto in India, so retail does not get into it. They also tried to bring a shadow ban via RBI, the Bank of India. But that was not a ban by law. And also, obviously, India is a leading country – not as strong as in the U.S. – in terms of material liberty. People challenged the ban in court, the court overturned it and all that. The moment that happened the whole industry exploded and India is back to being one of the top regions for crypto. 

What’s the appeal of working in crypto in India?

Developers have really found a gold mine here. Elite developers are getting into it, because they get paid in dollars. If they take USD, their salaries go up relative to those getting paid in rupees. It’s very lucrative. It’s difficult to find comparative salaries here. The salaries will likely continue to rise over the next three to four years, approaching what you have in Silicon Valley. 

See also: How Normies Are Getting Crypto-Rich With DeFi

I think the salaries for good developers across the world will start approaching some global standard. Right now, a $60,000 salary in India would get you a senior developer. In SF (San Francisco), that would get you a college student. So the scene is poised to explode. 

And that’s part of the reason the government is unlikely to ban it outright. It’s an important front for the country. They are definitely going to regulate it, though.