MATIC: Plasma, FINALLY?

Mat­ic helps improve dApp usabil­i­ty by bring­ing scaleable and near-instant blockchain trans­ac­tions to Ethereum.

Blockchain scal­ing is a com­plex sub­ject, and Matic’s ambi­tions even go beyond help­ing scale Ethereum. We’ll need to unrav­el sev­er­al con­cepts until we can ful­ly under­stand what Mat­ic does and why the project is important.

Understanding Matic

Plasma

Plas­ma is a blockchain scal­ing solu­tion ini­tial­ly pro­posed by Joseph Poon and Vita­lik Buterin. At its core, Plas­ma enables big, slow and expen­sive chains like Ethereum to scale via the cre­ation of small­er, faster, often pur­pose-spe­cif­ic child chains that anchor their state in the big chain. This gives us best of both sides: the secu­ri­ty guar­an­tees by the base chain (the “big” chain), the speed, fea­ture set, price and scal­a­bil­i­ty of many nim­ble child chains.

Gross­ly sim­pli­fied, a plas­ma imple­men­ta­tion could look like this:

• A user want­i­ng to use a plas­ma solu­tion deposits some ETH in a smart con­tract on Ethereum.
• The plas­ma child chain detects this and mints an equal amount of ETH on the child chain, attribut­ing it to the user who made the deposit.
• The user now uses one or more dApps on the child chain with the ETH he deposit­ed, prof­it­ing from speed improve­ments, or oth­er fea­tures the child chain might have to offer.
• Occa­sion­al­ly, the user bal­ances on the child chain are sum­ma­rized and this com­pressed sum­ma­ry is com­mit­ted to a block on Ethereum.
• Some­when lat­er, the user wants to stop using the dApp in ques­tion and goes to the orig­i­nal smart con­tract on Ethereum, mak­ing a claim to with­draw the ETH he holds on the child chain (those might now be more, or less than he orig­i­nal­ly deposit­ed due to his activ­i­ties on the child chain).
• The orig­i­nal smart con­tract can ver­i­fy the user’s claim thanks to the child chain sum­maries it has access to and let the user with­draw his hold­ings. The tokens on the child chain are burned.

There are a num­ber of issues that could come up dur­ing the above process. For exam­ple, the oper­a­tors run­ning the child chain could be mali­cious and try to steal the user’s funds, or the child chain could be mal­func­tion­ing as a whole, or the behav­ior of those car­ry­ing infor­ma­tion between the child chain and the base chain could be mali­cious, or the user him­self could try to game the sys­tem. To com­bat these issues, plas­ma imple­men­ta­tions have a num­ber of addi­tion­al mech­a­nisms, e.g. they allow to “prove” fraud on a child chain to the base chain via so-called fraud proofs, or actors on the child chain are bond­ed by a child chain token that can be slashed in case of mali­cious behavior.

Ensur­ing con­sis­ten­cy between the base chain and the child chain, even for some­thing as seem­ing­ly sim­ple as token bal­ances, is a hard prob­lem to solve. Ensur­ing con­sis­ten­cy for all state changes that can occur dur­ing smart con­tract exe­cu­tion is, as they say, “a research prob­lem”. Mean­ing: “we are not sure whether your bags will still be alive once we solved it”.

Matic’s main­net release is cur­rent­ly rolling out. In terms of the Plas­ma frame­work, it will sup­port token trans­fers for ETH, ERC20 and ERC721, asset swaps and a num­ber of cus­tom plas­ma func­tions. In its cur­rent state, Mat­ic is an account based Plas­ma imple­men­ta­tion and does not attempt to rep­re­sent more ephemer­al states of its child chain on Ethereum.

One of the big poten­tials of Plas­ma, even with­out com­plete rep­re­sen­ta­tion of child states in the base chain, is that the mod­el is not forcibly bound to one base chain. Mat­ic could very well anchor itself in mul­ti­ple chains and thus, for exam­ple, offer cross-chain asset exchanges. The team seems to already have forged rela­tion­ships with inde­pen­dent blockchain scal­ing projects like Elrond.

Child Chain/Side Chain

To pro­vide the secu­ri­ties required for Plas­ma, a plas­ma imple­men­ta­tion needs to oper­ate its own blockchain. In the case of Mat­ic, this is a Proof of Stake blockchain built on top of Ten­der­mint. Matic’s chain sep­a­rates the block pro­duc­tion from the val­i­da­tion process. So-called check­point nodes are respon­si­ble for val­i­da­tion and for the anchor­ing of the child chain on Ethereum.

To pro­vide its own smart con­tract func­tion­al­i­ty, Mat­ic offers an EVM on the child chain. 

While the main­net cur­rent­ly rolling out will fea­ture one EVM based side chain, Mat­ic will not be lim­it­ed to one side chain alone in the future.

Use and Usefulness

It can be guessed from the above descrip­tion of the inner work­ings of Mat­ic and the Plas­ma frame­work that such a solu­tion does have a mul­ti sided adop­tion challenge:

Developer Adoption

A Plas­ma project has to con­vince devel­op­ers to build on it. This is clev­er­ly solved in the case of Mat­ic through the use of the EVM on Matic’s child chain, mak­ing it easy for devel­op­ers to switch their dApps over to Matic’s faster infra­struc­ture. Add to this the known scal­ing pains on Ethereum, and ini­tial adop­tion of Mat­ic among the siz­able Ethereum devel­op­er com­mu­ni­ty appears like­ly. The fact that notable Ethereum projects are already exper­i­ment­ing with Mat­ic seems to con­firm this. Beyond Ethereum, Mat­ic is inter­est­ing to new blockchain projects that might want to plug into the sys­tem to get indi­rect access to Ethereum’s liq­uid­i­ty, users and devel­op­er base.

User Adoption

Users of a Plas­ma based sys­tem have to deposit a part of their hold­ings into the sys­tem, like they would deposit them on a Lay­er 2 exchange or a dApp with its own smart-con­tract based wal­let. Whether users will be ready to do this depends entire­ly on the added val­ue Mat­ic based dApps can pro­vide, com­pared to Ethereum-native dApps. 

The pain on Ethereum is real, both in terms of slug­gish­ness and in terms of cost. Still, adop­tion for Mat­ic will like­ly have to hap­pen through dApps with intense use first. Deposit­ing tokens on an exchange to lat­er make mul­ti­ple trades makes sense, but users are unlike­ly to deposit a token into a new sys­tem first to then lat­er be quick­er in pur­chas­ing a cof­fee at the cof­fee shop. How will intense-use dApps look like? We don’t know yet. With­out user adop­tion, blockchain scal­ing remains a text­book exam­ple to a cer­tain extent.

Operator Adoption

While a Plas­ma based sys­tem does inher­it a lot of its secu­ri­ty from the base chain, there still need to be oper­a­tors for the child chain. Mat­ic will incen­tivize their oper­a­tors via the dis­tri­b­u­tion of Mat­ic tokens, and projects build­ing on Mat­ic will be moti­vat­ed to run their own nodes too. Over time, the net­work will need to gain suf­fi­cient adop­tion and actu­al use to ade­quate­ly reward node operators.

PLASMA, FINALLY?

If Mat­ic does man­age to roll out and sta­bi­lize this com­plex sys­tem, if devs do migrate to it, users flock to the new dApps, their activ­i­ties hand­some­ly reward­ing the net­work oper­a­tors, Mat­ic does have the poten­tial to be a tremen­dous­ly use­ful scal­ing solu­tion with very lit­tle bar­ri­ers of entry for those cur­rent­ly suf­fer­ing under Ethereum’s clogged blockchain. Mat­ic could even­tu­al­ly offer con­sumer lev­el speed and trans­ac­tion count — up to 10K TPS have been observed on test­net — at great­ly reduced costs. And that’s a lot.

Plas­ma is hard. His­to­ry teach­es us that if you stick around long enough try­ing to imple­ment Plas­ma, you’ll even­tu­al­ly be called a scam­mer. As it hap­pened with Omise Go or Loom Net­work, two oth­er Plas­ma projects that many now con­sid­er failed. Mat­ic is the best shot yet at Plas­ma for Ethereum, and build­ing a scal­ing solu­tion so close to the only smart con­tract plat­form with tan­gi­ble adop­tion is a more like­ly path to suc­cess than build­ing your own scaleable blockchain ecosys­tem from scratch.

Will peo­ple, thanks to Mat­ic, start gam­ing on the blockchain because they can be cer­tain to actu­al­ly own their in-game assets? We doubt it. On the oth­er hand, the whole ros­ter of DeFi appli­ca­tions now being built on Ethereum — trad­ing, lend­ing, options, syn­thet­ic assets, sta­ble­coins — is suf­fer­ing under slow block speed and high gas prices too, and should offer plen­ty enough poten­tial to make Mat­ic grow.

Will Mat­ic be the first viable Plas­ma solu­tion for Ethereum? Let’s hope so. Ethereum needs any scal­ing solu­tion it can get.

TEAM AND PROJECT PROGRESS

Mat­ic has a sol­id, but not a “blockchain all star” type of team. Most team mem­bers seem to come from a consulting/service provider back­ground and joined the blockchain space in late 2017 or even lat­er. Maybe pre­cise­ly because of that, Mat­ic has so far been mak­ing the right deci­sion, build­ing dili­gent­ly, deliv­er­ing on time and bond­ing with the com­mu­ni­ty. Many things can go wrong in a project of this com­plex­i­ty, but the only way to real­ly judge the qual­i­ty of what’s been built here will be to close­ly watch the upcom­ing step-by-step main­net release, the issues that will come up, and the team’s reac­tion to them. Plas­ma is hard.

$MATIC Tokens

As far as project tokens go, $MATIC is tight­ly bound to the project’s suc­cess. MATIC tokens will be required as a bond for those par­tic­i­pat­ing in con­sen­sus, they will be dis­trib­uted as a reward to those pro­vid­ing ser­vices to the net­work, and the project hopes to estab­lish the token as a medi­um of exchange on the child chain. MATIC tokens will also be used to pay net­work fees, with an addi­tion­al abstrac­tion lay­er between dApp spe­cif­ic coins and MATIC, so that indi­vid­ual projects don’t have to wor­ry about hold­ing MATIC tokens. While sce­nar­ios could be imag­ined where the token loos­es sig­nif­i­cance over time — Matic’s archi­tec­ture could also be built with­out a sep­a­rate token — the above aspects give $MATIC a tighter token-val­ue link than many oth­er projects.

$MATIC is cur­rent­ly trad­ing at $0.023, up rough­ly 10x from the seed stage/Binance launch­pad price of $0.0026 back in April 2019. Mat­ic has a com­pa­ra­bly aggres­sive token release sched­ule. 100% of all tokens are sup­posed to come into cir­cu­la­tion until Octo­ber 2022 (cur­rent cir­cu­la­tion: 40–60%). Cur­rent token val­u­a­tion of Mat­ic sits at 79M US$, but giv­en the aggres­sive token release sched­ule, the full sup­ply val­u­a­tion of $234M should be tak­en into con­sid­er­a­tion too.

Quite typ­i­cal for Launch­pad projects, Matic’s price has been on a wild ride ever since the token’s release back in 2019. It reached a high of $0.041 short­ly after launch, in May 2019, and took out that high by a small mar­gin, reach­ing $0.043 in Decem­ber 2019. Dur­ing the March 2020 cryp­to dump, the token went as low as $0.0081.

CONCLUSION

$MATIC is cur­rent­ly part of our Icono­mi strat­e­gy. All things equal, $MATIC looks like a plau­si­ble bet on Plas­ma-based scal­ing for Ethereum, but until main­net has been ful­ly rolled out and gained some adop­tion, it will also remain just that: anoth­er bet on Plas­ma. Sen­ti­ment-wise, $MATIC seems to be in a good posi­tion to prof­it from a time favor­able to alts, as it can cap­ture a num­ber of attrac­tive nar­ra­tives and pos­si­bly prof­it from risk-seek­ing cap­i­tal on Ethereum. Beyond bull­ish times, we would put the project on “watch very closely”.

Sources

• https://www.learnplasma.org/en/
• https://research.binance.com/projects/matic-network
• https://medium.com/matic-network/what-is-matic-network-466a2c493ae1
• https://whitepaper.matic.network/

Cov­er image by Tony, https://www.flickr.com/photos/triplea4/.