What is Polygon?
Polygon (formerly Matic Network) arose out of a desire to address some of the inefficiencies of Ethereum. Namely, Polygon exists as “a protocol and a framework for building and connecting Ethereum-compatible blockchain networks.”Specifically, Polygon seeks to address several pain points of the Ethereum user experience by offering features like: one-click deployment of blockchain networks, including modules for customization and enabling interoperability (i.e. ability to work together and share information) with other blockchain networks, and optional “security as a service” via Ethereum validation processes. Ultimately, Polygon’s goal is to make it easier for DeFi protocols to compete with the UX and accessibility of centralized platforms.
The rebrand from Matic to Polygon was precipitated by a change in the team’s ambitions. While Matic was simply a 2-layer scaling solution for Ethereum, Polygon “is the infrastructure for a network of massively scaling, collaborative blockchains that retain their self-sovereignty.” Polygon was founded by Jaynti Kanani, Sandeep Nailwal, and Anurag Arjun in late 2017 and has since grown its team and taken on investments from investors such as Mark Cuban.
Polygon 2.0, announced in June 2023, is an ambitious upgrade that introduces a multi-chain system designed to enhance scalability, interoperability, and usability within the Polygon ecosystem. Polygon 2.0 aims to address the pressing issues of network congestion and high transaction costs. By leveraging a novel architecture that interconnects multiple chains, it promises a more efficient, seamless, and cost-effective experience for users and developers alike.
What is the MATIC token?
MATIC, the native token of Polygon, is an ERC-20 token running on the Ethereum blockchain. Fees paid through use of the Polygon network are paid in MATIC, such as transaction fees on sidechains, and MATIC also serves as the central settlement currency between users of the network.
Similar to many other crypto protocols, the Polygon network’s governance is distributed by conveying voting rights to every MATIC holder (1 token: 1 vote). Validators stake their MATIC tokens as collateral to become part of the network’s Proof-of-Stake (PoS) consensus mechanism (how network transactions are validated) and receive MATIC tokens in return. MATIC tokens are released monthly as per a schedule agreed to by the Polygon community.
Before trading any crypto assets it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset.
No securities regulatory authority or regulator in Canada has evaluated or endorsed the Crypto Contracts or any of the crypto assets made available through the platform.
Wealthsimple has performed an assessment of whether MATIC can be supported by Wealthsimple’s platform, including whether MATIC is a security and/or a derivative and is being offered in compliance with securities and derivatives laws.
We evaluated MATIC based on publicly available information, including (but not limited to):
- The creation, governance, usage and design of MATIC, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created MATIC;
- The supply, demand, maturity, utility and liquidity of MATIC;
- Material technical risks associated with MATIC, including any code defects, security breaches and other threats concerning MATIC and its supporting blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them;
- Legal and regulatory risks associated with MATIC, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of MATIC; and
- Statements made by regulators or securities regulatory authorities in Canada and other jurisdictions regarding whether MATIC, or generally about whether the type of crypto asset, is a security and/or a derivative.
Wealthsimple monitors ongoing developments related to crypto assets available on its platform for significant changes that may affect Wealthsimple’s original assessment of those assets, including Wealthsimple’s assessment of the application of securities and derivatives laws. Any significant changes relating to MATIC may result in changes to this Crypto Asset Statement and/or Wealthsimple’s ability to support MATIC.
Like all other crypto assets, there are some general risks to investing in MATIC. These include short history risk, volatility risk, liquidity risk, demand risk, forking risk, cryptography risk, regulatory risk, concentration risk, electronic trading risk and cyber security risk. Please review the Wealthsimple Crypto Product Risk Disclosure for additional discussion of general risks associated with the crypto assets made available through the platform.
Additional Risks / Information
MATIC has elevated regulatory risk. The United States Securities and Exchange Commission (SEC) has alleged that MATIC is a security under U.S. federal securities laws in one or more enforcement proceedings pending before U.S. courts against crypto trading platforms. None of Polygon Labs are parties to this proceeding, and the U.S. courts have not determined that MATIC is a security. In the event that a U.S. court determines that MATIC is a security or there are other material developments affecting the treatment of MATIC under securities laws, Wealthsimple may cease to support MATIC and/or the market for MATIC may be adversely affected.
Wealthsimple only supports the ERC-20 version of MATIC and does not support the version of MATIC available on the Polygon blockchain. Wealthsimple cannot bridge or convert the ERC-20 version of MATIC to the token on the Polygon network. If you wish to bridge or convert your ERC-20 version of MATIC, you must first withdraw it and then bridge or convert it using tools provided by the platform or protocol, which may subject you to additional risks.
We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading MATIC. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.
Wealthsimple is offering Crypto Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Wealthsimple Investments Inc. dated December 18, 2023 (the Decision).
The statutory rights of action for damages and rescission in section 130.1 of the Securities Act (Ontario), and, if applicable, similar statutory rights under securities legislation of other jurisdictions of Canada, do not apply in respect of this Crypto Asset Statement to the extent a Crypto Contract is distributed under the prospectus relief in the Decision.
Last updated: January 1, 2024