MATIC is a scaling solution for the Ethereum blockchain that has become quite popular in recent years. It allows for faster and cheaper transactions on Ethereum by utilizing sidechains attached to the main Ethereum chain. This allows for transactions to be processed more quickly and cheaply while still benefitting from Ethereum’s security.
MATIC was first announced in 2017 and launched its mainnet in 2020. Since then it has grown to become one of the most widely used layer 2 scaling solutions. But who exactly owns and controls the MATIC network? That is an important question for any cryptocurrency. Knowing the owners and backers can provide insight into the motivations and incentives behind the project.
Background on MATIC
MATIC refers to both the cryptocurrency token and the blockchain network as a whole. The native token for the network is also called MATIC. It is what is used to pay fees and interact with smart contracts deployed on the MATIC sidechains.
The MATIC network utilizes a dual-token model. Along with the MATIC token, there is a MATIC ERC-20 token on the Ethereum blockchain that is bridged to the MATIC network. This allows users to quickly move their assets between Ethereum and MATIC while still benefiting from the faster and cheaper transactions on MATIC.
The MATIC network uses a Proof-of-Stake consensus model. Validators stake MATIC tokens and process transactions and generate new blocks. In return, they earn more MATIC as rewards. This is similar to how Ethereum is transitioning to PoS consensus with the upcoming ETH 2.0 upgrade.
In terms of governance, MATIC uses a Decentralized Autonomous Organization (DAO) model. This allows MATIC holders to vote on proposals for the network’s development. Major protocol changes and new feature additions are decided by the community via the DAO governance process.
The MATIC Foundation
MATIC was created by the SAN FRANCISCO based company MATIC NETWORK back in 2017. The MATIC NETWORK team conducted an ICO in 2019 for the MATIC token and raised funds to develop the network.
In November 2019, MATIC NETWORK announced that it was transferring the control and intellectual property of the MATIC Network to the newly formed MATIC FOUNDATION. The MATIC Foundation is a non-profit organization based in SINGAPORE that now oversees the development and governance of the MATIC Network.
Some key figures involved with founding the MATIC Foundation include:
- Jaynti Kanani – Co-founder and advisor
- Sandeep Nailwal – Co-founder and advisor
- Anurag Arjun – Co-founder and advisor
- Mihailo Bjelic – Head of research and development
The MATIC FOUNDATION’s role includes facilitating research and development of the protocol, supporting dApps building on MATIC, and driving awareness and adoption. The MATIC FOUNDATION teams leads development of the core protocol, builds developer tools, runs the validator nodes, and provides open-source SDKs and APIs for developers.
The MATIC FOUNDATION utilizes the funds generated from the MATIC ICO to fund ongoing development. As a non-profit, any excess revenue gets re-invested back into the ecosystem. The Foundation plans to fund its operations through 2025.
Ownership Breakdown of MATIC Tokens
When the MATIC mainnet launched in 2020, there was a total supply of 10 billion MATIC tokens. The breakdown of the initial token distribution looked as follows:
| Recipient | Percentage of Total Supply |
| MATIC Foundation | 19.9% |
| Team | 16% |
| Advisors | 4% |
| Network Operations | 12% |
| Foundation Reserve | 21.86% |
| Ecosystem | 10.24% |
| Private Investors | 15% |
A few key things stand out:
– The MATIC Foundation received 19.9% of the initial token supply
– The founders and team members received 16% of the supply
– Over 20% is held in a Foundation Reserve to help fund development
– 15% was sold to private investors during the ICO
This means the MATIC Foundation controls a significant portion of MATIC tokens, giving it a lot of influence over the network. However, the tokens are utilized to actively develop the ecosystem rather than for profit.
The founders and team also received a substantial allocation. This helps incentivize them to build and grow the network over the long-term. Their tokens likely have vesting periods to ensure long-term alignment.
The Foundation Reserve gives flexibility to fund ongoing development and ecosystem growth initiatives. And the private investors help bootstrap the network with initial capital.
Overall, the token distribution seems designed to provide funding for the Foundation while retaining founder incentives. No single party controls a majority of tokens. The community still has a lot of influence through the DAO voting process.
Supply Changes Since Mainnet Launch
Since launching in 2020, the total supply of MATIC tokens has increased. As of October 2022, Circulating Supply is approximately 7.5 billion MATIC. Total Supply has increased to over 10.4 billion MATIC.
The increased supply comes from:
– Validator rewards for securing the network
– MATIC rewards to users for staking and delegating
– Grants and funding allocated from the Foundation Reserve
– Additional sales to investors
This reflects an aligned incentives model – validators and stakers earn MATIC for participating in the network. The Foundation Reserve funds ongoing development. And investors provide capital to support growth.
The increased supply gets distributed across a wider group as the network expands. It does dilute the original allocation percentages slightly. But so far, the increases have fallen within the initial tokenomics framework.
The MATIC Foundation’s share of the supply likely remains around 15-20%. The founders and team also retain a significant portion. Overall, the original stakeholders remain influential over the network while community participation expands.
Competitors
As one of the leading layer 2 solutions on Ethereum, MATIC does have competitors in the scaling space. Some of the main ones include:
- Optimism – Uses optimistic rollups to bundle transactions off-chain.
- Arbitrum – Also uses optimistic rollups and supports EVM compatibility.
- zkSync – A ZK-rollup focused on payments and transfers.
- Starkware – General purpose ZK-rollup for DeFi and payments.
- Celer Network – Uses state channels and sidechains for off-chain scaling.
These layer 2 projects are all working to reduce costs and congestion on Ethereum. They leverage somewhat different technical approaches.
MATIC’s main advantage is providing an EVM equivalent sidechain. This allows developers to port smart contracts and dApps easily. It also integrates the concept of checkpoints back to the Ethereum mainchain.
From a commercial perspective, MATIC has also focused heavily on developer support and user adoption. The EVM compatibility and focus on usability has helped drive its usage. But the other layer 2 platforms are strong competitors within the scaling space.
It’s worth watching whether any of these competing platforms or other new solutions gain an edge in adoption long-term. But as of now, MATIC remains among the top choices for Ethereum scaling.
Regulatory Oversight
From a regulatory perspective, decentralized cryptocurrencies exist in a challenging gray area. Regulatory bodies like the SEC have not provided full guidance on how crypto assets and networks should be classified and regulated.
The MATIC Foundation’s base in Singapore provides access to a reasonably crypto-friendly jurisdiction. Singapore has taken steps to regulate cryptocurrency exchanges but without outright banning activities.
Still, regulatory risk does remain a concern. If certain governments took a hard stance against MATIC, it could limit adoption. The decentralized and open-source nature of MATIC does help provide some protection compared to companies controlling private blockchains. But regulatory overhang remains an issue for the project.
Overall though, the MATIC Foundation taking steps to operate transparently and through Singapore helps mitigate some regulatory concerns. There is always risk of increased regulation but MATIC appears to be approaching it as responsibly as feasible.
Conclusion
In conclusion, the MATIC Network was created by founders from the MATIC NETWORK company before control was transferred to the non-profit MATIC FOUNDATION. The MATIC Foundation based in Singapore now oversees protocol development and governance.
The founders and MATIC FOUNDATION control a significant portion of MATIC tokens. This gives them influence over the network but also incentivizes them to build for the long-term. The MATIC token distribution seems designed to provide funding and incentives to support growth.
MATIC has many competitors working on Ethereum layer 2 scaling. But its traction and developer support has helped give it a leading position so far. And operating through Singapore gives it a reasonably favorable regulatory environment, though uncertainties remain.
Overall, the MATIC Network has a credible team and structure behind it based on its history and initial tokenomics. The Foundation’s sizable role and focus on funding ecosystem growth points to long-term plans for MATIC amidst a crowded scaling space.