Thanks for putting this together, @venturecapital. This proposal brings up some important points and I am personally happy that we are having this conversation.
In the week since you originally posted, I’ve circulated your proposal within Polygon Labs for feedback and input.
This post (sorry it’s so long!) represents a summary of key thoughts and suggestions, as well as a few immediate things that we’re taking on in order to address your concerns about network tokenomics.
First, I want to share that Polygon Labs has been actively looking into a POL buyback program that would benefit the entire ecosystem; the research on POL buyback is early, but this has been on our radar in recent months.
That said, when people talk about cutting emissions, it’s important to understand how the network currently functions. I’d like to summarize some of the discussions that we had internally, specifically around why emissions exist, what role they play, and how they help keep the ecosystem healthy and growing for everyone.
POL Emissions
POL emissions earn the network more than the 2% emitted in total returns.
When MATIC was upgraded to POL (a process that will be nearly 100% complete this month when Coinbase upgrades outstanding MATIC to POL) it was a utility upgrade that came with new, sustainable tokenomics. Network consensus was reached, introducing an expanded vision of POL as a token not only for Polygon, but also Agglayer. You can read how POL will accrue value here and here.
The new tokenomics introduced a 2%/year POL emissions. These 2% emissions go directly to two sources:
- funding staking rewards through the network’s 105 validators for doing the work of validation as well as the delegators who stake POL; and
- funding the independent Polygon Community Treasury to support and grow the Polygon ecosystem.
There are no private entities paying for validators or ecosystem growth.
These functions are entirely funded with independent, public resources—POL—which is critical for network decentralization.
It ensures that validators and the Community Treasury are funded fairly and consistently, without private entities jockeying for control over them.
1% of POL emissions goes to staking rewards: validators and stakers have collectively staked 3.4B POL
POL emissions ensure staking secures the network:
- Rewards stakers for delegating POL
- Rewards validators and ensures they have a neutral, independent, and consistent source of revenue to insulate against normal market fluctuations.
This helps to protect against validator offboarding by keeping rewards consistent. If there are no POL emissions, there are no staking rewards for validators and delegators.
A few things would happen without staking rewards, with far larger and worse outcomes than an emission-based token economy:
- Polygon is a proof-of-stake network: without rewards, there is no incentive to stake; without stake, there is no network security
- Validators would offboard from the network: without rewards for doing the work, there’s no reason to continue to run a validator node.
- No rewards leads to unhealthy tokenomics: without rewards, validators and delegators unstake the 3.4B tokens, with a large part of that float coming to markets
So, a 1% annual POL emission, directed as a staking reward, incentivizes validators and delegators to keep the network secure, sufficiently decentralized, and trustless.
Without it, the network loses these properties and becomes less stable.
1% of POL emissions go to the Polygon Community Treasury
The other 1% of POL emissions is directed towards the Treasury. The Treasury is a transparent, independent body that funds all network public goods.
It also uses received POL to strategically invest, leading to network returns that have the potential to far outweigh a 2% network burn.
Most competing networks have treasuries with 30-40% supply of tokens. These networks can outcompete Polygon in the long run if the Community Treasury is defunded by turning off emissions today.
Without the Treasury, the network would have no way to pay for:
- Network governance infrastructure, including the Protocol Council, an independent group of industry leading auditors, security experts, and blockchain executives that ensure the decentralization and security of the Polygon protocol.
- Critical infrastructure for blockchain accessibility and usability, including network RPC providers, indexers, and wallets.
- Critical partnerships that support decentralization and the Polygon community, including independent funding for L2Beat and Blockworks.
When it comes to growth, the Treasury Board is currently:
- Allocating ~20% of all spending for seed liquidity, bootstrapping ecosystem teams in a way that will directly pay the Treasury back 100% while supporting continued value multipliers to reverberate throughout the ecosystem.
- Exploring a proposal to stake idle and additional funds, supporting ecosystem partners’ growth while earning and reinvesting yield.
- Strategically targeting deals that bring net larger onchain value to Polygon than the grant amount, such as the recently announced AlloyX collaboration.
Put simply, the Treasury ensures the network both survives and thrives, funding critical strategic and infrastructure projects onchain that the ecosystem needs to win.
Next Steps
All of the above initiatives are scheduled to phase down over time; but given the reasons stated above, now is not the time to make changes. In the same vein, as stated in the beginning, we’re looking into a POL buyback.
We believe in creating value by building and improving, rather than chasing short-term gains. It is understandable to focus on short-term supply and demand arguments that might seem beneficial at the moment.
Those ideas are reasonable to consider, but they do not always support long-term growth.
Our focus at Polygon Labs remains on building the strongest ecosystem we can, offering the best services on the best blockchain with the best technology stack.
POL grows in value as the Polygon ecosystem grows in real utility and adoption.
For example, last week Polygon experienced the biggest-ever payments upgrade. It’s not an exaggeration to say that the Rio upgrade brings Polygon to the forefront of payments in crypto. Polygon is now faster, more reliable, and more open to builders—everythin institutions, developers, and fintechs need in a payments platform.
The upgrade:
- Enables 5,000 TPS
- Ends the risk of reorgs
- Increases blocktime and brings near-instant finality
- Lowers the cost of running nodes and expands network participation
This is a major improvement that significantly increases scalability, reduces congestion, and lowers costs.
For POL holders, this means faster and cheaper transactions, a better experience for users interacting with the network, and stronger adoption of applications built on Polygon.
For builders and institutions, it means accelerating growth, at a moment when Polygon leads in P2P everyday payments (under $100), leads in emerging markets with 90% of stablecoin volume, and continues to see major adoption and integration by the likes of Stripe, Revolut, and many others.
Rio strengthens the utility and value proposition of POL because as the network grows and more activity happens on-chain, demand for POL naturally increases.
In parallel, the Foundation is leading a series of POL activations and educational campaigns to raise awareness about the upgrade from MATIC to POL. Several large market makers have also recently returned to support POL liquidity on exchanges globally.
We continue to deepen partnerships that drive real utility and adoption. Our collaboration with Cypher Capital and Amina Bank focuses on accelerating ecosystem growth by backing high-quality projects building on Polygon and supporting developers through funding, mentorship, and regional market access. Meanwhile, our work with AlloyX is aimed at expanding real-world asset opportunities on Polygon, bringing new on-chain yield products and institutional-grade financial infrastructure that can attract a broader base of users and investors.
These efforts create tangible, long-term value for POL holders and strengthen Polygon’s position as the leading platform for scalable, real-world finance.
Looking ahead, there are various airdrops coming via the Agglayer Breakout Program.
This is just the beginning. We have a strong pipeline of announcements ahead that will continue to expand the utility of POL and deliver value for holders.
Really happy about your thoughtful proposal, thank you for sparking this discussion! If you have any further requests or concerns, please let me know.