In a recent Messari report, Nicholas Garcia and Red Sheehan talked the state of Polygon ($MATIC) as of the end of Q3 2022.

Polygon is “a decentralised Ethereum scaling platform that enables developers to build scalable user-friendly dApps with low transaction fees without ever sacrificing on security.” The Polygon Lightpaper describes Polygon as “a protocol and a framework for building an connecting Ethereum-compatible blockchain networks.”

On 18 May 2021, Independent Ethereum educator, investor and advisor Anthony Sassano took to Twitter to clear up some of the confusion around Polygon (e.g. some people refer to Polygon as a sidechain to Ethereum, while others call it an L2 blockchain). Below are a few highlights from that Twitter thread:

  • There is the Matic Plasma Chain and the Polygon PoS chain. The vast majority of the activity is happening on the PoS chain.
  • The PoS chain is what people refer to as a ‘sidechain’ to Ethereum because it has its own permissionless validator set (100+ who are staking MATIC) which means it doesn’t use Ethereum’s security (aka Ethereum’s PoW).
  • The PoS chain goes beyond a standard sidechain and actually relies on and commits itself to Ethereum (what some people may call a ‘commit-chain’). It relies on Ethereum because all of the validator/staking logic for the PoS chain lives as a smart contract on Ethereum.
  • This means that if the Ethereum network went offline, the Polygon PoS chain would also go offline. Secondly, the PoS chain actually commits/checkpoints itself to Ethereum every so often.
  • This has 2 benefits: it provides Ethereum-based finality to the PoS chain & it can help the chain recover in case of catastrophic event. This also means that Polygon is paying Ethereum to use its blockspace (in ETH) & paying for it to secure the contracts & checkpointing.

In a Messari research report titled “State of Polygon Q3 2022”, Garcia and Sheehan said:

Despite the ongoing bear market, Polygon continues to build at a heightened pace. During Q3, Polygon saw network-wide activity increase, continued its aggressive business development strategy with new partnerships with distinguished companies, and progressed on its ZK-scaling efforts with the unveiling of Polygon zkEVM.

Polygon’s financial and network activity reflects Polygon PoS activity. During Q3, revenue was $4.2 million, a 26% QoQ decline driven by a 10% decline in transactions and 51% decline in transaction fees. Polygon average transaction fees were $0.09, so revenue is not expected to be significant. The Polygon treasury ended the quarter with 2.4 billion MATIC ($1.8 billion).

In general, account-related metrics increased during the third quarter with active addresses setting an all-time-high of 6 million, new addresses spiking 180% QoQ, total unique addresses surpassing 170 million, and total transactions surpassing 2 billion. The NFT and gaming sectors led the increases with the launch of the Reddit NFT marketplace and the hit game Benji Bananas. Despite the increase in accounts, total transactions dropped 10% QoQ to 256 million (-50% from all-time-highs), and TVL dropped 43% QoQ. The declines are attributable to Arbitrum and Optimism launching their respective liquidity mining campaigns and new users still demonstrating limited on-chain activity.

Decentralization and staking-related metrics were consistent. As of Sept. 30, 2022, there is a limit of 100 active validators at a time to maintain the quick two-second block times. The newly introduced Polygon Improvement Proposal 4 (PIP-4) proposes to increase the maximum validator set to 105, a potential first step in a progressive path towards decentralization. Additionally, Polygon set an all-time-high with 38% of total supply staked (+21% QoQ) due to the Polygon team staking their tokens received from the 2021 vesting unlock.

Polygon’s focus on ZK-scaling and aggressive business development continued. The unveiling and open-sourcing of the Polygon zkEVM was a monumental milestone, as it was the first open-sourced zkEVM. The business development team signed new partnerships with Acentrik, Disney Accelerator, Reddit, Robinhood, Starbucks, and Worldpay. The early success of the Reddit marketplace is an encouraging sign that the aggressive business development strategy is paying off.

By allowing independent teams to experiment with different scaling approaches, Polygon is fostering intense collaboration and information sharing. In the coming months, multiple scaling solutions are scheduled to go live on testnet or mainnet. Polygon is betting the future of Ethereum is ZK-scaling, so Polygon’s success will largely depend on its ability to quickly and effectively deliver its new ZK-solutions.

The Polygon ($MATIC) team recently announced that according to data from Web3 development platform Alchemy, there are currently over 53,000 decentralized applications (dApps) deployed on Polygon.

According to the blog post published by the Polygon team on 17 October 2022, this 53K figure “represents an increase of over 60% since June and almost an eightfold jump from the start of the year” and it is “the cumulative number of applications ever launched on both the mainnet and the testnet and represents a highwater mark of ecosystem activity.”

Polygon’s blog post went to say:

Monthly active dApps, a closer approximation of the number of live applications in the ecosystem, rose 29% since the end of last quarter to 17,800, Alchemy data show. The increase is fourfold from the start of the year.

The number of monthly active teams, the most direct measure of developer activity on the Polygon PoS chain, rose 27% to about 13,700. About 66% of the projects are building solely on Polygon, with the remainder also launching on Ethereum. A single team can have multiple dApps on the chain, not all of which are consumer-facing.

The adoption of Polygon on Alchemy led to a surge in the popularity of new decentralized finance (DeFi) applications and non-fungible tokens (NFTs) on the chain. With over 174.9 million unique user addresses and $5 billion in assets secured, Polygon PoS has processed more than 2.1 billion transactions till date.

On 19 October 2022, Polygon announced that it is helping Brazil-headquartered digital bank (i.e. internet only) Nubank to make the transition from Web2 to Web3:

Polygon’s blog post about this announcement said that FinTech firm Nubank, which was founded in 2013, is “partnering with Polygon to launch its cryptocurrency token and leverage the democratizing power of Web3” and that the Nucoin token will be “powered by Polygon Supernets technology, which allows for the creation of application-specific, scalable, and customizable blockchain networks.” Apparently, Nubank “plans to airdrop the digital token to its customers in the first half of 2023.” These tokens will “serve as the basis for its customers loyalty rewards program and will have benefits such as discounts and other advantages.”

Sandeep Nailwal, co-founder of Polygon, had this to say:

One of the largest digital banking institutions in the world, offering its own cryptocurrency is a strong testament to the utility blockchain and crypto have to offer. Nubank’s customer loyalty rewards program, powered by Polygon, will deliver the transformative benefits of blockchain technology to its customers, while acknowledging the shift happening in the traditional finance space.

Image Credit

Featured Image via Pixabay