Polygon raised $450 million & Core updates to scale Ethereum

The Polygon ecosystem is developing quickly with important updates, such as EIP-1559 and Zk-Rollup. Let's follow the steps of the ecosystem with our Panorama Series to capture information and not miss out on any investment opportunities.

lochoang

Published Mar 06 2022

Updated Jun 04 2024

5 min read

Important Updates on Polygon Ecosystem

Polygon raised $450 million in a funding round

On February 7, 2022, Polygon raised up to $450 million through a private sale of their MATIC token, led by Sequoia Capital India with other 40 highly respected investment firms such as SoftBank Vision Fund 2, Galaxy Digital, Galaxy Interactive, Tiger Global, Republic Capital and others.

This event marked a major milestone for the Network as the largest funding round since the project’s founding in 2017. The funds will allow Polygon to accelerate the developments of the network by investing in cutting-edge technology such as ZK for mass adoption of Web3.

EIP-1559 Upgrade

Polygon’s core development team is rolling out a testnet implementation of Ethereum Improvement Proposal 1559 to introduce burning of its native MATIC token and better fee visibility.

EIP-1559 gets rid of the first-price auction as the main mechanism for fee calculation. Instead, there is a discrete base fee for transactions to be included in the next block and a priority fee to speed up processing. The base fee, which fluctuates depending on network congestion, is then burned.

⇒ MATIC is a hard-capped token supply. As people use Polygon, the transaction fees will be burned in MATIC. This means that the finite supply of MATIC will be burned as more people use the network. Eventually, as demand goes up and supply goes down - the underlying price of the MATIC token will be increased.

Polygon partnered with NFL

The NFL is the most-watched sport in the United States and one of the most popular in the world today. The launch of Super Bowl ticket NFTs along with other NFT series will be hosted on the Polygon blockchain.

The partnership with Polygon highlights how the NFL is recognizing the opportunity in the NFT space and the benefits of item collectability. Along with being a low-cost platform, partnering with such a popular name in the sports world will help Polygon promote the project's brand to more users in the future.

Polygon ZK Roll-up

Polygon has allocated $1B funds from the Polygon Treasury in August 2021 for the development of the Ethereum ZK-based L2 scaling solution. The network spent $650M so far including two significant events:

August 2021: Polygon Network acquired Hermez Network for $250M, Hermez's team of 26 employees will also join Polygon's 80-person team to develop a ZkEVM solution.
December 2021: Announced the acquisition of MIR for $400M and launch of Polygon Zero, a Zk Rollup solution using plonky2 Proof.

The blockchain industry is still in an early phase when it comes to scaling and blockchain infrastructure in general. As can be seen, Polygon allotted large funds and effort to focus on developing ZK roll-up. This is also considered the "end game" for blockchain scaling as the team plans. Whether it develops effectively or not, it will take a long time to monitor the network's movements and indicators in the near future.

The Coin98 team will keep you updated with important developments of this event.

Polygon Ecosystem Analysis

The number of Daily Active Users of the network has shown a significant decrease with just over 300,000 users compared to the All-Time-High number in January 2022 with nearly 600,000 users. This is partly due to the influence of the market being in high volatility, the level of hype will not be the same as before.

Following that, the number of daily transactions has also decreased significantly and is maintaining at around 2.5 million transactions a day since February 2022.

Although there are many dApps built on Polygon, the majority of users who maintain activities on the network are mainly in the gaming segment. The lack of innovations in the ecosystem when compared to other chains has slowly attracted more users to use Polygon's network for the time being.

The lack of innovation in important areas of the DeFi ecosystem partly affects the retention of long-term users to stay with Polygon. Let's take a look at some of the key projects in the Polygon ecosystem.

DEX & Lending

In the past month, Aave has been affected the most by the strong market volatility. The project's Total Value Locked has decreased by up to 40% in February 2022. This is understandable when at this time the use of collateral in the lending segment will bring less efficiency and investors will tend to find platforms that bring more stable profits.

Contrary to Aave, Curve and Quickswap are two DEX platforms that have seen decent growth of 32% and 15% respectively in a month. It is also understandable that these two platforms offer more secure options to bring profits to investors.

Typically, Quickswap is a platform built exclusively on Polygon that still maintains stable liquidity at an average of $750 million USD per day.

Gaming

Polygon is an ideal place for gaming projects that can attract users due to its fast network speed and low cost. As can be seen, there are many users on Polygon who focus on the Gaming segment when 6 of the top 10 most used projects belong to this segment.

Apparently, the launch of Polygon Studios with the objective to focus on the two main segments of the blockchain today, NFT and Gaming, has achieved a good effect in attracting users to the network.

However, with the current situation of the Gaming segment with many problems in terms of tokenomics and gameplay, users tend to switch to new games to bring excitement to the game as well as many incentives in different gameplay styles. This will be a challenge in the future with the goal of becoming the leading platform in these two areas.

NFT Marketplace

Opensea is the largest and most popular NFT marketplace in the market. Looking at the parameters of Polygon on Opensea will help us somewhat understand the current status of this network.

Polygon's monthly volume on Opensea has not had too many significant changes and is maintaining at $65-70 million in February 2022. However, NFT sales have decreased significantly by 30% since January 2022. This shows that currently there are fewer NFTs minted on the network, although the volume remains stable.

Among them, there are some outstanding projects like Decentral Games Ice Poker that are achieving a much higher volume than others with sales volume up to 901 ETH (2.5M USD).

Conclusion

In general, the Polygon network is still having quite stable development progress and focusing on the NFT and Gaming segments. With important updates like EIP-1559 or the ZK Roll-up that will partially improve current problems, Polygon will still be an ideal place to attract projects and users in the near future.

Hope you have fully grasped the situation of Polygon in the last months. If you have any questions or concerns, leave them in the comment section below.

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