As decentralized finance (DeFi), and nonfungible tokens(NFT) become more popular, the growth of layer-two protocols is one of the most important stories for 2021. This has led to transaction costs rising on Ethereum (ETH), effectively pricing out many participants.
The Polygon network (formerly MATIC) emerged earlier this year as one of top contenders for an Ethereum layer-2 scaling solution. Additionally, the QuickSwap deFi platform from the project was one of the most successful Uniswap clones.
Although the platform was popular at first, there were many discussions about Polygon as other platforms such as Arbitrum and Optimism. Some traders even call the platform “slow”. Flipside Crypto data shows that Polygon’s low-cost capabilities were under attack following the cleverly designed arbitrage bot which turned 14 Ether into 218.5 Ether within four months.
Each block was filled with “meaningless transactions”.
Flipside Crypto data shows that the attack started in May and reached its peak in June when transactions on the Polygon network reached 8 million per hour. The maximum number of transactions on Ethereum was also at 1.2million during the same period.
Comparison of the number of transactions on Ethereum and Polygon. Source: Flipside Crypto
According to data found on a Polygon forum, the attacker was inflating transaction volumes up to 90% by filling every block with “meaningless transactions”. He only had to pay 0.02 MATIC for spamming the block and approximately $1,000 per day.
Deeper analysis of transactions and addresses on the network revealed that 30% of transactions were coming from two contracts that have been identified as arbitrage bots. These bots conduct thousands of transactions daily to different decentralized exchanges (DEX).
It is not clear why the spammer filled each block, even though bots were conducting between 2,000 and 4,000 trades per hour. However, one theory suggests that it was done to stop anyone else from running the trade.
Related: Polygon could hit $3.50 Q4 when MATIC’s 20% weekly rally triggers bullf flag setup
On average, the bot made $6,800 per day in profit
The bot was capable of growing an initial amount 14 Ether to 218.5 Ether over 120 days. It is currently worth $813.694.
This amounts to approximately $6,800 per day before you include the cost of spamming the network.
Polygon’s team decided that increasing the minimum transaction cost from 1 to 30 gwei was the best way to combat spammers and improve network health.
It appears that the move achieved its goal. Data provided by Delphi Digital indicates that the spike in transaction costs coincided closely with a sharp decline in daily transactions. Spamming the network for an entire day now costs $30,000
Average gas cost per Polygon based on daily transaction count Source: Delphi Digital
According to network data, spam transactions have fallen from 2 million transactions per day to 500,000, which is a 75% decrease, but still account for 16.7% daily transactions. The bots are spending approximately $5,000 on gas each day to keep the scheme going.
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