Polygon (MATIC), which suffered a 50% correction between December 25 and January 25, has struggled to maintain the $1.40 support. Some argue that the top-15 coin has only adjusted following a 16.200% increase in 2021. Others point to scaling alternatives growth.
MATIC token/USD at FTX. Source: TradingView
MATIC is still 50.8% lower than its $11 billion peak. Currently, Terra’s market cap is $37 billion. Solana (SOL), at $26 billion, and Avalanche, (AVAX), at $19 billion.
Positive news is that Polygon raised $450 Million on February 7, 2018. The round was supported by Sequoia Capital, one of the largest venture funds in blockchain.
Polygon provides infrastructure and scaling support for Ethereum Virtual Machine-based decentralized applications (DApps) (EVM). It is also free from network congestion and high transaction fees that can negatively impact the Ethereum network.
However, proof-of-stake layer-1 network technology was created and provided low-cost smart contract capabilities. This greatly increased competition for Ethereum network decentralized financing (DeFi), nonfungible token minting, marketplaces and crypto games.
Terra’s total value locked increased 340% between July 2021 and December 2021 to $12.6 billion. Similar results were seen in Avalanche, where smart contracts deposits increased by $185 million to $11.11 trillion during the same time.
Polygon’s Scaling Solution is decreasing in popularity
After Polygon’s TVL fell below 4 billion MATIC, Polygon’s primary DApp indicator began to show weakness in August 2021.
Polygon Total Value Locked MATIC. Source: DefiLlama
The chart below shows that Polygon’s DApp deposits peaked in July 2021 at 7.4 Billion MATIC. They then dramatically declined over the following months. The current $3.5 billion TVL, in dollar terms is the lowest since May 2021. According to DefiLama data, these figures are less than 5% of aggregate TVL (excluding Ethereum).
Ankr, a multichain toolkit for Blockchain infrastructure, has enabled a token bridge between Ethereum (Polygon) and Polygon on March 9. The first release will enable the aMATICb liquid staking to token to be sent, stored and transferred. This allows users to unlock additional rewards through DeFi platforms.
Analyzing DApp usage metrics can help confirm if the TVL drop in Polygon has been problematic. Some DApps such as collectibles and games don’t require large deposits so the TVL metric doesn’t apply.
Polygon DApps 30-day On-Chain Data. Source: DappRadar
DappRadar shows that the number of Polygon network address interacting with decentralized apps increased by 5% on March 10, compared to the previous month. Although Polygon’s TVL was hit the most by smart contract platforms like Smart Contract Platforms, there is still solid gaming sector use, according to Crazy Defense Heroes’ 199.260 active addresses over the past 30 days.
Polygon’s zk-STARK powered Miden Virtual Machine was launched on Nov. 16. It is a zero-knowledge Scalable Transparent Argument of Knowledge. Polygon also has committed more than $1 billion to develop complex DeFi applications, which require sensitive information to be redacted from digitized assets. This reduces their size for quick verification by blockchain participants.
These data show that Polygon is holding firm against competing chains. Those who hold the shares might not be too concerned about MATIC’s price correction of 50%. Polygon’s ecosystem is thriving and its ability to offer layer-2 scaling solutions that are highly sought after by multiple industries can be considered a positive factor.
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Eileen Wilson –Technology and Energy
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