The bright future of Polygon | Analysis

Hello,?

We have been writing the crypto-based newsletter for quite some time on various avenues and we thought there is an audience on LinkedIn as well looking for such dedicated and detailed content made in an interesting way.?

In this edition, despite the bear market, it is a great time to look at projects, analyze them, and scrutinize their future, in order to invest in their cryptos when you think the time is right. So this week, we do a deep-ish dive into Polygon – the pride of the Indian crypto ecosystem.

The big story

Analysis of Polygon and Matic?

Platform/Coin?Basics

The future of Ethereum lies in the products which are built on top of it. Ethereum is like an app store, but for Web 3.0. It is a blockchain ecosystem on top of which other decentralised apps with specific purposes can be built. But it is not easy for dApps to be built on Ethereum, because, being a blockchain where every transaction needs to be validated by the entire network, scaling is tough. With the transactions-per-second capabilities of the network only slowly increasing, how can makers of dApps use the blockchain to build their apps?

That’s where Polygon comes in. Polygon provides scaling solutions for Ethereum developers. Scaling solutions help a blockchain to deliver more transactions at lower cost by processing transactions off-net. This can be done by using “layer 2” technologies, and Polygon uses what are called Zero-Knowledge (ZK) rollup solutions. All these are new terms for you? Take a quick break from this issue and read up on layer 2 tech from one of our previous issues here.

Polygon is now developing seven scaling solutions ranging from various zk-rollup to side chains to engineering infrastructure such as SDK.

Polygon has a wide-ranging product stack, and its token is called Matic. More details on this below.

Numbers

USD 11 Billion

Market cap of Polygon

USD 450 Million?

Amount of money raised so far.?

35x

Returns of the Matic token since inception

500

dApps already onboarded on Polygon Studios

100,000

Gamers already using the Polygon Studios

If we benchmark Polygon’s valuation against the largest Indian banks, it would rank as the seventh-largest financial institution in India.?

Source: Messari

People and Organisation?

Polygon started in 2018 as a joint effort between Bjelic – who was experimenting with Plasma rollups – and Jaynti Kanani, Sandeep Nailwal, and Anurag Arjun, the three of whom had been working on another scaling blockchain, Matic Network.

At that time, the joint entity combined the products under its belt, mainly the blockchain SDK development framework developed by Bjelic and the Plasma rollup and Matic sidechain, powered by the MATIC token.

Unfortunately, blockchain researchers discovered the data availability problem shortly thereafter (discussed further in the report), leading to Plasma being deprecated for other solutions. The resulting period of time left the team focused on the Matic sidechain, the SDK framework (later renamed to Edge), and in search of the next steps.?

Around February 2021, the team announced the rebrand from Matic Network to its current Polygon name and announced its strategy to become a cross-chain hub for Ethereum. Its new goal would be to function as a company for a host of multichain services. Offering an emerging suite of products would become the new focus for the company, starting with the user-facing product that had survived since the beginning: Matic Network, which has now rebranded to Polygon Proof-of-Stake (PoS).

Polygon’s Product Stack

Polygon’s suite of products includes the aforementioned PoS sidechain and six ZK-supported projects. Out of those six, three of them (Hermez, Miden, and Zero) are direct ZK Rollups, another (Nightfall) is a privacy-enabling Optimistic rollup with ZK cryptography, while the remaining two (Avail and Edge) are designed to help build ZK and modular infrastructure.

Low-security products are akin to standalone chains with independent validators while high shared security products are full Layer-2 rollups entirely dependent on Ethereum.

Source: Messari

Partnerships

Polygon maintains relationships with four organizations, though the company does not have the decision-making authority to invest capital. These four organisations are:?

Wintermute:? Partnership with a $20 million fund to support project liquidity, business development, and token exchange listing purposes

776: Collaboration with a $200 million general-purpose fund investing in Web3 and other crypto-native applications

Outlier Ventures: Polygon-based accelerator designed to foster mentorship and collaboration with the venture team at Outlier Ventures.

StableNode: Partnership with a blockchain node management operator experienced in providing hands-on services such as staking, governance, and more

Polygon Ecosystem Fund

The $100 million Ecosystem Fund manages all of Polygon’s corporate investments. This includes joint investments with the Polygon Studios team. So far, $15 million from the fund has been deployed across 50 global projects. The team is still actively searching for investment opportunities.

Polygon Studios

In 2021, Polygon launched Polygon Studios, its internal unit aimed at drawing existing gamers toward blockchain games. Polygon Studios collaborates with ambitious NFT projects and marketplaces to scale user bases across a low-cost platform.

More than 100,000 gamers and over 500 apps are already onboarded. The team has announced partnerships with both crypto-native projects such as The Sandbox, Decentraland, and OpenSea, along with traditional entertainment brands such as DraftKings, Electronic Arts, and Atari.

Vibe?

Aside from its prominent reputation in the global crypto community, it’s important to also focus on Polygon’s role in the crypto community in India. The company’s status as an Indian-founded startup unicorn has helped validate the industry in the eyes of sceptics and encouraged more of the nation’s youth to experiment with crypto.

Polygon has also taken an active role in investing in its community. Polygon frequently sponsors, mentors, and judges hackathons in India. It was heavily involved with ETHIndia.?

Tokenomics?

MATIC had a great start to 2021 – rising from under $0.02 to $2.45 in 5 months. After reaching a high of $2.85 in November 2021, the token has been impacted by the bear market that followed. It is currently trading at just above $0.7 – still a significant 35x from the start of 2021.

MATIC’s performance is eventually tied to the adoption and use of the Ethereum blockchain as it is a scaling solution for the same. Investors who believe in Ethereum blockchain can spread their risks and invest a share of their portfolio in MATIC.

Performance of MATIC

Source: Coinmarketcap

?Special Mentions

Funding

Notable names such as Sequoia Capital India, Andreeson Horowitz, Tiger Global, Union Square Ventures, Galaxy Digital, and others have backed the company, signalling faith in the team and alignment with the company’s vision.

Source: Messari

The Final Word?

The next few years will be competitive for Layer 2 scaling solutions like Polygon. Winners will be decided by determining which has the best ease of use, transaction speed, and transaction cost. Polygon is striving to meet this demand with its suite of rollup solutions. Its aggressive 2021 growth strategy, by acquiring and onboarding different ZK projects, now ensures Polygon’s portfolio offers something for everyone. The suite of products gives Polygon a significant moat. As long as it can draw projects to its platform, Polygon will continue to remain a big industry participant for years to come.

Disclaimer: Crypto-asset or cryptocurrency investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.