Polygon (MATIC) is completely on fire.
Despite the sudden and historic market crash, MATIC’s overall secondary market performance over the past half month has been quite strong. Last week, Polygon became the first Layer2 project with a market cap of more than $10 billion, and MATIC recovered its losses quite quickly after stabilizing on the frightening night of 519, and even turned positive on a daily basis.
As of 11:30 on May 21, MATIC was quoted at $1.81, with a circulating market cap of about $11 billion, placing it among the top 15 cryptocurrencies in terms of market cap.
While secondary market trends are always unpredictable and difficult to capture, in Polygon’s case, booming fundamentals are undoubtedly the main reason for its explosion.
Polygon’s rapidly expanding DeFi footprint
In recent months, the Polygon network has been expanding at an impressive rate.
Aave, Curve, Sushiswap, 1inch, Opensea, Zapper and many other well-known projects in the ethereum ecosystem have deployed their own versions of Polygon and have accumulated considerable locked-in funds. As of this writing, the funds locked in Polygon version Aave have exceeded $5.8 billion; the funds locked in Curve and Sushiswap have also exceeded the $600 million mark.
One is that Polygon itself has previously launched a $100 million fund to drive adoption of DeFi on top of the network, with the aforementioned Aave, Cvure, and Sushiswap all benefiting from the fund, and users providing liquidity for these DeFi products while Users will also be rewarded with MATIC tokens from Polygon for providing liquidity to these DeFi products.
But it’s the second reason that matters most – as a native Layer2 of Ether, Polygon’s excellent EVM compatibility allows DeFi projects built on one layer of Ether to be easily migrated to the network with a few simple tweaks, while Polygon also offers far better performance and almost negligible performance than Layer 1. As Messari researcher Mira Christanto has previously noted, the Polygon network already has three times the transaction volume of Ether One, but the total network gas cost is only 0.01% of the former.
If you’ve been following Polygon’s official Twitter feed or joining the community for a long time, you can clearly see that If you’ve been following Polygon’s official Twitter feed or joined the community for a while, you’ve seen a marked increase in the speed at which Polygon announces new project integrations, from “one in a few days” at the beginning of the year to “several in a day” later on, and now, smaller projects are no longer being announced.
Awesome Polygon data shows that there are currently 273 Dapps in the Polygon ecosystem, and 59 infrastructure and development tools.
ViewBase data shows that MATIC tokens have been flowing out of exchanges for some time, and with the increase in on-chain lockups, it is easy to imagine that most of these MATICs flowing out of exchanges are being transferred to on-chain DeFi applications. Generally speaking, a decrease in the number of positions on exchanges is a positive indicator for the secondary market, and this may be one of the contributing factors to the strong performance of MATIC over the past period.
Interestingly, the continuous flow of MATIC tokens to the Polygon chain also creates a unique phenomenon, as MATIC tokens can only enter and exit the Tier 1 and Tier 2 networks through the Plsama channel, which takes only a few minutes to enter Tier 2 and a week to exit. This results in MATIC entering layer 2 very smoothly, but returning to layer 1 is not smooth, so the ERC 20 tokens in layer 1 network have a significant premium over the main network tokens. (mainnet coins only). I also tried to arbitrage, but found that this exit restriction of the Plsama channel made it difficult to do so due to the lack of exchanges that support both tokens.
The explosion of the on-chain ecosystem and the continued rise in coin prices has also brought Polygon higher attention. On the CoinGecko hot list, which can be used as an aid to determine market trends, MATIC and the other two phenomenal coins, DOGE and SHIB, have become the top three nail-biters, basically “living” on the list every day. “on the list.
In the previous extreme market, the gas cost of the Ethernet layer network once soared to over 1000 Gwei, which also pulled a new round of attention to Polygon. Cao Yin, a famous investor in the industry and managing director of Digital Renaissance Foundation, said in his personal circle of friends that if he hadn’t moved all his DeFi positions to Polygon long ago, he would probably have been liquidated under such extreme market, so it is expected that after this black swan, the amount of money locked on Polygon network will continue to soar.
Controversial and controversial, does Polygon count as Layer2 or not?
However, along with the increased attention comes not only praise, but also controversy.
On May 16, the same day Polygon was ranked among the top 20 cryptocurrencies by market capitalization, Uri Kolodny, co-founder and CEO of Starkware, another of the Layer2 circuit’s biggest stars, added a congratulatory note: “It’s worth noting that Polygon should be considered a sidechain, not Layer 2, which relies on ethereum for its security, which is not relevant (and often lower) than a layer.”
In response, Polygon co-founder Mihailo Bjelic issued a series of responses, the core of which included
Polygon is not a sidechain, but a complete scaling solution.
Polygon’s PoS chain has a fully decentralized set of verifiers and has $2.8 billion (May 16 data) pledged to secure the network; and
It is misleading to claim that Layer2 is more secure than a sidechain solution, such as StarkWare’s Rollup solution which has only one PoA running node that can go down or indulge in power over transactions.
Why would Starkware say this, and why would Polygon answer it? It starts with the Layer 2 iteration of the technology. How to expand the Ethernet Layer 1 network has been one of the main tasks in the cryptocurrency world for a long time. In the past history, various solutions such as stateful channel, sidechain, Plsama, etc. have had their own periods of glory, but eventually they all failed to become a common consensus in the community due to various limitations (such as the sidechain security issue mentioned by Kolodny and the Plsama exit time issue mentioned above). It was not until Rollup emerged, with the affirmation of V God and other big V’s and the research and promotion of many excellent teams, that the community gradually recognized Rollup as the basic route for Ethernet expansion.
Polygon’s predecessor is Matic Network, which started earlier, when the project was trying to scale Ether, Rollup consensus had not yet risen, and the direction the project chose at that time was to use sidechains for off-chain computing, while using the Plasma framework and decentralized PoS verification to ensure asset security and achieve scale. Matic Network completed the development of two scaling solutions – Plasma Chain and PoS Chain – based on this direction.
With the rise of Rollup consensus, Matic Network announced the upgrade to Polygon in January this year and decided to develop new scaling directions such as Optimistic Rollups, zkRollups, Validium, etc. to become the first Layer2 aggregator on the Ethernet chain. But up to now, Polygon has not completely completed the development of these new expansion directions, and for the time being, only Plasma Chain and PoS Chain are still able to operate stably.
This is also the reason why Starkware has “fired” at Polygon, whose PoS Chain solution is somewhat similar to a sidechain, officially defined as a “Commit Chain”. “The security of Polygon’s PoS Chain is not absolutely tied to ethereum, and Mihailo Bjelic himself has explicitly mentioned in response to community questions that “PoS Chain is not strictly speaking a Layer2.”
But as Mihailo Bjelic responded, Uri Kolodny’s accusations don’t seem to hold up so well.
For one, even if Polygon’s PoS Chain is not considered Layer2, it cannot ignore another solution, Plasma Chain, not to mention that Polygon has promised to develop new solutions such as Optimistic Rollups, zkRollups, and Validium.
Second, Uri Kolodny’s statement may give readers the impression that Polygon is not secure enough. But in fact, Polygon has previously closed all foundation nodes, the verifier nodes have been completely decentralized, and the total amount of pledges across the network has reached billions of dollars, which is at the forefront of all PoS-type networks. Previously, Polygon had over 14 million blocks out, with no security failures at the network level.
The discussion has attracted some attention within the overseas Layer2 community, but the domestic community presents a very different picture, with Odaily Planet asking a MATIC holder for his opinion and receiving a simple response: “Hahaha Starkware is sour.”
The words sounded blunt, but they didn’t seem to be gibberish. Looking at the development of the Layer2 track, Polygon is facing the question of whether to “develop the ecology first, then implement the Rollup solution” or “implement the Rollup solution first, then develop the ecology”. Polygon seems to be going in a very different direction from other headline projects.
Back at the point in time when Polygon and the other projects took a fork in the road (i.e., when the brand was upgraded in January), the Layer2 battleground still looked like one or two DeFi leaders with a star tier 2 project (e.g., Uniswap chose Optimism, Curve chose zkSync, dydx chose Starkware), and each was evenly matched. But in just a few months, the battle has changed dramatically, with Polygon welcoming strong application layer support from Aave, Curve, Sushiswap, 1inch, and others, while many projects have yet to release a fully public mainnet. It’s no wonder that the community is saying “the Layer 2 war is over before it even starts”.
From the perspective of the changing battlefield, Starkware’s statement is somewhat interesting.
It seems that there is no precise definition of Layer2, which is a relative concept to Ether Layer 1, but there is no specific limitation on how to interact with it. With the explosion of external EVM-compatible chains, external chains such as BSC, NEAR, etc. are sometimes considered as the generalized Layer 2 of Ether.
In this regard, Mihailo’s attitude is quite open – Polygon is defined as an Ethernet scaling solution, and it doesn’t matter whether it is called Layer2 or not, what matters is whether it empowers the Ethernet ecosystem.
Jaynti Kanani, another co-founder of Polygon, previously stated, “From the beginning, Polygon has had one mission – to drive mass adoption of ethereum.”
Polygon has not gone back on its word, as exemplified by the NFT game Aavegotchi, which was intended to be built on Ether, but the high cost of on-chain operations led to a lack of progress in development. Today, Aavegotchi’s product is maturing and the team has started working on redeploying the project back to ethereum.
Is the Layer2 war over before it starts?
At the end of the article, let’s talk about our personal opinion.
In the previous article, we mentioned this joke in the community, and I was really a headliner when I chose it as the title of the article.
As an “ethereum maximalist”, I always believe that the Layer2 track has unlimited development potential, which is much higher than Polygon’s current market cap of 10 billion.
At this point in time, Polygon is indeed the first to take a few big steps forward, but from its own perspective, the speed of implementation of new generation scaling solutions such as Optimistic Rollups, zkRollups and Validium will also determine the long-term development of the project.
As for the real war, it probably hasn’t been fought yet. Arbitrum, which is called the Layer2 version of Chainlink by an industry expert, will go live on the main network at the end of the month; Optimism has the support of Uniswap, the first leader of DeFi; Starkware also attracts the support of top venture capital institutions such as Sequoia; the project I personally look forward to the most, dare to challenge My most anticipated project, zkSync, which dares to challenge the epic problem of “zero-knowledge proof version of EVM”, will probably finish its big move soon.
To conclude with a quote from Mihailo: “The cake is very big, don’t rush.”
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/polygon-bursts-into-flames-and-layer2s-war-is-over-before-it-even-starts/
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