Hey, friends!
Today I’m doing a deep dive on Polygon.
For those of you who were around in the last bull run may remember that $MATIC almost touched $3.
A lot has happened on the business development and innovation side for $MATIC after this, and the price is a lot lower now.
Let’s look at the opportunities and the current narratives in the Polygon ecosystem.
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The Bull Case For Polygon ($MATIC)
Let's talk about Polygon.
Polygon is a layer 2 scaling solution in rapid growth that runs alongside the Ethereum blockchain providing faster transactions and lower fees.
Polygon describes itself as a Swiss Army knife of Ethereum scaling and infrastructure development.
Let's take a look at all the opportunities in the ecosystem.
First, Polygon and MATIC are often used interchangeably but have clear differences.
Polygon is a layer-2 scaling infrastructure on the Ethereum blockchain, while $MATIC is its native token used to power the ecosystem. The token $MATIC is currently sitting at an 11B mcap.
Why Is Polygon Interesting?
Ethereum is the blockchain development platform of choice, but it has its limitations (eg. poor user experience, network congestion, and low throughput). Polygon is a Layer-2 scaling solution created to help bring mass adoption to Ethereum providing faster transactions and lower fees.
Polygon is designed to allow dApps to speed up payments, enabling nearly instant payment settlement through a specialized application programming interface (API) and software development kit (SDK).
This thread is not going to be about technical details, so let’s instead look at why the Polygon ecosystem is interesting.
If you want to deep dive more into the tech, check out this thread:
Upcoming Catalysts For Polygon
Business Development & Projects Migrating to Polygon
On a large scale, crypto is relatively small compared to where the total amount of money sits. The figure below illustrates this point. For example, we can see that the Amazon mcap is bigger than the combined value of all cryptocurrencies.
My point: crypto is still a niche.
Polygon is changing this by trying to bring the world to web3 (crypto).
Polygon has partnered with Disney, Reddit, Nubank, Starbucks, Meta, Addidas, Adobe, Stripe, Mastercard, NFL, Liverpool, and Nike+++.
Some of the biggest brands in the world are adopting Polygon as their blockchain of choice. Most of the projects utilize the low-energy use sidechain to mint NFTs for their brands. NFTs seems to be one of the best ways for normies to discover crypto, and in what better way could they discover crypto than by using brands they’re already familiar with?
At the end of 2022, we also saw major Solana projects - DeGods and Y00ts, announce their move to Polygon. This gave Polygon network a huge boost. We also saw Korea’s popular metaverse platform, OrbCity, announce its shift to the Polygon network.
Disrupting Traditional Finance
Stablecoins
As @paddi_hansen writes: “The total value settled with stablecoins is rising in the bear market, reaching over $7 trillion in 2022. For comparison, Mastercard processed $2.2 trillion in value in 2022”. Check out his full thread below.
Senior analyst at Cumberland, @SteveGoulden8 says that banks, payments firms, and e-commerce giants are increasingly seeing the potential in stablecoins and are quite rightly concerned about being disrupted. Stablecoins will likely disrupt the current system and as such threaten a key source of zero-cost funding for retail banks. Polygon seems like one of the more interesting crypto layers to settle on for TradFi.
Read more of Steve’s thoughts here in this thread starting from this tweet:
Polygon Supernets
Supernets are application-specific blockchains with higher performance. It allows you to create your own powerful blockchain network (in other words it allows a project to spin up an appchain, without having to maintain a blockchain).
If supernets would require $MATIC staking that could lead to a buying pressure of $MATIC = higher price.
Gaming
Firstly, Polygon works with some of the best partners in gaming (see picture below).
Secondly, Polygon PoS has some major benefits that will help them become one of the best places for gaming: high speed (65,000 TPS), low cost, scalable, and flexibility. If web3 gaming really takes off we could see increased gas spending and therefore an increase of demand in $MATIC = potentially higher price
zkEVM
This is another development on the road to helping scale Ethereum (better UX and even lower fees).
President at Polygon Labs @Fwiz, recently said:
“Polygon's zkEVM is the first Zero Knowledge scaling solution that’s fully equivalent w/ ETH: all existing smart contracts, dev tools, & wallets work seamlessly”
and co-founder @sandeepnailwal said the launch date is soon.
Late Q1 or Q2 2023 maybe?
EIP-4844
Senior analyst at Cumberland, @SteveGoulden8, thinks that post the ETH Shanghai upgrade, the Ethereum community will begin to focus on EIP-4844, which will reduce the cost and increase the throughput for L2s —> $MATIC could be a direct play on this narrative.
Polygon DeFi
We’ve looked at some catalysts, but what about the current state of Polygon DeFi? And which DeFi protocols look interesting?
Stats from DeFiLlama shows that Polygon currently has a TVL of 1.2B, and is the fifth-largest chain, a number I think will increase a lot going into the next bull run due to the implementation of zkEVM (could we see a “steal” of TVL from eg. Arbitrum and Optimism?)
AMM/DEXs (Trade, swap, stake, lend & farm with low fees)
Lending/Borrowing (earn yield while lending, borrow to increase leverage):
Yield aggregators (auto-compounders):
Yield/Services:
Derivatives/Options/Copy Trading:
Liquid Staking/Staking:
NFT marketplace:
Personally, I’m pretty excited about @GainsNetwork_io which I really got my eyes open for when the Binance FUD in November 2022 appeared due to FTX going under. Gains Network is a decentralized trading platform for perps.
Also enjoy the Synapse Protocol bridge, which is probably the bridge I use the most. I even wrote a thread about Synapse back in April 2022, check it out here:
Other than that it’s worth mentioning that if you want to try copytrading, you should check out @NestedFi, which is a social copytrading platform.
I am a partner at Nested, and will soon share my portfolio there if you want to copy my trades.
More about this later.
Price Comparision L2s and some L1s
Here is a comparison of the biggest L2s and some of the major L1s. $MATIC up 60% for the year and lagging behind the other names.
Yes, it has a bigger mcap, but the narratives around Polygon are strong, and I think it has more upside as long as $BTC keeps stable.
But don’t take my word for it, I don’t know if this is a good time to buy. We’re in a bear market after all.
But if we see a de-risking in crypto, people will flee to safer havens (mainly $BTC and $ETH, but also higher mcap alts like eg. $MATIC).
Here is a chart of $MATIC alone. Up 60% since the start of 2023.
In the future, Polygon hopes to expand beyond Ethereum and be used for other blockchains that are creating their own DeFi ecosystems.
To summarize this thread, Polygon looks like an ecosystem that has a strong momentum going forward:
Cooperation with “real-world” companies
Disrupting TradFi
Gaming Narrative
Polygon Supernets
zkEVM
NFTs
Lots of dApps looking to deploy on Polygon
That's it for today, friends!
See you next week.
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another great one, thanks a lot! 🙏
Waiting to see what price level can Polygan can reach next bull market. thank you for sharing.