Polygon’s focus on building L2 infrastructure outweighs MATIC’s 50% drop from ATH

After a devastating 50% correction between Dec. 25 and Jan. 25, Polygon (MATIC) has been struggling to maintain the $1.40 help. Whereas some argue this top-15 coin has merely adjusted after a 16,200% achieve in 2021, others level to competing scaling options development.

MATIC token/USD at FTX. Supply: TradingView

Both method, MATIC stays 50.8% beneath its all-time excessive at an $11 billion market capitalization. At present, the market cap of Terra (LUNA) stands at $37 billion, Solana (SOL) is above $26 billion and Avalanche (AVAX) is at a $19 billion market worth.

A optimistic notice is that Polygon raised $450 million on Feb. 7, and the funding spherical was backed by a few of blockchain’s most appreciable enterprise funds, together with Sequoia Capital.

Polygon provides scaling and infrastructure help to Ethereum Digital Machine-based (EVM) decentralized purposes (DApps). In addition to, it isn’t stricken by the excessive transaction charges and community congestion that influence the Ethereum community.

Nonetheless, as proof-of-stake layer-1 networks emerged and supplied low-cost sensible contract capabilities, it vastly elevated the competitors for Ethereum community decentralized finance (DeFi), nonfungible token minting, marketplaces, crypto video games, playing and social purposes.

Compared, Terra’s complete worth locked elevated by 340% between July and December 2021, reaching $12.6 billion. Equally, Avalanche’s sensible contracts deposits elevated from $185 million to $11.11 billion in the identical interval.

The usage of Polygon’s scaling answer is declining

Polygon’s main DApp metric began to show weak point in August 2021 after the community‘s TVL dropped beneath 4 billion MATIC.

Polygon Whole Worth Locked, MATIC. Supply: DefiLlama

The chart above reveals how Polygon‘s DApp deposits peaked at 7.4 billion MATIC in July 2021, then drastically declined over the subsequent couple of months. In greenback phrases, the present $3.5 billion TVL is the bottom quantity since Could 2021. These figures characterize lower than 5% of the combination TVL (excluding Ethereum), according to DefiLlama information.

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One other optimistic is that on March 9, Ankr, a multi-chain toolkit for blockchain infrastructure, enabled a token bridge between Ethereum and Polygon. The primary launch will enable the aMATICb liquid staking token to be despatched and saved. This allows customers to earn extra layers of rewards on DeFi platforms.

To substantiate whether or not the TVL drop in Polygon is troublesome, one ought to analyze DApp utilization metrics. Some DApps, reminiscent of video games and collectibles, don’t require giant deposits, so the TVL metric is irrelevant in these circumstances.

Polygon DApps 30-day on-chain information. Supply: DappRadar

As proven by DappRadar, on March 10 the variety of Polygon community addresses interacting with decentralized purposes grew by 5% versus the earlier month. Regardless that Polygon’s TVL has been hit the toughest in comparison with comparable sensible contract platforms, there may be stable community use within the gaming sector, as measured by Loopy Protection Heroes’ 199,260 energetic addresses within the final 30 days.

On Nov. 16, Polygon launched its zk-STARK-powered Miden Digital Machine, a zero-knowledge Scalable Clear ARgument of Data. Polygon has additionally dedicated over $1 billion for growing complicated DeFi purposes that want delicate info redacted on digitized property, lowering their dimension for quick verification by blockchain individuals.

The above information counsel that Polygon is holding its floor versus competing chains, and people holders may not fear an excessive amount of about MATIC’s 50% worth correction. Polygon’s ecosystem continues to flourish, and the truth that it provides a lot demanded layer-2 scaling options for a number of industries will be considered as a bullish issue.

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The views and opinions expressed listed below are solely these of the author and don’t essentially mirror the views of Cointelegraph. Each funding and buying and selling transfer entails threat. It is best to conduct your individual analysis when making a call.

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