After a devastating 50% correction between December 25 and January 25, Polygon (MATIC) has been struggling to hold the $1.40 support. While some argue that this top 15 coin has merely adjusted after a 16,200% gain in 2021, others point to the growth of competing scaling solutions.
Either way, MATIC remains 50.8% below its all-time high with a market cap of $11 billion. Currently, the market capitalization of Terra (MOON) amounts to $37 billion, Solana (SUN) is above $26 billion and Avalanche (AVAX) has a market value of $19 billion.
A positive note is that Polygon raised $450 million on Feb. 7, and the funding round was backed by some of the biggest blockchain venture funds, including Sequoia Capital.
Polygon offers scaling and infrastructure support for decentralized applications (DApps) based on Ethereum Virtual Machine (EVM). Also, you are not affected by the high transaction fees and network congestion that plague the Ethereum network.
However, as proof-of-stake layer 1 networks emerged and offered low-cost smart contract capabilities, competition for the Ethereum network's decentralized finance (DeFi), minting of non-fungible tokens, markets, crypto games, gambling and social apps.
By comparison, Terra's total value locked increased 340% between July and December 2021, reaching $12.6 billion. Similarly, Avalanche smart contract deposits increased from $185 million to $11.11 billion in the same period.
Usage of Polygon's scaling solution is declining
Polygon's primary DApp metric began showing weakness in August 2021 after the network's TVL fell below 4 billion MATICs.
The graph above shows how Polygon's DApp deposits peaked at 7.4 billion MATICs in July 2021 and then declined sharply in the coming months. In dollar terms, the current TVL of $3.5B is the lowest number since May 2021. These numbers represent less than 5% of the aggregate TVL (excluding Ethereum), according to DefiLlama data.
Another positive is that on March 9, Ankr, a multi-chain toolkit for blockchain infrastructure, enabled a symbolic bridge between Ethereum and Polygon. The first launch will allow sending and storing the liquid participation token aMATICb. This allows users to earn additional layers of rewards on DeFi platforms.
To confirm if the TVL drop in Polygon is problematic, DApp usage metrics should be analyzed. Some DApps, such as games and collectibles, do not require large deposits, so the TVL metric is irrelevant in those cases.
As shown by DappRadar, on March 10, the number of Polygon network addresses interacting with decentralized applications grew 5% compared to the previous month. Although Polygon's TVL has been hit the hardest compared to similar smart contract platforms, there is strong use of the network in the gaming sector, as measured by Crazy Defense Heroes' 199,260 active addresses in the last 30 years. days.
On November 16, Polygon launched its zk-STARK-powered Miden virtual machine, a zero-knowledge, scalable transparent knowledge argument. Polygon has also committed more than $1 billion to develop complex DeFi applications that need sensitive information redacted into digitized assets, reducing their size for quick verification by blockchain participants.
The above data suggests that Polygon is holding its own against competing chains, and those incumbents may not care too much about MATIC's 50% price correction. The Polygon ecosystem continues to flourish, and the fact that it offers highly in-demand Layer 2 scaling solutions for multiple industries can be seen as a bullish factor.
The views and opinions expressed herein are solely those of the Author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should do your own research when making a decision.
Post navigation
