Token of the Month

Key Takeaways

  • Near term growth will continue to be driven by Polygon’s ability to attract popular DeFi protocols onto its platform as well as, incentivize users to pool their capital onto the Polygon network.
  • Its suite of scaling solutions makes the Polygon network “sticky” for projects.
  • EIP-1559 could be just as bullish for Polygon as it is for Ethereum.

Brief Overview

Polygon, formerly known as Matic Network, is an all in one scaling platform helping to solve network congestion problems on the Ethereum blockchain. Polygon offers Ethereum developers a suite of tools in order to build decentralized and scalable applications. Since Polygon is EVM compatible, Ethereum developers can easily transfer their application onto Polygon as well. Currently, Polygon enables developers to scale their Ethereum application via two side chain solutions: Proof-of-Stake (PoS) Commit Chain or its More Viable Plasma (MoreVP) Scaling Solution. However, Polygon also plans to roll out several Layer 2 scaling solutions such as Zk Rollups, Optimistic Rollups, Stand-Alone Chains and Shared Security Chains in the near future. Polygon makes checkpoints on Ethereum to inherit some of its security. Its native token, MATIC, is primarily used to pay for fees and gas on the network and can be staked by participants in the network.

Recent Success

Although Polygon is just one of just many scaling solutions hoping to ameliorate Ethereum’s congestion problems, Polygon has been the most successful to date. Its PoS blockchain has already attracted over 80 Ethereum Dapps onto the Polygon network. Since its rebrand from Matic Network to Polygon in February the platform has already garnered a total of $4.9B in total value locked (TVL). Likewise, the scaling solution has attracted several of the largest blue chip DeFi projects from Ethereum such as; Sushiswap, Curve and Aave. With over 3M in daily transaction volumes, investors have been cognizant of the platform’s success, bidding up the token over 5000% YTD.

Investment Thesis

Polygon’s rapid rise to dominate market share in the Ethereum scaling space has and will continue to be driven by the scaling solutions ability to attract popular Ethereum based projects onto its platform, while also incentivizing user adoption. To give a few examples of Polygon’s recent success, the scaling solution has rolled out successful liquidity mining campaigns across several of the most popular Ethereum based DeFi protocols. Its $5M liquidity mining campaign on Curve Polygon has incentivized investors to pool over $350M of TVL onto the platform in just under a month. Polygon’s most recent liquidity mining campaign on Sushiswap, which has been live for just over a week, has seen its $30M campaign attract over $400M onto Sushiswap Polygon. Finally, its most successful campaign, which offered $40M in liquidity mining rewards to Aave Polygon users, has seen over $4B in TVL pooled on its platform in just over a month of the campaign’s launch. Polygon should continue to be able to replicate its prior success as its recent launch of its $150M ecosystem fund is designed to continue to attract both projects and capital onto the network.

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BKCoin Capital LP

BKCoin Capital LP

BKCoin Capital LP is a New York-based digital asset quant hedge fund dedicated to delivering consistent uncorrelated absolute returns.