(This article is reproduced from my personal Substack, you can read it on the Haodu version there)

Good morning, fellow angel investors 👼

If you believe that the future of blockchain is a combination of Web2 and Web3, then you can’t miss the project we’re studying today: Polygon. This project gained major Web2 giants as partners in the last bull market (Nike, Starbucks...), and it can be said to be one of the best marketing and most out-of-the-box Web3 projects in the currency circle. In today’s report, we start from the fundamentals to see whether Polygon can continue to shine in this bull market, what positive events there are, and my currency price analysis and layout ideas for $MATIC.

Article directory
0.0 Polygon Introduction
1.0 Polygon Team
2.0 Polygon Products and Services
3.0 Polygon Future Outlook
4.0 Polygon Profitability
5.0 Risks & Challenges of Polygon
6.0 My predictions and thoughts ($MATIC/$POL currency price)
7.0 References

0.0 Polygon project introduction

The predecessor of Polygon is called MATIC Network. Its main mission is to solve the problem of frequent congestion in the Ethereum blockchain and enhance the "scalability" of Ethereum. Polygon’s main product is called Polygon POS, which is an “Ethereum side chain” launched in December 2020. Because it is EVM-Compatible, many Ethereum Dapps can be painlessly transferred to Polygon.

As Ethereum moves in the direction of "Layer2+ modularization", the "scalability" problem seems to have been solved, but another problem has arisen: "Ethereum L2 and L2 cannot be connected, resulting in the dispersion of assets and users. Not a good experience."

Therefore, Polygon announced its transformation in June 2023 and released the Polygon 2.0 plan: introducing the "Aggregation Layer" in an attempt to create a middle layer built on Ethereum to enhance interoperability between chains.

Polygon can be said to be the industry leader in "Zero-Knowledge Technology". If you want to describe Polygon's current strategic layout in one sentence, it must be: "All In on Zero-Knowledge Technology!" You will wait for " Core products" see here

1.0 Polygon Team

1.1 Project Team

The construction team behind the construction of the Polygon blockchain is called Polygon Labs. It was founded in 2017 by a group of engineers from India, including Jaynti Kanani, Sandeep Nailwal, Anurag Arjun, and Mihailo Bjelic. However, in 2023, due to various reasons, Polygon Labs' senior management was reorganized. :

• In March 2023, Anuraj Arjun (co-founder) left Polygon to continue building Avail (a spin-off project from Polygon Labs)

• In July 2023, Ryan Wyatt (then CEO) decided to step down

• In October 2023, Jaynti Kanani (co-founder) chose to leave Polygon for no particular reason

After the reorganization, Sandeep Nailwal currently becomes the chairman of Polygon Labs, and the CEO is taken over by Marc Boiron (Chief Legal Officer of Polygon Labs).

• Sandeep Nailwal: From growing up in a slum in India to founding Polygon, he is not the chosen one that most people see in the currency circle, but a diligent engineer and dreamer with rich experience in new ventures.

• Marc Boiron: He is a lawyer. He has worked in major blockchain consulting companies. He is also the former Chief Legal Officer of dYdX. It can be said that he is very experienced in the laws and supervision of the currency circle.

Generally speaking, changing the CEO means that the company's operating policy will change: it can be seen that the priority of Polygon's previous "big brand cooperation marketing strategy" seems to have dropped, and instead it focuses more on developing infrastructure, such as zkEVM and Aggregation Layer — me Think it's a good thing for Polygon

1.2 VC investment institutions and investors

Polygon has raised a total of $457M in US dollars. I have listed several well-known investment institutions and VCs below for your reference:

• Binance: $MATIC was listed on Binance’s LaunchPad in April 2019, raising a total of $5M USD

• Coinbase Ventures: In April 2019, received $450K investment from Coinbase Ventures

• Peak XV Partners (Indian branch of Redshirt Capital): In February 2022, Redshirt Capital teamed up with major VCs such as Softbank and Dragonfly Capital to invest a total of $450M in Polygon. At that time, Polygon was valued at $2B US dollars.

• Disney: Selected as one of the six participating members of the Disney Accelerator (the only blockchain at the time) in July 2022 to help develop innovations in the fields of AR, NFT, and AI

• Mark Cuban: Owner of the NBA Mavericks team, has publicly stated that he has invested in Polygon

1.3 Partnership

The most outstanding thing about Polygon in the last bull market is that it is very good at finding Web2 giants as partners (aka willing to spend money on marketing). Here are some of the things that I think are important.

• Nike: Digital mall “Swoosh platform” is being deployed on the Polygon blockchain

• Starbucks: Loyalty program “Starbucks Odyssey” is being deployed on the Polygon blockchain

• Reddit: One of the largest social networking sites in the United States uses Polygon to issue its own NFT (Reddit Avatar)

• Meta: NFT mall is being deployed on the Polygon blockchain

• Other well-known brands including Adobe, Mercedes, Adidas, etc. have also announced that they have reached cooperation with Polygon.

In addition to cooperation with major Web2 brands, Polygon is also favored by many DeFi and GameFi projects in the Web3 field. Here are several important cooperations.

• Immutable X: Immutable X is a platform focused on GameFi. It targets Steam in the Web3 world and will use Polygon CDK to build its own Immutable zkEVM.

• OKX

• Astar Network: The Layer 2 blockchain built by the Japanese team is constructed using Polygon CDK and is the first blockchain to connect to the Polygon Aggregation Layer.

• NEAR: Will help Polygon build zkWasm Prover, and also provide Data Availability solutions for use by the Polygon ecosystem

• Manta Network: Originally built using OP Stack, Manta Network switched to using Polygon’s CDK to build Layer 2 in October last year and became a member of the Polygon ecosystem.

• Canto: A Layer1 blockchain built in the Cosmos ecosystem, which will use Polygon CDK to connect to the Polygon ecosystem

• Celestia: Provide DA services for Polygon CDK, becoming an additional choice for project parties when building new chains

It can be seen that several major collaborations in Web3 all come from the use of Polygon CDK (Chain Development Kit). We will introduce this magical tool in "Products and Services" later.

1.4 Communities/Users

When evaluating a community and the number of users, I like to look at two parts - social media activity and on-chain activity.

In terms of social media influence (As of 3/23/2024), we can see that there is still some gap between Polygon and the first-line leaders - Solana & Ethereum. Especially the discussion on Reddit does not seem to be high, perhaps because the currency price of $MATIC has been There are no big changes involved.

But when we look at the activity level on the chain, the data of the Polygon POS chain is quite good, closely behind NEAR and Solana, which is considered the first level.

2.0 Polygon Products and Services

Now, let’s look at products and services. I will analyze Polygon’s core products and value proposition, and also see how Polygon performs in the current market.

2.1 Core products and value proposition

Polygon has four core products, each with a different value proposition.

• Polygon POS (soon to be transformed into zkPOS)

This is an Ethereum side chain created in 2020, with high TPS, low handling fees, and a TVL of about $1B. In order to comply with the Polygon 2.0 plan, the current plan is to upgrade the Polygon POS chain to "Polygon zkPOS", officially turning the side chain into a Layer 2 blockchain on Ethereum, which can enjoy the security of Ethereum while expanding Polygon of ecosystem.

👉 Value proposition: high throughput (TPS), low handling fees

• Polygon zkEVM

This is an Ethereum Layer 2 built by ZK Rollup. The biggest difference with zkPOS is: zkEVM is built in the form of Rollup and will store transaction data on the chain; while zkPOS is built on Validium and will store data off-chain. . Therefore, zkEVM Rollup will be more secure; and zkEVM Validum can provide a faster and lower handling fee environment.

👉 Value proposition: high security

• Polygon Miden (under development)

Polygon Miden is another Layer2 chain built using ZK Rollup. The biggest difference from the first two is that Miden is not an EVM-compatible development environment and can be used as the main development environment for some Dapps that are "difficult to build on the EVM environment." In addition, Miden attaches great importance to privacy, and you should see some privacy-based projects built on it in the future.

👉 Value proposition: emphasizing privacy and encouraging innovation

• Aggregation Layer

Aggregation Layer (AggLayer) is an interoperable structure currently being developed by Polygon. AggLayer is deployed on Ethereum, allowing perfect interoperability between L2 and L2 driven by ZK technology, and sharing of fund pools. In the future, as long as the chain is developed using Polygon CDK, it can be seamlessly connected to AggLayer.

👉 Value proposition: Enhanced interoperability and user experience

Polygon CDK: A powerful blockchain development tool that can help developers easily build ZK-L2 for their own projects, or "turn" other EVM-compatible blockchains (such as Arbitrum, Avalanche) into ZK-Layer2 . This can greatly reduce the cost of linking to AggLayer

2.2 Market share and competitor analysis

When judging the market share of any blockchain, I like to look at three numbers:

• TVL (Total Locked Volume): How much money is on the chain

• Active users (number of addresses): How many users are using the app on Polygon

• DeFi Activity (Trading Volume): How much DEX trading volume is happening on the Polygon blockchain

(The following analysis uses Polygon POS that is already running, because the other two chains have not yet had a large amount of funds settled in)

Polygon’s current TVL is around $1B, ranking seventh. This result is pretty good for an “Ethereum side chain”.

Regarding the number of active users, I compared Polygon with several well-known public chains. Its number of active addresses in a single day (seven-day average) is 1M, which is not far from NEAR and Solana. It belongs to the first echelon, or even higher. On Ethereum mainnet, Arbitrum and other well-known blockchains.

In terms of DeFi activity (a.k.a. how many funds are converted on the blockchain): Polygon’s seven-day average is approximately $786M, which is similar to the Sui blockchain and belongs to the third tier.

From the above information, we can simply observe a phenomenon: Although Polygon’s number of active addresses ranks in the first tier, its DEX trading volume is at the mid- to downstream level, which is obviously a bit behind. This is because a large number of active addresses are not using Polygon’s DeFi projects. , but...GameFi!

From the data of Dapp Radar, we can see the ranking of unique addresses (UAW) of Dapps on the Polygon chain. The top five are not DeFi projects (the first UAW in DeFi is only 6K). Naturally, the DEX transaction volume It's normal if it's not high. Matr1x is a GameFi project on Polygon. It is currently competing and is very popular.

--

The above is part of the report. Others include Polygon's future outlook, profitability, currency valuation... etc. You can go to my Substack to read it.

I’m cryptocurrency researcher Max 🕵️, see you next time!

(This is forwarded to my personal Substack, welcome to read the full text there)