Polygon’s (MATIC) Scaling Solution Is Becoming Less Popular

The price of MATIC is still 50% lower than its all-time high, but the network’s TVL and DApp data indicate that the layer-2 solution is still a serious contender.

Polygon (MATIC) has been struggling to maintain the $1.40 support after a devastating 50% correction between December 25 and January 25. While some argue that this top-15 coin has simply adjusted after a 16,200 percent gain in 2021, others point to the growth of competing scaling solutions.

In any case, MATIC’s market capitalization of $11 billion remains 50.8 percent lower than its all-time high. Terra (LUNA) currently has a market cap of $37 billion, Solana (SOL) has a market cap of more than $26 billion, and Avalanche (AVAX) has a market cap of $19 billion.

On a more positive note, Polygon raised $450 million on February 7, with the funding round backed by some of blockchain’s most powerful venture funds, including Sequoia Capital.

Polygon provides scaling and infrastructure support for decentralized Ethereum Virtual Machine (EVM) applications (DApps). Furthermore, it is unaffected by the high transaction fees and network congestion that plague the Ethereum network.

However, as proof-of-stake layer-1 networks emerged, offering low-cost smart contract capabilities, competition for Ethereum network decentralized finance (DeFi), nonfungible token minting, marketplaces, crypto games, gambling, and social applications increased significantly.

In comparison, between July and December 2021, Terra’s total locked value increased by 340 percent, reaching $12.6 billion. In the same time period, Avalanche’s smart contract deposits increased from $185 million to $11.11 billion.

Polygon’s Scaling Solution Is Becoming Less Popular

Polygon’s major DApp statistic began to deteriorate in August 2021, when the network’s TVL fell below 4 billion MATIC.

The graph above depicts how Polygon’s DApp deposits peaked at 7.4 billion MATIC in July 2021, then plummeted over the following several months. In terms of dollars, the current TVL of $3.5 billion is the lowest since May 2021. According to DefiLlama data, these figures represent less than 5% of total TVL (excluding Ethereum).

Another plus is that Ankr, a multi-chain toolset for blockchain infrastructure, established a token bridge between Ethereum and Polygon on March 9. The initial version will enable the sending and storage of the aMATICb liquid staking token. Users may receive extra tiers of incentives on DeFi platforms as a result of this.

To determine if the TVL decline in Polygon is concerning, examine DApp use stats. Because certain DApps, such as games and collectibles, do not need substantial payments, the TVL statistic is meaningless in such circumstances.

According to DappRadar, the number of Polygon network addresses engaging with decentralized apps increased by 5% on March 10 compared to the previous month. Despite the fact that Polygon’s TVL has been impacted the most compared to rival smart contract platforms, network utilization in the gaming industry is strong, as seen by Crazy Defense Heroes’ 199,260 active addresses in the past 30 days.

Polygon released its zk-STARK-powered Miden Virtual Machine, a zero-knowledge Scalable Transparent Argument of Knowledge, on November 16. Polygon has also committed more than $1 billion to the development of complex DeFi applications that require sensitive information to be redacted on digitized assets in order for blockchain participants to verify them quickly.

According to the statistics shown above, Polygon is holding its own against rival chains, and those who own it may not be too concerned about MATIC’s 50% price reduction. Polygon’s ecosystem continues to thrive, and the fact that it provides much-needed layer-2 scaling solutions for a variety of businesses may be considered as a positive.