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

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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 means, Polygon (MATIC) stays 50.8% beneath its all-time excessive at an $11 billion market capitalization. At the moment, 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 constructive be aware 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 gives scaling and infrastructure help to Ethereum Digital Machine-based (EVM) decentralized functions. In addition to, it isn’t tormented 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), non-fungible token minting, marketplaces, crypto video games, playing, and social functions.

As 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.

Using Polygon’s scaling resolution is declining

Polygon’s major DApp metric began to show weak spot 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 following couple of months. In greenback phrases, the present $3.5 billion TVL is the bottom quantity since Might 2021. These figures characterize lower than 5% of the combination TVL (excluding Ethereum), in response to DefiLlama knowledge.

One other constructive 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 permits 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 resembling video games and collectibles don’t require giant deposits, so the TVL metric is irrelevant in these circumstances.

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

As proven by DappRadar, on March 10 the variety of Polygon community addresses interacting with decentralized functions grew by 5% versus the earlier month. Although Polygon’s TVL has been hit the toughest in comparison with comparable sensible contract platforms, there’s strong community use within the gaming sector, as measured by Loopy Protection Heroes’ 199,260 lively 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 complex DeFi applications that want delicate data redacted on digitized belongings, lowering their dimension for quick verification by blockchain contributors.

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

The views and opinions expressed listed here are solely these of the author and don’t essentially replicate the views of Cointelegraph. Each funding and buying and selling transfer includes danger. You need to conduct your personal analysis when making a choice.