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Polygon (MATIC) had a promising July, posting a staggering 83% gain in 30 days. The smart contract platform uses Layer 2 scaling and aims to become an integral Web3 infrastructure solution. But investors question whether the recovery is sustainable given lackluster deposits and brisk address data.
According to Cointelegraph, Polygon has risen after being selected for the Walt Disney Company’s accelerator program for building augmented reality, non-fungible tokens (NFTs), and artificial intelligence solutions.
On July 20th, Polygon announced plans to implement a zero-knowledge Ethereum Virtual Machine (zkEVM). It bundles multiple transactions before relaying them to the Ethereum (ETH) blockchain. In a recent interview with Cointelegraph, Polygon co-founder Mihailo Bjelic said the solution would reduce Ethereum fees by 90% and boost throughput to 40-50 transactions per second.
Another reason for Polygon’s rise is the growing number of platforms that have started offering liquid staking of MATIC tokens, allowing holders to earn additional rewards. Examples include Lido Finance, Balancer, Meshswap and Ankr Staking, according to DeFi Pulse.
Despite currently falling 69% below its all-time high, Polygon remains the top 12 tokens by capital ranking. Additionally, the network holds deposits worth $1.72 billion locked in smart contracts, known in the industry as Locked Total Value (TVL).
Polygon’s Ethereum-compatible scaling is fully functional and hosts decentralized exchanges (DEX), secured loan services, yield aggregators, NFT marketplaces, and decentralized applications (DApps) apart from games.
Polygon rose 83% over the 30-day period, while the network’s TVL, as measured by the MATIC token, fell 42% over the same period. In comparison, the Fantom (FTM) scaling solution decreased by 14% over 30 days and Klaytn (KLAY) increased by 11%.
In dollar terms, Polygon’s current TVL is $1.42 billion, down 67% year-to-date. Still, such numbers are not far behind Solana (SOL) at $2.08 billion or Avalanche (AVAX) at $2.52 billion. according to to DeFi Llama data.
To see if Polygon’s TVL decline is driven by a decline in adoption, we need to analyze DApp usage metrics. Nevertheless, some DApps such as games and NFT marketplaces do not require large deposits, so TVL metrics are irrelevant in these cases.
As DappRadar shows, on average on August 1st, the number of Polygon network addresses interacting with decentralized applications decreased by 19% compared to the previous month.
Considering Polygon’s TVL dropped by 42%, the network lacks more substantial user base growth to support further momentum in the MATIC token price. Still, the leading DApp, Quickswap, has submitted 138,530 active addresses over the last 30 days. By comparison, the leading Ethereum application, OpenSea, held 299,910 users during the same period.
The data above suggests that Polygon has lost some of its traction in the market for scaling solutions. However, the project’s recently announced zero-knowledge has not yet been implemented, but its benefits could push MATIC above $1.
The views and opinions expressed herein are solely author They do not necessarily reflect the views of Cointelegraph. All investment and trading movements involve risk. You should do your own research when making a decision.
