Disclaimer: Nansen has produced the following report as part of its existing contract for services provided to Polygon Labs (the "Customer") at the time of publication. While Polygon has the right to review and provide feedback to Nansen, Nansen maintains full editorial control over the publication of this report. All views expressed are the independent opinions of Nansen's research analyst(s) who are the author(s) named in this report. This report is intended for informational purposes only and does not serve as investment, financial, professional, or other advice. For more information, please refer to the disclaimer at the end of this report, as well as our Terms of Service.
Polygon PoS is a Layer 2 scaling solution developed by Polygon Labs that utilizes sidechains for off-chain computation and a decentralized network of Proof-of-Stake (PoS) validators. The combination of low fees, ease of development, and energy efficiency of Polygon PoS sparked an adoption boom in 2021.
Aside from PoS, Polygon Labs also has developed a wide range of scaling solutions for web3 developers, from application-specific blockchain networks called Polygon Supernets (built using Polygon Edge, a framework for developers to build EVM-compatible blockchain) to various ZK-Rollups in development such as Polygon Zero, Polygon zkEVM, and Polygon Miden. Each scaling solution may have differing tradeoffs, but they all aim to provide a more secure and faster network with low transaction costs.
In this quarterly report, we will look at Polygon Labs’ performance in Q4 2022 and list the key developments implemented by Polygon Labs and the Polygon ecosystem to improve overall network performance and user experience.
Check out Nansen’s previous report on Polygon and other chains here.
Key Development: Q4 2022
Polygon zkEVM and other Zero-Knowledge updates
- In October 2022, the Polygon zkEVM public testnet came online and researchers at Polygon Labs called for the community to probe it.
- By providing access to the ZK community to audit the technology, Polygon Labs announced an ongoing audit of Polygon zkEVM to discover and fix bugs before mainnet is deployed in the future.
- Hence, on Dec 21, 2022, researchers at Polygon Labs introduced recursion, which enabled batch aggregation on zkEVM, with an optimized prover generating proofs for a batch in under 4 minutes.
Polygon University BETA
- Polygon University BETA was launched to make hands-on developer education reliable and easy to approach, in order to attract more builders onto Polygon. This is due to the fact that although many universities are beginning to teach blockchain development, the education remains disorganized and rapid innovations can prove difficult to keep up with.
- In relation to the launch of the Polygon zkEVM public testnet above, Polygon University had included an introductory course to Polygon zkEVM, a live tutorial to help developers connect to the public Polygon zkEVM testnet.
In Q4 2022, Polygon was buzzing with activity despite market conditions. The chain managed to attract some of the biggest projects from inside and outside of the web3 space. Below are exciting updates from the Polygon ecosystem this quarter:
- In October 2022, Binance announced the integration of BUSD into Polygon to connect BUSD users to Polygon’s ecosystem. The native Binance-Peg BUSD can be withdrawn directly from Binance into the Polygon PoS chain.
- Additionally, NFT ecosystem and gaming metaverse platform, Virtua, collaborated with Polygon Labs to provide users of their NFT ecosystem with reduced fees, increased speeds, and minimal environmental impact.
- On Oct 18, 2022, Flipkart, India’s e-commerce giant, announced their partnership with Polygon Labs through the launch of ‘Flipverse’. The AAA game-like high-fidelity metaverse will allow users’ digital avatars to go on quests to unlock new e-commerce experiences.
- Starbucks Odyssey went live on Polygon on Dec 8, 2022. Starbucks Rewards loyalty program members and Starbucks partners (employees) in the United States are now able to earn and purchase digital collectible stamps in the form of NFTs.
- Meta-owned Instagram announced on 3 Nov, 2022 that they were testing new features in the United States, where users will be able to create and sell NFTs on the Polygon network.
- Sensorium, a metaverse and Web3 developer that built SENSO dApp, is partnering with Polygon Labs to build high-fidelity VR worlds centered around immersive musical experiences.
- On Nov 22, 2022, Magic Eden, a cross-chain NFT marketplace, announced support for the Polygon network to accelerate blockchain games development.
- In November 2022, Phantom, a non-custodial crypto wallet, added support for the Polygon network. Non-custodial wallets like Phantom give users complete control over their funds, which is vital in wake of the crypto exchange FTX’s collapse.
- On Dec 1, 2022, The Graph Network, a decentralized protocol used to index Web3 data, announced that it is adding support for Polygon.
- Bangalore International Airport Limited (BIAL) announced the launch of the world’s first airport metaverse: BLR-Metaport, in collaboration with AWS, Intel and Polygon Labs.
- New decentralized trading platform, Bebop, launched on Polygon on Nov 8, 2022. The project offers ‘one-to-many’ and ‘many-to-one’ digital asset trading with zero slippage.
- In December 2022, Game7 pledged $100m in total over the next 5 years into the Game7 Grants Program. This initiative enables recipients to receive additional technical and developmental support from Polygon Labs and Game7’s financing.
Nansen On-chain Data
Daily transactions count on Polygon was relatively volatile throughout Q4 2022, within a range of ~2m-3.7m transactions. On the other hand, daily gas paid had a peak of ~$570k while the lowest point was at ~$16k.
Both highest transaction count and highest daily gas paid occurred around Nov 8-10, 2022, which was likely caused by the speculation of major crypto exchange FTX’s insolvency.
Daily Active Addresses
The number of daily active addresses on Polygon was volatile throughout the quarter, with a range between ~350k-1.7m addresses. The huge soar at the beginning of the quarter was caused by the launch of zkEVM public testnet. On the other hand, the uptick that occurred in November was likely influenced by the users’ attempt on bridging out funds from FTX.
Daily Transactions and Gas Paid (vs Ethereum)
Polygon’s daily transactions were almost twice as high and more volatile than Ethereum’s throughout Q4 2022. There was a spike on Nov 9, 2022, likely due to the speculation of crypto exchange FTX’s liquidity concerns; while the huge spike in Ethereum’s daily transactions on Dec 9, 2022, was likely due to the speculation on crypto exchange Binance’s liquidity concerns, which came in the wake of FTX’s collapse.
On average, the daily gas paid for transactions on Polygon was ~40x-100x cheaper than on Ethereum. The highest average gas paid on Polygon took place on Nov 8, 2022, as it was influenced by the transaction activity caused by the speculation of FTX’s insolvency.
Top Entities by Users and Transactions
One could analyze the top entities in Q4 based on the number of users and transactions on Polygon using Nansen’s comprehensive list of labels. Chainlink had the highest number of transactions for being a cross-chain data oracle on Polygon, followed by MEV bots transactions at above 15m throughout Q4 2022. Arc8 (GAMEE) and OpenSea had more than 3m transactions in Q4, which showed that GameFi and NFT were popular on Polygon.
When sorted by the number of users, the game Benji Bananas, showed significant user activity this quarter. Furthermore, stablecoins remained popular among users in Polygon, with Centre (USDC) and MakerDAO (DAI) in the top five.
Smart Money Segments on Polygon
The chart above shows a breakdown of the Smart Money Ethereum addresses that are also active on Polygon. Smart Money is one of Nansen’s most useful features, which contains a list of labels for wallets that are very active and profitable on-chain. In Q4 2022, Smart NFT Sweeper, First Mover Staking and Airdrop Pro were the three highest proportions of Smart Money on Polygon at above 70%. This may indicate that there was a balanced combination of enthusiasm between DeFi and NFT in the Polygon ecosystem.
Check out this page for how the Smart Money categories are defined and how you can use those labels on Nansen!
Notable Projects in Q4 2022
- Gamic app is a chat platform that combines a wallet experience with advanced community management tools.
- The beta version was released on Dec 20, 2022 and features a Web3 gaming toolset offering financial and operational solutions for gamers, guilds, and eSports teams.
- It integrated a communication channel similar to Discord, a wallet service with token swapping and support for YouTube live-streaming (that provides tipping options in crypto and NFTs).
- HellCats, a non-fungible token (NFT) collection, migrated from the Terra blockchain in the wake of Terra LUNA’s collapse in May 2022.
- Since then, the team successfully migrated over 80% of the NFTs to the Polygon network and has already achieved a total cumulative trade volume of more than 279,000 MATIC.
Captain Tsubasa -RIVALS-
- Captain Tsubasa -RIVALS- announced its release on the Polygon network. The popular comic book series from Japan is making its Web3 debut as a blockchain-based game on Polygon.
- The game is centered around “Player" NFT character cards with properties that include rarity, level, position and special attacks, and is scheduled to launch in January 2023.
Despite the general bearish sentiment caused by the collapse of crypto exchange FTX on the crypto market in Q4 2022, Polygon kept onboarding various popular companies into the Web3 space, thanks to its EVM compatibility, fast finality, and low fees. It was further proven by the significant increase in metaverse projects and web3 gaming added to its ecosystem. To handle the upcoming mass adoption of Web3, Polygon Labs continues to audit the Polygon zkEVM public testnet and is preparing for the future deployment of Polygon zkEVM in mainnet.