Bear vs Bull - Exploring the Blockchain Industry
This series delves into the timeless debate of Bear vs Bull, focusing on chains, games, platforms, tools, and more within the blockchain industry. These posts should comprehensively analyze bear and bull cases, hopefully offering a balanced perspective and shedding light on the positives and negatives. By understanding these viewpoints, you can make well-informed decisions, steer project development, and craft strategic plans in the dynamic world of blockchain. Stay tuned for valuable insights on current trends and practical tips for navigating this intricate landscape.
Initial Thoughts About Polygon
With the rapid adoption of Ethereum, the problem of scalability arose. Soon after, gas prices started rising as more people wanted to get Ethereum block space. Polygon, launched as MATIC network, was created to provide a scalable solution to Ethereum. It is a Layer Two Proof-of-Stake (PoS) blockchain, where transactions are collected and settled on the Ethereum blockchain. This gives Polygon the interoperability, liquidity, and security of Ethereum.
Polygon is a PoS sidechain. MATIC, the native token of the Polygon network, is used as a staking token to validate transactions and vote on network upgrades. MATIC is also used to pay for the gas fees on Polygon.
Let's get this out of the way: My gaming studio currently uses Polygon. We made that decision early in our evaluation process in 2022. They were the only chain with a long-term view of blockchain and its use cases for a broader market expansion. They were excited about expansion through gaming and seemed like a perfect match.
Moonlit Games wants a partner with the same vision for the long-term growth of blockchain technology and a consumer-first approach. The industry can’t grow without a seamless experience for the end user, meaning interaction with blockchain cannot be felt. For those in the industry, we approach it as we would if implementing AWS vs. Azure, something players should never feel.
History & Milestones
Polygon started as MATIC Network in 2017 and rebranded to Polygon in 2021 to reflect its broader mission. Key milestones include the launch of the mainnet in 2020, integration with major platforms like Aave and SushiSwap, and partnerships with industry giants. They had a mission to be the consumer chain, which we'll get deeper into.
Polygon, originally launched as MATIC Network in 2017 by Jaynti Kanani, Sandeep Nailwal, Anurag Arjun, and Mihailo Bjelic, rebranded to its current name in 2021 to signify its expanded vision of a multi-chain system compatible with Ethereum. Noteworthy milestones include raising $450 million from prominent investors like Sequoia Capital India and SoftBank (Vision Fund) in 2022, acquiring the Mir blockchain network, and forming key partnerships with industry giants such as JPMorgan, Disney, Draft Kings, Starbucks, and Mastercard. Recognized for its innovation, Polygon was featured in the TIME100 list in 2023.
Bull Case
Polygon 2.0 and Technological Innovations
Polygon 2.0 represents a significant network evolution, introducing a set of upgrades that will enhance its scalability, security, and usability. This upgrade includes the implementation of POL, a "next-generation" token designed to support a vast ecosystem of zero-knowledge-based Layer 2 chains. POL allows for re-staking across multiple chains, which enhances the network’s utility and flexibility.
Investment in zk-Rollups
Polygon has heavily invested in zero-knowledge (zk) technology, positioning itself as a leading zk platform. This pivot aims to enhance scalability and privacy.
Strong Institutional Adoption and Partnerships
This has been the backbone of Polygon's success, largely due to the Polygon exec and BD teams. Polygon continues to forge strong partnerships with major institutions and platforms. For instance, Ernst & Young has adopted Polygon PoS for its OpsChain Contract Manager, "enhancing contract management efficiency and reducing costs". Additionally, partnerships with platforms like Robinhood to advance NFT and stablecoin offerings highlight Polygon’s growing influence and integration in the broader financial ecosystem.
Robust Ecosystem Expansion
Polygon’s ecosystem is rapidly expanding and driven by strategic partnerships and innovations. The launch of the high-throughput STARK-based rollup, Miden, is a prime example of Polygon’s commitment to providing cutting-edge solutions. Initiatives like the Polygon Village offer grants and support for Web3 startups, fostering innovation and growth within the ecosystem.
Integration & Acquisitions Rumors
Rumors about possible acquisitions/mergers to strengthen Polygon's position and technological capabilities have also been circulating. In the past, rumors quickly turned into partnerships. The recent hard pivot into tech has only fueled the fire of speculation about Polygon acquiring up-and-coming tech companies to bolster its tech offering.
Unconfirmed reports about potential new integrations with major tech, gaming, and financial platforms suggest Polygon is not resting on its laurels. I look forward to hearing about more gaming and financial sector integrations throughout 2024. Already partnering with IMX, Merit Circle, and JP Morgan, It makes too much sense and would significantly boost Polygon's adoption and utility and synergize with its push to be the leader in zk technology.
Bear Case
Executive Turnover
Ryan Wyatt left, along with several executives who shared the chain's larger vision. This departure led to concerns about leadership stability and strategic direction, but new leadership might bring fresh perspectives and renewed focus.
Lets be frank - a TON of money was raised and spent in the last 2 years. The grand vision of Ryan Wyatt to become a multi-faceted chain that was the backbone of blockchain's coming out party to consumers has mostly been stifled.
Team Instability
Last year's departure of key executives like Ryan Wyatt has led to concerns about the project's stability and future direction. Consistent leadership is crucial for maintaining strategic focus and achieving long-term goals.
Just a few days ago, Polygon Labs' new(ish) CEO, Marc Boiron, announced a 19% reduction of the workforce to "enhance performance despite challenging the rapid team growth during the bull market." Additionally, Polygon Ventures was spun off as P2 Ventures, focusing on early-stage Web3 investments, while Polygon ID will become an independent entity to further its digital identity solutions. "These strategic shifts aim to streamline operations and maintain focus on core protocol development, ensuring the sustained growth and success of the Polygon ecosystem."
Shifting Focus & It's Identity Crisis
Initially focused on growing through gaming, Polygon has since broadened its market scope. This shift has included notable deals like the one with Immutable X, raising questions about their core focus and strategic priorities.
I'd argue that Polygon has lost its original vision while allowing partners to take on gaming. It now presents itself as a ZK platform rather than sticking firmly as an L2 solution for Ethereum, and I believe this identity shift has created uncertainty among developers.
Market Dilution
Polygon’s attempt to cater to a broader market, including various sectors beyond gaming, likely diluted its brand and may have spread itself too thin. This could impact its ability to excel in any domain, weakening its competitive edge. EVM Layer 2 competitors like Arbitrum and Optimism (Ryan Wyatts' new location) are pushing to close the lead that Polygon built by attacking these gaps.
Outro
Evaluating and selecting blockchain platforms is complex, involving many factors that can influence long-term success. Polygon has shown its promise with its scalability solutions, low transaction fees, robust ecosystem, and commitment to sustainability. However, recent shifts in focus, leadership changes, and evolving market strategies present challenges and opportunities.
Personally, I hold MATIC, but I think close competitors or alternative chains might offer higher potential returns with similar risk exposures. As they diversify through partnerships, you can take advantage of industry-specific plays; for example, Immutable X is, for all intents and purposes, Polygon gaming.
We'll continue to explore the bear and bull cases for various chains, games, platforms, and tools in the blockchain industry. Share your thoughts or questions in the comments below, and stay tuned for the next post in this series, where we will delve into another prominent blockchain platform.
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