Polygon Network Sees Growth Despite Market Downturn
Polygon, a layer 2 scaling solution, has shown resilience in its network activity despite challenges faced by the broader cryptocurrency market and its own token, MATIC, in the second quarter of 2024. A recent report from market intelligence platform Messari highlighted the positive performance of the Polygon network during this period.
While MATIC’s circulating market cap dropped by 44.3% to $5.5 billion, causing it to move from the 20th to the 26th position in the crypto asset ranking, the on-chain metrics of the protocol remained strong. This is a stark contrast to the decline seen in larger cryptocurrencies like Bitcoin and Ethereum, which experienced market capitalization decreases of 12% and 6% respectively.
The success of Polygon’s network performance in the face of market challenges can be attributed to the implementation of Ethereum Improvement Proposal (EIP) 4844 on the Polygon mainnet in the first quarter of 2024. This upgrade, which introduced “blobs” to the network, led to a significant reduction in the average transaction fee on Polygon from $0.017 to $0.01, marking a 41.1% decrease.
Despite the decrease in transaction fee revenue by 40.6% to $4 million in Q2 2024, Polygon’s user activity continued to grow steadily. The protocol witnessed significant increases in daily active addresses, daily returning addresses, and new addresses being added to the network, showcasing strong user engagement.
In terms of on-chain activity and ecosystem growth, the report revealed that the average number of daily active addresses on Polygon surged by 47.6% quarter-over-quarter to 1.2 million. Daily returning addresses increased by 50.5% to 1 million, while new addresses joining the network saw a 31.7% rise to 167,800 per day on average. Additionally, Polygon’s transaction volume remained robust, with an average of 4.1 million daily transactions, just below its all-time high.
While the decentralized finance (DeFi) total value locked (TVL) on Polygon declined by 22.9% to $1 billion, this was primarily due to MATIC’s price drop rather than a capital outflow. In fact, TVL denominated in MATIC increased by 38.1% to 1.8 billion tokens. However, some DeFi protocols on Polygon experienced declines in TVL, with Quickswap seeing the largest drop at 35%.
Moreover, the non-fungible token (NFT) market on Polygon remained stable, with average daily NFT volume slightly decreasing but daily NFT sales showing an increase. This indicates sustained interest from collectors in the NFT space on the Polygon network.
Despite the positive network performance, MATIC’s price has faced challenges, with a 5% increase to $0.512 after hitting a 2-year low in July. The token has also seen a significant decrease in trading volume, resulting in a substantial difference from its all-time high. As the market continues to evolve, Polygon remains a key player in the crypto space, showcasing resilience and growth in user engagement and network activity.