Layer 2 scaling solution Polygon has maintained strong network activity even as the broader cryptocurrency market and its native token, MATICexperienced a slowdown in the second quarter of 2024, according to a new report from market intelligence platform Messari.
Polygon Resists crypto Market Crash
While MATIC saw its circulating market cap drop 44.3% to $5.5 billion during the quarter, placing it as the 20th-largest crypto asset (currently in 26th position), the protocol’s on-chain metrics remained strong.
This is in contrast to larger cryptocurrencies such as bitcoin and ethereum, which saw their market capitalization decreased by 12% and 6%, respectively, during the same period.
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The key factor behind Polygon's network performance stability during the second quarter of the year, according For Messari, it was the implementation of ethereum Improvement Proposal (EIP) 4844 on the Polygon mainnet in Q1 2024.
This update, which introduced “blobs” to the network, significantly reduced the average transaction fee on Polygon from $0.017 to just $0.01, resulting in a decrease of 41.1%.
As a result, Polygon’s revenue from network transaction fees fell by 40.6% to $4 million in Q2 2024. However, this drop was not due to a decrease in user activity, but rather due to the lower fees enabled by EIP-4844. In fact, Polygon’s user metrics continued to increase, and the protocol saw strong growth across several key indicators.
Chain activity and ecosystem growth
According to the report, the average number of daily active addresses The number of daily return addresses increased to 1.2 million, up 47.6% from the previous quarter. The average number of daily return addresses increased further, by 50.5%, to 1 million. In addition, new addresses added to the network grew by 31.7%, to 167,800 per day on average.
The report also notes that Polygon's transaction volume also remained stable, averaging 4.1 million transactions daily, just below its its highest point and represents an increase of 3.9% compared to the previous quarter.
In comparison, Layer 2 networks Arbitrum (ARB) and Base recorded an average daily active addresses of 545,000 and 528,000 respectively.
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While Polygon's decentralized finance (DeFi) total value locked (TVL) fell 22.9% to $1 billion, which was largely due to the falling price of MATIC rather than a net capital outflow. Messari reported that TVL denominated in MATIC actually increased 38.1% to 1.8 billion tokens.
However, DeFi protocols on Polygon had mixed results: Aave, Uniswap, and SushiSwap all experienced TVL drops ranging from 13% to 25%. Quickswap saw the largest drop of 35%.
Lastly, Polygon’s non-fungible token (nft) marketplace also remained stable, with average daily nft volume declining slightly by 5.7% to $1.8 million. However, the number of daily nft sales actually increased by 1.8% to 52,000, underscoring continued collector interest.
At the time of writing, MATIC has seen a mere 5% increase to a trading price of $0.512, after hitting a 2-year low of $0.428 on July 5.
Along with this worrying price action, the token has seen a 30% decline in trading volume over the past few days, reaching $197 million, according to CoinGecko. dataAll of this has resulted in an 82% gap from MATIC’s all-time high of $2.91, which was set during the 2021 bull run.
Featured image from Shutterstock, chart from TradingView.com