Why is Polygon Busy But Not Making Money?


Polygon
(MATIC),
a
Layer-2
scaling
solution
for
the
Ethereum
blockchain,
finds
itself
in
a
curious
position.
Recent

data
from
Messari
paints
a
picture
of
a
network
brimming
with
activity

daily
active
addresses
surging
nearly
120%,
new
user
sign-ups
exploding
by
70%,
and
daily
transactions
reaching
a
staggering
4
million.
Yet,
beneath
this
bustling
surface
lies
a
troubling
undercurrent:
a
19%
drop
in
quarterly
revenue
compared
to
the
previous
quarter,
and
a
hefty
40%
decline
year-over-year.


Related
Reading


Polygon:
A
Network
On
Fire

Polygon’s
user
base
is
clearly
smitten.
The
first
quarter
of
2024
witnessed
a
land
rush,
with
new
addresses
flocking
to
the
network
at
an
unprecedented
rate.
This
surge
in
user
adoption
translated
into
a
transaction
frenzy,
with
daily
interactions
on
the
platform
quadrupling.

How To Get Free Crypto  
Source:
Messari

The
decentralized
finance
(DeFi)
sector
on
Polygon
also
thrived,
with
the
total
value
locked
(TVL)
in
DeFi
projects
climbing
30%
compared
to
the
previous
quarter.
The
non-fungible
token
(NFT)
ecosystem
on

Polygon
also
got
a
shot
in
the
arm,
with
sales
volume
rising
by
nearly
20%.

MATIC
price
action
in
the
last
24
hours.
Source:

CoinMarketCap


The
Revenue
Riddle

So,
why
the
long
face
amidst
the
celebratory
confetti?
The
answer
lies
in
Polygon’s
dwindling
revenue
stream.
Despite
the
exponential
growth
in
activity,
the
network’s
coffers
are
taking
a
hit.

The
$7
million
earned
in
Q1
2024
pales
in
comparison
to
the
$10
million
and
$12
million
raked
in
during
the
previous
quarter
and
the
same
period
last
year,
respectively.
This
disconnect
between
booming
activity
and
declining
revenue
is
the
million-dollar
question
that
has
analysts
scratching
their
heads.

MATIC market cap currently at $6.8 billion. Chart: TradingView.com


Fee
Fiasco
Or
Funding
Flux?

There
are
two
main
suspects
behind
this
revenue
paradox.
The
first
culprit
could
be
Polygon’s
transaction
fee
structure.
Perhaps,
in
a
bid
to
attract
more
users,
the
network
lowered
its
fees
to
an
extent
that,
despite
the
massive
increase
in
transactions,
the
overall
revenue
generation
suffered.

Coinbase Banner  

Another
possibility
lies
in
a
potential
shift
in
Polygon’s
revenue
sources.
Maybe
there
was
a
decline
in
income
from
a
specific
source,
such
as
grants
or
partnerships,
that
wasn’t
adequately
compensated
for
by
growth
in
other
areas.


Related
Reading


What
Lies
Ahead

Polygon
faces
a
critical
juncture.
The
network’s
ability
to
attract
users
and
foster
a
vibrant
DeFi
and
NFT
ecosystem
is
undeniable. However,
if
it
fails
to
address
the
revenue
conundrum,
its
long-term
sustainability
could
be
at
risk.
Moving
forward,
transparency
from
Polygon
regarding
its
fee
structure
and
revenue
streams
will
be
crucial
in
assuaging
investor
concerns.

Additionally,
exploring
alternative
revenue
models,
such
as
offering
premium
services
or
strategic
partnerships,
could
be
the
key
to
unlocking
Polygon’s
full
financial
potential.


Featured
image
from
Zameen.com,
chart
from
TradingView

Go to Source
Author: Christian Encila


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