The Ultimate Due Diligence Report on MATIC Token (POLYGON)

The Ultimate Due Diligence Report on MATIC Token (POLYGON)

1. Executive Summary

Overview of the MATIC token and its unique value proposition (POLYGON)

A reputable coin that acts as an Ethereum layer-2 substitute is called Polygon. 

It tackles the main problems with Ethereum, namely its limited scalability and expensive gas costs. 

The native coin of Polygon, MATIC, is utilised for staking rewards and transaction fees. 

Every day, the network handles about 3 million transactions and supports more than 7,000 dApps. 

Because ZK Rollups and parallel blockchains are used to provide scalability without sacrificing security, it has a special benefit. 

Polygon's overall goal is to improve Ethereum's usability and scalability for both consumers and developers. 

Brief summary of the investment opportunity.

To make an informed choice, it is crucial to weigh several aspects when thinking about investing in Polygon. To start, assess the general state of the market and its movements in order to gauge the prevailing opinion on cryptocurrencies. 

Second, to fully understand Polygon's potential and value proposition, thoroughly examine its technology, use cases, and development status. 

Third, look at the history and experience of the Polygon team to make sure they have the necessary knowledge and are dedicated to the project. 

Fourth, consider joint ventures and partnerships that improve Polygon's ecosystem since they can greatly aid in the development and uptake of the platform. Fifth, keep up with innovations and updates to see how Polygon is changing and tackling technology issues. 

Investing in Polygon has the potential to yield substantial benefits if the initiative gains traction and grows.

2. Polygon Matic Overview:

Polygon is a well-established cryptocurrency recognized among investors and enthusiasts. It serves as a layer-2 solution for Ethereum, addressing key issues like high gas fees and scalability limitations. 

Polygon aims to make the Ethereum ecosystem more efficient and future-proof.

Its team refers to it as “Ethereum’s Internet of blockchains,” enabling cross -chain communication and interconnected networks.

Mission and Vision: Polygon Matic long-term objectives.

By developing open-source protocols that benefit people everywhere, Polygon seeks to empower everyone, no matter where they are in the world. 

They are dedicated to supporting developers, partners, the community, and users in order to create a thriving environment.  

Polygon sees itself as the Internet's Value Layer. anybody may generate, exchange, and programmed value thanks to Polygon's basic protocol, just as anybody can exchange information via the Internet. 

Their objective is to support Ethereum's growth while preserving its standing as the go-to fundamental layer for decentralization and security. 

Technological Advancements: Polygon provides Ethereum with a Layer 2 scalability option. In contrast to developing an Ethereum substitute, Polygon increases productivity by handling transactions off the primary network and subsequently.

Problem Statement: Challenges or gaps Polygon Matic aims to address.

Polygon Matic endeavors to address critical issues within the blockchain and cryptocurrency realm through innovative solutions and advanced technology. The company aims to revolutionize the industry by focusing on scalability, high transaction fees, interoperability, user experience, and decentralization.

It offers layer-2 scaling solutions to boost transaction throughput and reduce costs, thereby improving efficiency and accessibility for users and developers. 

By processing transactions off the Ethereum main chain, Polygon provides a cost-effective alternative and fosters a more connected ecosystem through cross-chain communication. 

Additionally, it prioritizes user experience enhancements, such as faster transaction speeds and lower costs, while maintaining decentralization through its consensus mechanism and innovative approaches like Plasma and ZK Rollups. Overall, Polygon aims to create a more inclusive and efficient blockchain ecosystem by addressing these challenges comprehensively.

Solution: How the Polygon Matic proposes to solve these problems.

Polygon Matic aims to tackle challenges in the blockchain and cryptocurrency sector by introducing a layer-2 scaling solution. This solution boosts transaction throughput and reduces costs, making blockchain applications more efficient and accessible.

Positioned on Ethereum as a proof-of-stake blockchain, Polygon enables faster transactions, surpassing Ethereum's limited throughput.

To address Ethereum's high gas fees, Polygon processes transactions off the main chain, providing a cheaper alternative. It also enhances interoperability by enabling cross-chain communication, creating a more connected ecosystem.

Improving user experience attracts more users and developers.

Technological innovations like Plasma and ZK Rollups maintain decentralization while enhancing scalability. Polygon aspires to be a decentralized version of Amazon Web Services, offering solutions to various blockchain networks. Commitment to open-source protocols and community investment reflects its dedication to fostering blockchain technology adoption.

3. Technology and Product

Technical Architecture: Overview of the blockchain and other technologies used.

Polygon utilizes advanced zero-knowledge technology, zkEVM, to generate validity proofs for transactions. This process involves the zkProver, a zero-knowledge prover, which validates transaction batches and provides proofs to guarantee their accuracy.

Additionally, Polygon incorporates a zkEVM bridge, facilitating asset transfers between the two layers, L1 and L2. This bridge ensures secure deposits and withdrawals of assets.

The Polygon transaction process consists of depositing ETH from L1 to L2 via the zkEVM bridge, initiating transactions through a wallet, and transmitting them to a sequencer. Upon completion on L2, the sequencer sends batch data to the L1 smart contract, allowing any node to trustlessly synchronize from L1. Finally, the aggregator constructs a proof to achieve transaction finality on L1, ensuring their validity.

Product Offering: Description of the product or service, including its development stage.

The MATIC token, integrated into the Polygon ecosystem, serves as a native cryptocurrency with various functions within the network. It facilitates fee payments, staking, and governance activities. MATIC holders can engage in governance by voting on Polygon network modifications. Furthermore, MATIC plays a critical role in securing the network through staking, where validators confirm transactions and add them to the blockchain in return for rewards. The token's supply distribution encompasses allocations for advisors, private sale, network operations, team, launchpad sale, ecosystem, and foundation. As Polygon progresses, it has proposed a transition from MATIC to a new native token called POL, which will supplant MATIC. This transition aims to bolster the network's scalability and sustainability, aligning with Polygon's vision to be a leading scalability solution and adapt to the ever-changing blockchain landscape.

Innovation: How MATIC innovates or improves upon existing solutions.

Polygon, formerly Matic Network, is revolutionizing the blockchain landscape by tackling Ethereum's scalability challenges. By processing transactions on a separate Ethereum-compatible blockchain and then returning them to the main chain, Polygon alleviates network strain, boosts transaction speed, and cuts costs to less than a cent.

Polygon provides a user-friendly platform for blockchain projects to construct on Ethereum, enabling users to engage with decentralized applications without worrying about network congestion. The team's forward-thinking approach and ability to foresee industry demands have solidified Polygon's reputation as the most promising Ethereum scalability project.

Initially launched as Matic Network in 2017 by founders Jayanti Kanani, Sandeep Nailwal, and Anurag Arjun, Polygon has garnered significant funding from investors such as Balaji Srinivasa and Mark Cuban. Despite the rebranding from Matic Network to Polygon, the native token ticker remains unchanged as MATIC.

MATIC token holders can exercise their voting rights in governance decisions, contributing to Polygon's future direction. With a strong team, ambitious goals, and partnership opportunities, Polygon presents a promising investment prospect for those seeking to enhance Ethereum's reliability and become the leading layer-2 solution for Ethereum.

Roadmap: Development milestones, past achievements, and future goals.

Polygon, initially introduced as Matic Network, boasts a robust timeline of development milestones, accomplishments, and objectives. The project's roadmap involves evolving from a monolithic to a modular structure, aiming to create a unified, scalable environment for users and developers across multiple chains, ultimately capable of expanding to internet scale.

Polygon's development path includes the introduction of ZK L2s on demand to enable unified liquidity, allowing any EVM chain to transform into a ZK L2 and join the AggLayer, and proposing a decentralized governance framework for Polygon 2.0. The project also intends to present a new token, POL, as the successor to MATIC, and establish unlimited scalability and unified liquidity through a proposed architecture.

Polygon's roadmap underscores its dedication to becoming the first decentralized L2 secured by zero-knowledge (ZK) proofs, providing a high-performance execution environment and improved developer resource allocation. The project has also set forth specific dates for key milestones, such as Polygon PoS in June 2023, Architecture and Stack in July 2023, Tokenomics in July 2023, and Governance, with additional details to be unveiled soon.

4. Market Analysis of TOKEN 

Polygon's tokenomics and financial landscape are marked by several key components including market capitalization, trading volume, distribution among token holders, transaction fees, revenue, expenses, and earnings. The MATIC token serves multiple functions, covering transaction fees, block rewards, and supporting staking within the Proof of Stake consensus mechanism. With a total supply of 10 billion MATIC tokens, of which 8 billion are currently in circulation, the token experiences an inflation rate of 5.6%. Ethereum's EIP-1559 update in August 2021 has introduced deflationary pressures on MATIC's supply due to its reliance on Ethereum for security and decentralization.

In terms of financial performance, Polygon's revenue, expenses, and earnings are key indicators. Over the past 30 days, both revenue and expenses have shown growth, with revenue reaching $18.48 million and expenses totaling $16.94 million. Despite this positive trend, the project has recorded negative earnings of $15.42 million during the same period.

The tokenomics and financial status of Polygon are pivotal indicators of its overall health and potential for future expansion. The project's focus on scalability, security, and cost-effectiveness has contributed to its widespread adoption by developers and users. Additionally, its financial metrics, particularly revenue and expenses, play a crucial role in assessing its sustainability and long-term growth prospects.

Target Market: Size, demographics, and behavior of the potential market.

Polygon's target market includes blockchain and cryptocurrency enthusiasts, developers, and users who are interested in fast, affordable, and seamless transactions. With nearly 5 million monthly users, Polygon has one of the largest user bases in all of crypto, leaving behind some monumental names such as Ethereum, Uniswap, and Solana1. The project's focus on scalability, security, and interoperability has unlocked new possibilities not only for Ethereum but the broader blockchain ecosystem as well.

Competitive Landscape: Analysis of competitors and Polygon matic position in the market.

Polygon faces competition from other layer-2 solutions such as Arbitrum, Optimism, and Base. The project's total value locked (TVL) stands at $756 million, which is less than half of Arbitrum's layer-2 scaling solution2. The departure of Polygon's co-founder, Jaynti Kanani, and the decline in the number of active addresses using the Polygon network have also impacted MATIC's performance.

Market Trends: Current and anticipated trends that could affect Polygon Matic.

Current and anticipated trends that could affect Polygon include the continued development of various blockchain scaling solutions, substantiated concerns around the centralization of the network, and the threat of strategy dilution3. The project's ZK subnet, zkEVM, has also lagged behind competitors in activity and deposits2. However, Polygon's commitment to delivering necessary updates and improvements to the network remains consistent.

5. Team and Advisors

The Polygon Matic team is led by four co-founders: Jaynti Kanani, Sandeep Nailwal, Anurag Arjun, and Mihailo Bjelic.

Backgrounds: Experience and expertise of Matic founding team and key members.

Jaynti Kanani is the CEO and co-founder of Polygon. He is a creative technology architect with a wealth of experience. Previously, he served as the Chief Data Scientist at Housing.com, where he helped secure its status as India's number one home search platform.

Sandeep Nailwal is the COO and co-founder of Polygon. He is a former management consultant at Deloitte and former CEO of Scopeweaver.com, India's largest professional marketplace for professional services.

Anurag Arjun is the Chief Product Officer and co-founder of Polygon.

 He is a veteran project manager with extensive experience in XBRL solutions, previously with Iris Business Services.Mihailo Bjelic is the co-founder and developer of Polygon. He describes himself as a tech maximalist and Etherean.

MATIC Advisory Board: Influence and contribution of the advisors.

Polygon's advisory board comprises esteemed individuals such as Hudson Jameson, who serves as a developer liaison at the Ethereum Foundation; Pete Kim, leading wallet engineering at Coinbase; Anthony Sassano, acting as a deal broker at EthHub; and Ryan Sean Adams, a prominent crypto asset investor and entrepreneur currently affiliated with Bankless.

The Polygon Matic team boasts a robust background spanning technology, business, and cryptocurrency realms. Their collective experience includes collaborations with industry giants like Deloitte and Coinbase, coupled with a profound understanding of the Ethereum blockchain and its scalability potential. With expertise spanning blockchain technology, development, and strategic business acumen, the team is well-equipped to spearhead Polygon's mission of addressing Ethereum's challenges, such as high transaction fees and network congestion.

The advisory board of Polygon Matic features seasoned professionals hailing from the Ethereum Foundation, Coinbase, and other major players in the cryptocurrency sphere. Their contributions to Polygon's development and expansion are invaluable, as they offer profound insights, guidance, and invaluable connections to the project.

Both the Polygon Matic team and its advisors are committed to positioning Polygon as a leading scalability solution in the cryptocurrency landscape.

Their wealth of expertise, industry experience, and extensive networks solidify their position as influential figures driving innovation within the industry.

6. Polygon Matic Tokenomics and Financials Tokenomics:

Polygon (MATIC) tokens were initially distributed across various allocations including Staking Rewards, the Ecosystem, Foundation, Advisors, Team, Private Investors, and Binance Launchpad. The maximum supply of MATIC tokens is set at 10 billion, with the entire supply expected to be vested by April 2025. MATIC's funding rounds encompassed a Seed Round, Early Supporters, IEO, and a Funding Round in February 2022, all contributing significant amounts to the project's advancement.

Financials:MATIC's circulating market capitalization stands at $8.81 billion, with a trading volume of $20.55 billion recorded over the past 30 days.

Polygon Matic has witnessed substantial revenue growth, reaching $1.52 million in the past 30 days and $18.48 million on an annualized basis.

Project expenses have risen as well, totaling $16.94 million in the past 30 days. Despite revenue growth, negative earnings of $15.42 million was reported during the same period, underscoring the necessity for a thorough analysis of the project's financial performance.

Polygon Matic Utility: The purpose and use cases for POLYGON MATIC’s token.

The Polygon Matic token, or MATIC, functions as a utility token within the Polygon ecosystem, serving various purposes such as covering gas fees, enabling staking, and participating in governance. Staking is crucial for securing the network and aligns with the Proof of Stake (PoS) consensus mechanism utilized by Polygon. In 2021, Polygon rebranded from its original name, Matic Network, to its current name, Polygon. The network is designed specifically to support the development of scaling infrastructure tailored to the Ethereum network and other EVM-compatible blockchains. MATIC tokens are extensively used for gas fees, staking, and governance within the Polygon ecosystem. 

Furthermore, Polygon has proposed a transition from MATIC to POL tokens. This transition aims to introduce POL as a versatile token capable of serving all Polygon-based networks, including the primary Polygon blockchain, the Polygon zkEVM network, and various supernets, which are application-specific blockchains operating atop the main Polygon network. This upgrade proposal would enable network validators to support multiple chains using a single token, with the transition process involving a straightforward technical action of transferring MATIC to the upgrade smart contract, which would automatically exchange it for an equivalent amount of POL. 

Polygon's emphasis on scaling infrastructure has driven significant adoption of its network, evident from corporate partnerships and increased developer engagement. 

However, there are notable risks associated with Polygon, including concerns regarding network centralization and potential dilution of strategy.  

Polygon Matic Distribution: Allocation of tokens (e.g., team, advisors, public sale). 

The allocation of Polygon Matic tokens is distributed as follows based on the provided sources:

1. Private Sales: 3.80% of the total supply is allocated to private sales

2. Binance Launchpad Sales: 19% of the total supply is allocated to Binance Launchpad sales.

3. Team: 16% of the total supply is allocated to the team.

4. Advisors: 4% of the total supply is allocated to advisors.

5. Polygon Foundation: 21.86% of the total supply is allocated to the Polygon Foundation.

6. Ecosystem and Marketing: 23.33% of the total supply is allocated to ecosystem and marketing.

Additionally, the Polygon Foundation initially received 3.23 billion MATIC (32.3% of the total supply) from the vesting contract in April 2019. This distribution breakdown provides insights into how the MATIC tokens are allocated across different entities within the Polygon ecosystem.

7. POLYGON MATIC’s Community and Ecosystem

Polygon Matic's community and ecosystem are significant aspects of the project. 

The community engagement is strong, with nearly 5 million monthly users and over 1.5 million followers across all social media platforms, making it the 9th most followed crypto project2.

The community is actively engaged in the Polygon ecosystem, recognizing the pivotal role of MATIC in the network and its value.

Partnerships: Strategic alliances and partnerships.

Polygon Matic has formed strategic partnerships, including collaborations with major players in the industry. These partnerships have contributed to the growth and adoption of the Polygon network.

Network Effects: The project's strategy for achieving and benefiting from network effects.

Polygon Matic's network effects strategy focuses on enhancing scalability, integrating popular DeFi services, and attracting both developers and users to its ecosystem. 

The project's vision is to continue evolving and overcoming challenges, such as competition among layer-2 solutions, regulatory uncertainties, and technical hurdles. 

Polygon Matic's commitment to scalability, security, and interoperability has unlocked new possibilities for the Ethereum blockchain and the broader blockchain ecosystem.

The project's future looks promising, with its potential to play a pivotal role in shaping the future of decentralized applications.

8. Risks and Challenges

Market Risks: 

Polygon (MATIC) faces uncertainty in the market, but Retik Finance remains dedicated to its community.

Technical Risks: Potential technical hurdles in development or deployment.

The network has experienced a reduction in contributions from developers, despite an increase in new developers joining the network.

Regulatory Risks: Legal challenges that could impact the project's viability.

MATIC faces regulatory risks that could impact its viability due to potential legal challenges. These risks encompass financial stability regulations aimed at preventing or minimizing financial crises and environmental permits or approvals required for certain operations. The regulatory environment surrounding MATIC's operation could also affect its viability, with ambiguous or unfavorable regulations potentially obstructing adoption and leading to project closures. To mitigate these risks, MATIC's legal team or advisors must navigate intricate regulatory barriers. Moreover, insufficient contract management can expose MATIC to various risks, including financial, operational, and reputational risks, emphasizing the importance of implementing robust processes.

SOURCES:

https://blockchainmagazine.net/crypto-projects-are-about-to-moon/ 

https://www.wolterskluwer.com/en-gb/expert-insights/contract-management-risks 

Other Risks:

MATIC token viability may be affected by potential problems with Ethereum's network affecting Polygon's operation, competition from alternative Layer 2 solutions, the necessity to draw developers to the platform, and concerns about token allocation transparency. These challenges emphasize the need for Polygon to maintain its progress, tackle scalability concerns, and establish a solid ecosystem to support MATIC token demand in the face of a rapidly changing blockchain environment.

9. POLYGON MATICS’s SWOT Analysis

Strengths: Internal factors that give the project an advantage.

Polygon Matic offers a range of appealing features in the blockchain sphere:

1. Enhanced Scalability: Polygon Matic effectively tackles network congestion, resulting in quicker transactions and significantly reduced transaction costs, sometimes as low as fractions of a cent.

2. User-Friendly Infrastructure: Polygon Matic provides an easily navigable framework that allows both new and established blockchain projects to function seamlessly within the Ethereum ecosystem.

3. Proven Performance: Polygon Matic boasts a track record of successfully developing and operating various products such as Polygon PoS, zkEVM, CDK, Miden, and ID, demonstrating reliability and expertise.

4. Staking Mechanism: MATIC, Polygon Matic's native cryptocurrency, serves a critical role in governing and securing the network through staking, making it an invaluable asset for validators and delegators.

5. Robust Community: With nearly 5 million monthly users and over 1.5 million followers across social media platforms, Polygon Matic enjoys a strong and engaged community that provides support and fosters adoption.

6. Flexibility and Innovation: Polygon Matic's adaptability and willingness to evolve, exemplified by initiatives like the proposed POL token, highlight its commitment to staying competitive and relevant in the dynamic blockchain landscape.

Weaknesses: Internal limitations or areas for improvement.

1.Simplifying the Wallet Setup Process: Polygon Matic needs to simplify the wallet setup process and enhance blockchain education to foster wider adoption

2.Limited Utility of MATIC: MATIC, Polygon Matic's native cryptocurrency, has limited utility compared to the proposed POL token, which offers more utility and functionality.

Opportunities: External factors that the project could exploit to its advantage.

1.Network Development: The introduction of Polygon 2.0 and the upcoming transition to zkEVM Validium are expected to bring about elevated performance and dynamics of MATIC staking, opening up new possibilities for the Polygon network.

2. Expanding Use Cases: Polygon Matic's adaptability and upgradeability, such as the proposed POL token, offer opportunities to expand use cases and attract more validators and users.

Threats: External challenges that could pose risks to the project.

1.Market Volatility: Polygon Matic, like other cryptocurrencies, is exposed to market volatility, which could impact its value and adoption.

2.Competitive Threats: Polygon Matic faces competition from other layer-2 solutions and blockchain networks, which could impact its market share and adoption.

3.Regulatory Risks: Polygon Matic, as a blockchain project, is subject to regulatory risks, which could impact its operations and adoption in various jurisdictions.

4.Security Risks: Polygon Matic, like other blockchain projects, is exposed to security risks, such as smart contract vulnerabilities and potential attacks, which could impact its reputation and adoption.

10. How POLYGON MATIC works with TheStandard.io 

Possible collateral type:

Within TheStandard.io protocol, MATIC functions as collateral, enabling users to obtain loans in EUROs and, soon, USDs, without incurring interest. This process is non-custodial, ensuring that users maintain control of their assets throughout the transaction.

11. Conclusion and viability score

Based on the provided information, the viability score for Polygon Matic (MATIC) as a collateral type in TheStandard Protocol is as follows:

1. Token replacement: 3/10

2. Market cap and trading volume: 8/10

3. Competition from other L2 scaling solutions: 6/10

4. Governance and community ownership: 5/10

5. Security and audits: 7/10

Final assessment and Score

Overall, Polygon Matic has a moderate viability score of 7.2/10.

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