Layer 2 Scaling Solution Polygon has maintained strong network activity even as the broader cryptocurrency market and its native token, MATICexperienced a downturn in the second quarter of 2024, according to a new report from market intelligence platform Messari.
Polygon is weathering the crypto market downturn
While MATIC saw its circulating market capitalization drop 44.3% to $5.5 billion during the quarter, making it the 20th largest crypto asset (currently at 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 value Market capitalization fell by 12% and 6% respectively in the same period.
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The main driver behind Polygon’s stability in network performance during the second quarter of the year, according to to Messari, was 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, significantly lowered the average transaction costs on Polygon from $0.017 to just $0.01, resulting in a drop of 41.1%.
As a result, Polygon’s network transaction fee revenues fell 40.6% to $4 million in the second quarter of 2024. However, this decline was not due to a decline in user activity, but rather the lower costs made possible by EIP-4844. In fact, Polygon’s user metrics continued to rise, with the protocol showing strong growth across several key indicators.
Activity and ecosystem growth in the chain
According to the report, the average number is daily active addresses rose to 1.2 million, an increase of 47.6% quarter on quarter. The average number of daily recurring addresses increased even further, by 50.5% to 1 million. In addition, the number of new addresses added to the network grew by 31.7% to an average of 167,800 per day.
The report also notes that Polygon’s transaction volume also remained stable, with an average of 4.1 million daily transactions, just below the level of highest ever and represents an increase of 3.9% compared to the previous quarter.
By comparison, fellow Layer 2 networks Arbitrum (ARB) and Base saw 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, this was largely due to the decline in the MATIC price and not a net outflow of capital. Messari reported that TVL, in terms of MATIC, actually increased by 38.1% to 1.8 billion tokens.
However, the DeFi protocols on Polygon showed mixed results, with Aave, Uniswap, and SushiSwap all experiencing a drop in TVL ranging from 13% to 25%. Quickswap had the largest decline with 35%.
Finally, Polygon’s non-fungible token (NFT) market 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 rose 1.8% to 52,000, underscoring the continued interest from collectors.
At the time of writing, MATIC has experienced a rise of just 5% to a trading price of $0.512, after hitting a two-year low of $0.428 on July 5.
Coupled with this worrying price action, the token has seen a 30% drop in trading volume in recent days, amounting to $197 million, according to CoinGecko. facts. All of this has resulted in an 82% difference from MATIC’s all-time high of $2.91, which was achieved during the 2021 bull run.
Featured image from Shutterstock, chart from TradingView.com