Polygon (CRYPTO: MATIC) saw sudden and intense growth this year and seems to be on its way to competing with major blockchains to host a bigger slice of the decentralized finance (DeFi) ecosystem.
What Happened: According to The Block data, Polygon saw astronomical growth in the total gross value locked (TVL) in the smart contracts that DeFi protocols operate on: from just over $151,000 at the beginning of the year to over $6.31 billion today, an increase of no less than 4,178,708%.
Further testament to the fact that the protocol's native coin is increasingly being used — rather than just being speculated on — is the fact that Glassnode data shows the percentage of MATIC held on exchanges has been steadily decreasing, from 24.6% at the beginning of 2021 to 2.27% as of Aug. 2.
While Polygon's TVL of $6.31 billion is a far cry from Ethereum's (CRYPTO: ETH) $61.28 billion, it is not that far from Binance Smart Chain's (CRYPTO: BNB) $15.18 billion — and that is the second contender. Polygon even overtook Solana (CRYPTO: SOL), whose TVL exceeded Polygon's at the beginning of the year but then it failed to keep its pace and stayed at $1.23 billion.
Further confirming its growth is Polygon's number of active addresses shown by Glassnode charts, up from just 489 at the beginning of 2021 to 4,509 earlier this week. Also, the number of Polygon unique addresses quadrupled in June alone.
Why It's Important: Polygon's success can be largely attributed to how fast and cheap it is to send transactions on the network: conducting an operation on Polygon is hundreds of times cheaper than on its bigger brother Ethereum and is near-instantaneous instead of often taking hours.
Furthermore, with its growth having picked up the pace, Polygon also appears to be enjoying the positive impact of network effects spurred by the integration of major DeFi platforms such as SushiSwap (CRYPTO: SUSHI), Aave (CRYPTO: AAVE), Curve (CRYPTO: CRV), 1inch (CRYPTO: 1INCH) and others. In total, Polygon already hosts over 350 decentralized applications (DApps).
Those projects originally launched on Ethereum, but as the network started to make it increasingly slow and expensive for its users to interact with the protocol due to high traffic they started to look for alternatives. Of course, those projects did not fully migrate, instead, they started offering a twin platform that is based on the much cheaper and faster Polygon protocol.
Photo by: Courtesy of polygon.technology
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