Bernstein Says Polygon Blockchain Is the Web3 King
The project has hired staff from large global tech companies and is being used by many big brands such as Starbucks and Instagram, a note from the Wall Street firm said.
The Polygon blockchain has emerged as the leading gateway for moving Web2 consumers to Web3, Bernstein said in a research report Friday. The system has been chosen by Starbucks (SBUX), NuBank, Reddit, DraftKings (DKNG), Robinhood Markets (HOOD) and Facebook parent Meta Platforms' (META) Instagram.
Polygon’s native cryptocurrency, MATIC, rallied 30% in two days last week after Meta said it would introduce a toolkit allowing Instagram users to mint and sell Polygon-powered non-fungible-tokens (NFTs).
The Polygon team has done two things right, the report from Bernstein said. It has hired talent from large global tech companies such as Amazon (AMZN), YouTube and Airbnb (ABNB), and it has used its “business development muscle” to reach out to consumer-heavy brands.
“This has put Polygon in the unique position to be the Web3 on-ramp for millions of users,” and with the MATIC token trading at about $1.13, “the market has started rewarding it for building through the bear market,” analysts Gautam Chhugani and Manas Agrawal wrote.
Web3 represents the next generation of the internet that promotes decentralized protocols and aims to reduce dependency on large tech companies.
Bernstein notes two criticisms that have been leveled against Polygon: That its current proof-of-stake chain isn't a long-term solution because it is actually a side chain and that “Polygon has been parasitic to Ethereum.”
The broker says Polygon has been smart, making strategic acquisitions during the bull market that ended last year. It acquired multiple teams who were building zero-knowledge layer 2 scaling products (zk-rollups) on the Ethereum blockchain, and during the current bear market, it has built a working live solution for zk-rollups, with an impending launch.
This allows Polygon to overcome a technological barrier and to build a long-term scaling platform that can support a Web2-like scale. Because it was built as an Ethereum VM (virtual machine)-compatible platform, it uses standard Ethereum language and tools and uses ether (ETH) as the gas currency across the platform, the note said.
Polygon moves from “potential cannibalization” of the Ethereum blockchain to becoming a complimentary scaling platform, bringing value back to the Ethereum ecosystem, the note said. Therefore, “Polygon’s success becomes the success of the Ethereum ecosystem.”
Zk-rollups are Ethereum layer 2 protocols that help process transactions separately from the main network to increase speed and lower costs. Layer 2 refers to separate blockchains built on top of layer 1s that reduce bottlenecks with scaling and data. Layer 1 is the base layer or the underlying infrastructure of a blockchain.
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