Paying for Use Slows Down Crypto's Search for a Use Case

CoinDesk's Danny Nelson reported that Polygon paid DraftKings to be on the network, a furtive deal that only misrepresents consumer choice.

AccessTimeIconNov 30, 2023 at 7:24 p.m. UTC
Updated Jan 26, 2024 at 3:21 p.m. UTC
AccessTimeIconNov 30, 2023 at 7:24 p.m. UTCUpdated Jan 26, 2024 at 3:21 p.m. UTC
AccessTimeIconNov 30, 2023 at 7:24 p.m. UTCUpdated Jan 26, 2024 at 3:21 p.m. UTC

Polygon Labs gave DraftKings millions worth of MATIC tokens to become one of the Ethereum-scalable protocol’s 100 validators. The payments were never disclosed, but evidence is visible on-chain, CoinDesk’s Danny Nelson found.

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Worse, DraftKings failed to maintain its validator's performance and was kicked off the network last month — despite receiving financial and technical support from Polygon as well as special privileges (like the ability to take 100% commission from delegators, well above the norm of 5%-10%).

When the tie-up was announced in early 2022, Polygon called it an "important adoption milestone" and “the first time a major publicly-traded firm has taken an active role in blockchain governance."

While it's fairly common for Web3 companies to pay mainstream brands, celebrities and influencers to promote or use their crypto protocols, discussing such deals as a signal of "mainstream adoption" is both an overstatement and undermining of crypto's supposed values.

And, at least in Polygon's case, there are often other costs associated with these type of special arrangements. As Nelson writes:

"DraftKings' earnings came at the expense of every other staker in Polygon's ecosystem. The network only issues a finite number of MATIC rewards to stakers annually. At least 80% of DraftKings' Polygon-delegated tokens came directly from the Foundation, meaning they were not previously being staked. These newly delegated tokens diluted how much rewards everyone else could get."


"Polygon's undisclosed allocation to DraftKings – and its validator's near-complete reliance on Polygon – undercut the blockchain company's own characterizations about the validator being like all the others."

It'd be hard to say exactly that Polygon did wrong by subsidizing DraftKings' use of the network. DraftKings did participate in other Polygon-related efforts, and made good use of a Polygon-based NFT platform. But the image being projected of crypto being willingly used and chosen by major brands is a falsehood, and one that will only end up costing the industry more in the long run.

If a false idea of usage is bought and paid for, then crypto may never find out what people and companies actually want from it.

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CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk offers all employees above a certain salary threshold, including journalists, stock options in the Bullish group as part of their compensation.

Daniel Kuhn

Daniel Kuhn is a deputy managing editor for Consensus Magazine. He owns minor amounts of BTC and ETH.