Miles Deutscher Profile picture
Jul 19, 2022 59 tweets 218 min read Read on X
Polygon is one of the most exciting projects in crypto.

$MATIC has been one of the best performers during this bear market, after announcing key partnerships with Disney, Meta, Stripe and Reddit.

🧵: The ULTIMATE thread on Polygon and its potential in 2022 and beyond. 👇 Image
1/ In this thread, I'm going to break down Polygon's:

• Technology
• Ecosystem Development
• DeFi Protocols
• NFTs/Gaming
• Financial Backers
• Tokenomics
• Investment Potential/My Thesis

Let's Dive In!
2/ Polygon was founded in 2017 by @sandeepnailwal, @jdkanani, and @anuragarjun, with the purpose of addressing the scalability problem of Ethereum.

$MATIC rebranded to "Polygon" in 2021 to become the "Swiss Army knife" of scaling solutions.
@sandeepnailwal @jdkanani @anuragarjun 3/ Polygon at its core is a platform designed to help Ethereum scale. It features a modular, flexible framework (Polygon SDK) that allows developers to build and connect Layer-2 infrastructures.…
@sandeepnailwal @jdkanani @anuragarjun 4/ It takes a multi-faceted approach to scaling Ethereum via utilising:

• Sidechains
• Optimistic/ZK Rollups
• Plasma chains
• Hybrid scaling solutions Image
@sandeepnailwal @jdkanani @anuragarjun 5/ To fully understand how Polygon works (and the problem it aims to solve), first you have to understand the difference between a Layer 1 and a Layer 2 blockchain.

(if you're not tech-minded, skip to "DEVELOPMENT" on tweet 17).
@sandeepnailwal @jdkanani @anuragarjun 6/ A Layer 1 is the base level architecture which comprises a blockchain network.

Layer 2s are secondary networks that work in parallel or independent of the main chain. Image
@sandeepnailwal @jdkanani @anuragarjun 7/ The need for L2s stem from the famous 'Blockchain Trilemma'.

This ideology follows the concept that decentralised networks can only facilitate 2 of the 3 factors of scalability, security and decentralisation. Image
@sandeepnailwal @jdkanani @anuragarjun 8/ A blockchain like Ethereum (although relatively decentralised and secure), struggles in terms of scalability. Its current limitations lead to slow transaction speeds and high gas fees amidst high traffic.

This introduces the need for Layer 2 solutions.
@sandeepnailwal @jdkanani @anuragarjun 9/ Enter: Polygon.

The Polygon network is designed to help Ethereum scale via offering a flexible framework of infrastructures that support the primary MATIC POS blockchain.
@sandeepnailwal @jdkanani @anuragarjun 10/ THE TECH

It uses a Proof-of-Stake consensus mechanism, consisting of three layers:

• ETH layer
A set of contracts on the Ethereum mainnet.

• The Bor: Block production layer
Aggregates transactions into blocks.

• Heimdall: Validator layer
Supports all validator nodes. Image
@sandeepnailwal @jdkanani @anuragarjun 11/ Polygon has a base validation layer, with compatibility for:

• Plasma enabled chains
• EVM sidechains
• Optimistic/ZK Rollups (in the future)

This makes the network extremely scalable and adaptive.

@sandeepnailwal @jdkanani @anuragarjun 12/ Polygon uses Plasma chains to scale, which are more secure iterations of sidechains. The key difference between the two being: The “root” of each plasma chain block is published to Ethereum.

Plasma chains run alongside the primary blockchain. Image
@sandeepnailwal @jdkanani @anuragarjun 13/ Like all POS networks, holders stake $MATIC to validator nodes, in turn securing the network.

Some key details regarding Polygon's POS mechanism: ImageImage
@sandeepnailwal @jdkanani @anuragarjun 14/ One key area of focus for @0xPolygon are Zero-knowledge rollups.

ZK rollups combine multiple Layer 2 transactions (off-chain) into one transaction, which then get mined on the Ethereum mainnet.

This is opposed to mining 100s of transactions individually.
@sandeepnailwal @jdkanani @anuragarjun @0xPolygon 15/ Polygon is reportedly going live with ZK Rollups this year, enabling enhanced scalability potential.

Polygon is actively "developing a suite of ZK rollups to increase throughput on Ethereum without sacrificing decentralisation or security."…
@sandeepnailwal @jdkanani @anuragarjun @0xPolygon 16/ Remember, the success of Polygon relies on its ability to scale.

The implementation of additional infrastructures to support this offer a major incentive to build on $MATIC vs $ETH.

@sandeepnailwal @jdkanani @anuragarjun @0xPolygon 17/ DEVELOPMENT

According to Electric Capital's 2021 Developer Activity report, Polygon is home to the 6th most active developers by chain. Image
@sandeepnailwal @jdkanani @anuragarjun @0xPolygon 18/ Polygon is also the 10th fastest growing ecosystem by increase in developers (136% growth from Dec 2021-Dec 2022). Image
@sandeepnailwal @jdkanani @anuragarjun @0xPolygon 19/ Developer activity is an important metric as it affects the quality of applications on-chain (impacting user acquisition).

Invest early in the cycle and you stand to benefit the most, as per the flow of funds model:

Capital > Developers > Users > Transactions > TVL >Price.
@sandeepnailwal @jdkanani @anuragarjun @0xPolygon 20/ DEFI

Many projects have chosen to make Polygon home. Polygon currently has 275 compatible DeFi projects, totalling a TVL of $1.77b.

This makes Polygon the #3 ranked chain for active protocols, and the #6 ranked project by TVL. Image
@sandeepnailwal @jdkanani @anuragarjun @0xPolygon 21/ Of these 275 projects, 52 are built directly on Polygon.

Here's a list of each project and what it does:
@sandeepnailwal @jdkanani @anuragarjun @0xPolygon 22/ Breaking down its DeFi ecosystem even further, we can observe that over 50% of its TVL is comprised by 3 projects:

@AaveAave (borrowing/lending)
@QuickswapDEX (Primary DEX)
@CurveFinance (AMM) Image
@sandeepnailwal @jdkanani @anuragarjun @0xPolygon @AaveAave @QuickswapDEX @CurveFinance 23/ But it's not just DeFi protocols adopting Polygon. Due to the network's scalability, there are 2 sectors which stand out as potential suitors:

• Gaming
• NFTs

Let's break down both categories. 👇
@sandeepnailwal @jdkanani @anuragarjun @0xPolygon @AaveAave @QuickswapDEX @CurveFinance 24/ GAMING

Many games are currently live on Polygon, some of the most notable including:

@decentraland (partnership)
@sandeepnailwal @jdkanani @anuragarjun @0xPolygon @AaveAave @QuickswapDEX @CurveFinance @TheSandboxGame @decentraland @CyberKongz @ARC8App @RealChainGames @REBEL_BOTS @0xSunflowerLand @snook_gg 25/ But, we know how massive the crypto gaming space is going to be over the coming decade. Just a mere fraction of its potential has been realised.

Many of the top games are building on @0xPolygon, and it remains one of the best chains for this purpose.

@sandeepnailwal @jdkanani @anuragarjun @0xPolygon @AaveAave @QuickswapDEX @CurveFinance @TheSandboxGame @decentraland @CyberKongz @ARC8App @RealChainGames @REBEL_BOTS @0xSunflowerLand @snook_gg @realmsofeth @REVV_Racing @PlayfulStudios @aavegotchi 27/ Polygon is so serious about NFTs, Gaming and Metaverse that they launched their own dedicated division titled @polygonstudios, of which @Fwiz is at the helm as CEO.

Polygon Studios set up a $100m fund to support gaming projects building on Polygon.
@sandeepnailwal @jdkanani @anuragarjun @0xPolygon @AaveAave @QuickswapDEX @CurveFinance @TheSandboxGame @decentraland @CyberKongz @ARC8App @RealChainGames @REBEL_BOTS @0xSunflowerLand @snook_gg @realmsofeth @REVV_Racing @PlayfulStudios @aavegotchi @polygonstudios @Fwiz 28/ NFTs & PARTNERSHIPS

Whilst many other projects stagnate during the bear market, @0xPolygon has been very impressive from a business development perspective.

Here are some of the partnerships they've closed:
• Disney
• Meta (FaceBook)
• Reddit
• Stripe
• Draft Kings
@sandeepnailwal @jdkanani @anuragarjun @0xPolygon @AaveAave @QuickswapDEX @CurveFinance @TheSandboxGame @decentraland @CyberKongz @ARC8App @RealChainGames @REBEL_BOTS @0xSunflowerLand @snook_gg @realmsofeth @REVV_Racing @PlayfulStudios @aavegotchi @polygonstudios @Fwiz 29/ @Disney

Announced a web3-focused accelerator program:
• Designed to accelerate the growth of innovative companies (in this case $MATIC).
• Devs will build web3 experiences on
• Focus on metaverse, AR and NFTs.

@sandeepnailwal @jdkanani @anuragarjun @0xPolygon @AaveAave @QuickswapDEX @CurveFinance @TheSandboxGame @decentraland @CyberKongz @ARC8App @RealChainGames @REBEL_BOTS @0xSunflowerLand @snook_gg @realmsofeth @REVV_Racing @PlayfulStudios @aavegotchi @polygonstudios @Fwiz @Disney @Meta 31/ @stripe

Stripe is one of the biggest online payment processing platforms, host to 3.1m active websites.

Stripe announced it will use $MATIC as the facilitator in allowing crypto payments on its platform. Image
@sandeepnailwal @jdkanani @anuragarjun @0xPolygon @AaveAave @QuickswapDEX @CurveFinance @TheSandboxGame @decentraland @CyberKongz @ARC8App @RealChainGames @REBEL_BOTS @0xSunflowerLand @snook_gg @realmsofeth @REVV_Racing @PlayfulStudios @aavegotchi @polygonstudios @Fwiz @Disney @Meta @stripe @Reddit @DraftKings @TechCrunch 36/ This is extremely bullish for $MATIC in my opinion, as some of the Terra applications are fantastic developments.

It speaks volumes to the quality of Polygon's chain, considering 48 of these projects willingly chose to reside on $MATIC over other chains.
@sandeepnailwal @jdkanani @anuragarjun @0xPolygon @AaveAave @QuickswapDEX @CurveFinance @TheSandboxGame @decentraland @CyberKongz @ARC8App @RealChainGames @REBEL_BOTS @0xSunflowerLand @snook_gg @realmsofeth @REVV_Racing @PlayfulStudios @aavegotchi @polygonstudios @Fwiz @Disney @Meta @stripe @Reddit @DraftKings @TechCrunch @sequoia @mcuban 40/ So, @0xPolygon clearly has the developers, backers and partners on board to help it achieve success. But what about the token itself?

Just because a project succeeds, doesn't necessarily guarantee token price appreciation.
@sandeepnailwal @jdkanani @anuragarjun @0xPolygon @AaveAave @QuickswapDEX @CurveFinance @TheSandboxGame @decentraland @CyberKongz @ARC8App @RealChainGames @REBEL_BOTS @0xSunflowerLand @snook_gg @realmsofeth @REVV_Racing @PlayfulStudios @aavegotchi @polygonstudios @Fwiz @Disney @Meta @stripe @Reddit @DraftKings @TechCrunch @sequoia @mcuban 41/ TOKENOMICS

The total breakdown of the MATIC token supply is as follows:

• Ecosystem: 23.33%
• Foundation: 21.86%
• Binance Launchpad: 19%
• Team: 16%
• Staking Rewards: 12%
• Advisors: 4%
• Private sale (seed round + early supporters): 3.8% Image
@sandeepnailwal @jdkanani @anuragarjun @0xPolygon @AaveAave @QuickswapDEX @CurveFinance @TheSandboxGame @decentraland @CyberKongz @ARC8App @RealChainGames @REBEL_BOTS @0xSunflowerLand @snook_gg @realmsofeth @REVV_Racing @PlayfulStudios @aavegotchi @polygonstudios @Fwiz @Disney @Meta @stripe @Reddit @DraftKings @TechCrunch @sequoia @mcuban 42/ Currently, 80% of $MATIC tokens are in circulation, after the majority of unlocks have already hit the market.

The remaining 20% is set to be released over the next 2 years, with the next major unlock coming in October this year. Image
@sandeepnailwal @jdkanani @anuragarjun @0xPolygon @AaveAave @QuickswapDEX @CurveFinance @TheSandboxGame @decentraland @CyberKongz @ARC8App @RealChainGames @REBEL_BOTS @0xSunflowerLand @snook_gg @realmsofeth @REVV_Racing @PlayfulStudios @aavegotchi @polygonstudios @Fwiz @Disney @Meta @stripe @Reddit @DraftKings @TechCrunch @sequoia @mcuban 43/ Overall, from a liquid supply curve perspective, the unlock schedule is favourable, as the majority of supply has already hit the market.

Although there are some unlocks yet to come, the market should price these in ahead of time.
@sandeepnailwal @jdkanani @anuragarjun @0xPolygon @AaveAave @QuickswapDEX @CurveFinance @TheSandboxGame @decentraland @CyberKongz @ARC8App @RealChainGames @REBEL_BOTS @0xSunflowerLand @snook_gg @realmsofeth @REVV_Racing @PlayfulStudios @aavegotchi @polygonstudios @Fwiz @Disney @Meta @stripe @Reddit @DraftKings @TechCrunch @sequoia @mcuban 45/ $MATIC has a similar value accrual mechanism to most prominent L1s: User growth > Increased transaction volume > More $MATIC burnt (value accrual) > Increased demand for staking via fee incentives.
@sandeepnailwal @jdkanani @anuragarjun @0xPolygon @AaveAave @QuickswapDEX @CurveFinance @TheSandboxGame @decentraland @CyberKongz @ARC8App @RealChainGames @REBEL_BOTS @0xSunflowerLand @snook_gg @realmsofeth @REVV_Racing @PlayfulStudios @aavegotchi @polygonstudios @Fwiz @Disney @Meta @stripe @Reddit @DraftKings @TechCrunch @sequoia @mcuban 46/ The more users the chain accrues - the higher demand for the $MATIC token itself, as it is a key resource within the ecosystem, used not only for gas but also to transact and interact with dAPPS.

Thus, a bet on $MATIC is a bet on @0xPolygon's ability to accrue users.
@sandeepnailwal @jdkanani @anuragarjun @0xPolygon @AaveAave @QuickswapDEX @CurveFinance @TheSandboxGame @decentraland @CyberKongz @ARC8App @RealChainGames @REBEL_BOTS @0xSunflowerLand @snook_gg @realmsofeth @REVV_Racing @PlayfulStudios @aavegotchi @polygonstudios @Fwiz @Disney @Meta @stripe @Reddit @DraftKings @TechCrunch @sequoia @mcuban @messari 48/ Overall, the $MATIC tokenomics are very solid in my opinion.

Decent distribution from a supply perspective, standard unlock schedule (most tokens are already unlocked), and a clear value accrual mechanism.
@sandeepnailwal @jdkanani @anuragarjun @0xPolygon @AaveAave @QuickswapDEX @CurveFinance @TheSandboxGame @decentraland @CyberKongz @ARC8App @RealChainGames @REBEL_BOTS @0xSunflowerLand @snook_gg @realmsofeth @REVV_Racing @PlayfulStudios @aavegotchi @polygonstudios @Fwiz @Disney @Meta @stripe @Reddit @DraftKings @TechCrunch @sequoia @mcuban @messari 49/ So, considering all of the positive factors highlighted so far in this thread - what are the drawbacks?

I think its important to look at the counter-argument whenever evaluating an investment, in order to stay objective and remove confirmation bias.
@sandeepnailwal @jdkanani @anuragarjun @0xPolygon @AaveAave @QuickswapDEX @CurveFinance @TheSandboxGame @decentraland @CyberKongz @ARC8App @RealChainGames @REBEL_BOTS @0xSunflowerLand @snook_gg @realmsofeth @REVV_Racing @PlayfulStudios @aavegotchi @polygonstudios @Fwiz @Disney @Meta @stripe @Reddit @DraftKings @TechCrunch @sequoia @mcuban @messari 50/ PARTNERSHIPS aren't an indicator of success unless something concrete comes out of it.

Strategic partnerships in crypto are often used primarily as a marketing tool. Unless we see real user acquisition via the Disney, Meta partnerships etc. don't get TOO excited.
@sandeepnailwal @jdkanani @anuragarjun @0xPolygon @AaveAave @QuickswapDEX @CurveFinance @TheSandboxGame @decentraland @CyberKongz @ARC8App @RealChainGames @REBEL_BOTS @0xSunflowerLand @snook_gg @realmsofeth @REVV_Racing @PlayfulStudios @aavegotchi @polygonstudios @Fwiz @Disney @Meta @stripe @Reddit @DraftKings @TechCrunch @sequoia @mcuban @messari 51/ MARKET CONDITIONS still aren't favourable from a macro perspective. No matter how great a project may be, 99% of chains rely on capital inflows.

@0xPolygon is no different (despite its relative strength during this bear market so far).
@sandeepnailwal @jdkanani @anuragarjun @0xPolygon @AaveAave @QuickswapDEX @CurveFinance @TheSandboxGame @decentraland @CyberKongz @ARC8App @RealChainGames @REBEL_BOTS @0xSunflowerLand @snook_gg @realmsofeth @REVV_Racing @PlayfulStudios @aavegotchi @polygonstudios @Fwiz @Disney @Meta @stripe @Reddit @DraftKings @TechCrunch @sequoia @mcuban @messari 52/ ETHEREUM MERGE: With the $ETH merge set to kickstart the roadmap for enhanced $ETH scaling, the question becomes: Can ETH scale to the point that L2 solutions eventually become irrelevant?

I personally disagree with this sentiment, but it's still a question to consider.
@sandeepnailwal @jdkanani @anuragarjun @0xPolygon @AaveAave @QuickswapDEX @CurveFinance @TheSandboxGame @decentraland @CyberKongz @ARC8App @RealChainGames @REBEL_BOTS @0xSunflowerLand @snook_gg @realmsofeth @REVV_Racing @PlayfulStudios @aavegotchi @polygonstudios @Fwiz @Disney @Meta @stripe @Reddit @DraftKings @TechCrunch @sequoia @mcuban @messari 53/ This thread is intended to serve as a guide to researching $MATIC and its potential (not FA).

Although I am bullish on $MATIC long term (and plan on DCAing in the near future), it's important that you DYOR and use this thread as a starting point, not as a buy signal.
@sandeepnailwal @jdkanani @anuragarjun @0xPolygon @AaveAave @QuickswapDEX @CurveFinance @TheSandboxGame @decentraland @CyberKongz @ARC8App @RealChainGames @REBEL_BOTS @0xSunflowerLand @snook_gg @realmsofeth @REVV_Racing @PlayfulStudios @aavegotchi @polygonstudios @Fwiz @Disney @Meta @stripe @Reddit @DraftKings @TechCrunch @sequoia @mcuban @messari 54/ Given the recent explosion in price, it's never wise to FOMO in during periods of expansion, just as it is unwise to panic during periods of contraction.

Come up with an accumulation plan that fits your financial goals and personal situation.
@sandeepnailwal @jdkanani @anuragarjun @0xPolygon @AaveAave @QuickswapDEX @CurveFinance @TheSandboxGame @decentraland @CyberKongz @ARC8App @RealChainGames @REBEL_BOTS @0xSunflowerLand @snook_gg @realmsofeth @REVV_Racing @PlayfulStudios @aavegotchi @polygonstudios @Fwiz @Disney @Meta @stripe @Reddit @DraftKings @TechCrunch @sequoia @mcuban @messari 55/ Also, apparently $MATIC has a BIG announcement coming tomorrow. I'll be adding to this thread to keep you updated, so make sure you have my post notifications turned on so you don't miss it. 👀 Image
The announcement is here! ZK EVM integration.

• ZK tech (highly scalable)
• EVM compatible (ease of use)
• First of its kind

• • •

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It may feel like you're late, but in reality you're STILL early.

Want proof? Check out the 5 indicators below. 👇🧵
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