In 2022, Polygon did what no other Layer 2 chain managed to do in terms of collaborations: break into mainstream adoption with brands like Adobe, Disney, Meta, NFL, NuBank, Reddit, Robinhood, Starbucks and more. The network was able to do this through very well-timed and nearly flawless execution of user acquisition campaigns. We’ll take a look at the Polygon ecosystem today, how it managed to achieve this success and what’s in store for the network in 2023.

Polygon is a layer 2 scaling solution for Ethereum that uses different scaling technologies to improve the scalability of Ethereum mainnet. Valued at $20 billion in a $450 million funding round led by Sequoia Capital India in February 2022, Polygon was founded in 2017 by experienced Ethereum developers Jaynti Kanani, Sandeep Nailwal, Anurag Arjun, as well as Mihailo Bjelic. The network went live under the name Matic and was rebranded to Polygon in February 2021.

Polygon offers several solutions in its tech stack for different use cases, all targeted towards fulfilling specific needs for developers:

The Polygon ecosystem houses a wide range of dApps ranging from DeFi, NFTs, Gamefi to infrastructure projects. Throughout the course of the year, Polygon has been putting in strong efforts to build up its ecosystem, aggressively onboarding projects with attractive grants. The guilds and advocates programs also played a huge part in bringing together many members of the community to build and develop on Polygon.

DeFi

DeFi projects on Polygon are amongst the top including AAVE, Uniswap and Curve Finance. How did Polygon achieve this? The network was able to grow its DeFi user base through the launch of its #DeFiforAll fund, funding liquidity mining programs that enticed users to bridge to Polygon. Within 3 months of the launch, the TVL increased about 10x and unique wallet addresses jumped 500% to 100 million.

However, the same user acquisition strategy offered by Polygon can also be used by competitors, and the TVL on Polygon fell 40% QoQ during the same period Arbitrum and Optimism launched their liquidity mining campaigns. Users will go where the rewards are and dishing out tokens to attract more users is unsustainable in the long term. The DeFi landscape is extremely competitive, and we believe Polygon will have to focus on building a tighter community of users and bootstrapping DeFi innovation, creating Polygon’s very own DeFi successes like GMX on Arbitrum.

NFTs

Polygon achieved stellar success in NFTs, specifically in the form of digital collectibles created in collaboration with mainstream brands. Reddit’s introduction of digital collectibles powered by Polygon in August was a major adoption event by a mainstream audience. Reddit users minted more than 5 million of the Collectible Avatars, generating over $10 million in revenue. Meta revealed in November that soon all Instagram users will be able to mint, display and sell digital collectibles powered by Polygon, giving the platform creators a new avenue to engage with their followers. These big-name partnerships have helped put Polygon on the radar of non-crypto natives and paved the way for its push into mainstream adoption.

While the top NFT collections still remain on Ethereum, Polygon was able to do what Ethereum could not — form meaningful partnerships with mainstream brands. This is in part due to the advantages Polygon has to offer over Ethereum — lower gas fees, higher scalability and faster transaction times, making it more cost effective for large scale marketing campaigns. Corporate brands want to enter the Ethereum ecosystem where the largest base of users and NFT enthusiasts are, and Polygon has positioned itself as the gateway for them to do so.

These advantages may not last forever. There’s no stopping rivals ImmutableX, Arbitrum and Optimism from forming their own partnerships with corporates for blockchain-exclusive launches, and Polygon knows that too. But Polygon retains the first-mover advantage in this area at the moment and its current success may yield network effects that convince more brands to build on Polygon.

Gamefi

Gaming projects have higher network requirements and are more taxing on the blockchain, making layer 2s more suitable for the high volume, high frequency transactions needed for blockchain games. With Ethereum still being the blockchain with the largest base of Web3 gamers and NFT enthusiasts, yet facing problems with high transaction fees and lower network speeds, Polygon is again well-positioned to capture developers looking to target Web3 gamers.

But Polygon is not the only layer 2 targeting the gaming market. ImmutableX currently leads the race with notable projects like Illuvium, gods unchained and guild of guardians. This is a result of ImmutableX’s focus on gaming over the past 2 years, providing grants and strong developer support for its Web3 gaming partners. We believe this is something Polygon can achieve as well, and the team has just the right person to do that. Ryan Wyatt, CEO of Polygon Studios, was the former head of gaming partnerships at Google and head of gaming at YouTube with the know-how to create the right platform for successful game launches. Wyatt has hinted that Polygon has big plans in the works for Web3 gaming as well, and that some of its previous game announcements have been overshadowed by its big brand partnerships.

Good games take time to develop, typically on a 3–5 years cycle. We believe Web3 gaming will explode onto the scene over the next 2–4 years with high quality games, and layer 2 networks like Polygon will provide the technological fundamentals to drive this movement.

Mainstream Adoption Flywheel Gains Speed

These series of successful partnerships have made Polygon the poster child for the Web2 to Web3 bridge, building Polygon’s brand image and reputation as the web3 on-ramp for mainstream brands and companies. The results speak for themselves — Polygon’s Q3 report showed a 60% increase in decentralized apps built on its chain, and unique wallet addresses reached 188 million, just slightly behind Ethereum’s 210 million.

By partnering with popular corporate brands widely recognized by non-crypto natives, Polygon has positioned itself to be the blockchain of choice for advertisers and marketers looking to target young and savvy web3 users. We anticipate more brands will follow suit to find more meaningful ways to build their presence in Web3 in 2023 and this will speed up the adoption flywheel for Polygon as well, helping it reach out to a wider audience beyond Web3. This is also positive for the industry as a whole, bringing us a step closer towards the universal adoption of blockchain technology.

Future plans

In 2023, Polygon will continue deploying capital out of its $100 million ecosystem fund to grow the next generation of Web3 DApps, looking to compete with rival layer 2 solution ImmutableX on the gaming front. Furthermore, Polygon continues to hire more talent to expand and improve its security, network capabilities and ramp up business development efforts. On the environmental front, the company released its Green Manifesto in mid-April 2022, pledging $20 million to sustainability initiatives, and to achieving its goal of reaching network carbon neutrality in June 2023.