Polygon stuck as people lose trust in MATIC and ZK.Money

Polygon has been in the news the last week with their new Napoli upgrade and bidding farewell to the Mumbai testnet. Matic raised USD 5.6 million in April 2019, with a 310% ROI estimated for August 2022. Private ventures like Decentraland, Zebi, and Parsec Labs have invested in the project. Matic’s low gas fees, ranging from $0.0005 to $0.2, allow high transaction throughput and other benefits.

Ethereum Layer 2 has faced criticism due to its significant challenges due to gas fees and scaling issues. Based on the Ethereum Virtual Machine, the Polygon blockchain uses side chains to scale smart contracts. Plasma, built on a side chain, enables Ethereum Virtual Machine scaling. However, as of April 1st, Polygon’s live price was $0.995859 per (MATIC/UUSD), with a market capitalization of $9.87 billion USD. Analysts are skeptical of Polygon’s present standing because of its average stagnant price of $0.85 over the past two years.

Rewinding to Polygon’s Past

Polygon’s blockchain networks were initially monolithic, combining execution, settlement, consensus, and data availability into a single layer. These systems were unified and interoperable, but centralization came at the expense of security and scalability issues. Developers moved to a modular architectural approach (on the Eth mainnet) to overcome these constraints, enabling multiple chains to function autonomously while retaining their sovereignty.

Developers can now utilize any software, such as Polygon CDK and Dimensions RDK, for settlements and Celestia for data availability. This resulted in multi-chain ecosystems through fragmentation, intricate bridging solutions, and occasionally chain sovereignty tradeoffs. Soon after, Polygon launched its mission to rebrand from Matic to the $Pol token, introducing the ‘AggLayer’ as a new layer. This solution would solve the multi-chain problem and allow all settlements on the Aggregation Layer, aiming for unified liquidity under a unified bridge contract.

ZK.Money, MATIC, and Challenges

Polygon has introduced the world’s first zero-knowledge (ZK) scaling solution, ZK.Money, which is fully compatible with Ethereum. This private UnderlineDeFi yield aggregator creates private notes on Layer 2, allowing complete privacy protection and cost savings over equivalent Layer 1 transactions. Polygon’s breakthrough technology offers scalability, security, and Ethereum compatibility, opening a new chapter of mass adoption.

MATIC and Polygon faced challenges despite their advantages. One major concern was security, as Ethereum Layer 2 solutions improved transaction speed and cost but compromised security. Ensuring Polygon remained secure while scaling up was a constant challenge the company faced. Another factor was their dependence on Ethereum, as any significant changes or issues within the Ethereum framework could directly impact Polygon and MATIC due to their symbiotic relationship.

Polygon token holders are losing faith. 

In 2023, MATIC reached $1.5591; in 2024, it dropped to $0.4946. Despite outperforming 2021 and 2022, MATIC’s Polygon cost $0.98, but its rebranding has kept it flat. MATIC’s price has fluctuated due to strategic partnerships, DeFi utility, and blockchain adoption. However, token holders are concerned about new zkEVM competitors and that ZK is not a complete solution to confidentiality issues. Token holders require improvements in security and asset-oriented programming.