Expectations disappointed: MATIC falls victim to competition

MATIC, the native cryptocurrency of the Polygon network, failed to meet expectations at the beginning of October.

Unable to sustain the rally, MATIC lagged behind its rivals.

Bullish momentum erased
The decline in the Polygon network was heightened on the back of negative news about the departure of a key co-founder and weak activity on Polygon's zero-knowledge (ZK) rollup subnet.

MATIC's price erased the gains from earlier October's rally and the bullish momentum sparked by expectations of the protocol's upgrade.

Polygon's 2.0 scaling technology was announced in June 2023 as a scaling ecosystem plan consisting of four layers: staking, execution, interoperability, and proofing. Each of these layers has contributed to the creation of an interconnected chain ecosystem that facilitates secure, fast, and highly cost-effective transfers.

Lagged behind competitors
Measurements from on-chain data provider Artemis revealed a significant disparity between the 6,210 active addresses of the Polygon zkEVM and the 154,390 addresses of StarkNet and the 239,810 addresses of the zkSync ERA. A similar discrepancy was found when analyzing the number of transactions per day, and Polygon's zero-knowledge aggregation also lagged behind its competitors.

Despite launching in June 2020, much earlier than most Ethereum layer-2 solutions, Polygon is currently facing direct competition from Optimism (OP) and Base.

In addition, the decline in the number of active addresses using the Polygon network's decentralized applications also affected MATIC's performance.

Advantages of Polygon 2.0
The advantages of Polygon 2.0 include enhanced security and privacy through ZK proofs, full compatibility with the Ethereum Virtual Machine (EVM), and instant cross-chain interactions without requiring additional security or trust assumptions. The project continues to develop Miden, a layer-2 solution based on ZK-STARK.

It can also be argued that the recent pullback of 10.6% only reflects an adjustment to the extreme excitement triggered by the testnet launch. However, other factors may have contributed to the deterioration of investor sentiment towards Polygon. For example, Polygon's ZK subnet, zkEVM, lags behind its competitors in terms of activity and deposits.

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