A collapse of NFTs on Polygon?

Polygon looked set to overtake Ethereum in the NFT sector. However, this is now history, in particular due to the success of Solana and complicated market conditions.

A meteoric rise and nothing more…

Only a year ago, Polygon was ranked as the second network in terms of users in the NFT sector. To determine this number of users, Footprint Analytics gathers data from wallets that have bought or sold an NFT at least once during the previous month.

Polygon had enjoyed a meteoric rise. Indeed, the blockchain had gone from 0% NFT users over 48% in just 6 months. It was then possible to see the network overtake Ethereum and Solana, the two leaders in the sector.

Nevertheless, since the arrival of the bear market, things are very different. Solana has consolidated its position as the second reference blockchain in the field of NFTs. For his part, the number of Polygon NFT users plummeted. They are now significantly more numerous on Ethereum and Solana.

The number of NFT users per blockchain (source: Footprint Analytics)

Cryptocurrency investing is offered by eToro (Europe) Ltd as a PSAN, registered with the AMF. Cryptocurrencies are very volatile. No consumer protection.

The reasons for the success of Polygon

Polygon is the second layer solution, pioneer on Ethereum. This network considerably improves the scalability of Ethereum. The network was notably able to process a much larger number of transactions than Ethereum, all for a reduced cost.

With the recurring congestion concerns of Ethereum, the second layer or layer 2 solutions have experienced a major success. Apart from Polygon, we have seen the development of networks like Decision, Optimism or Boba Network. These solutions complement Ethereum, which remained the leader, particularly in the NFT sector and in terms of blockchain infrastructure.

More recently, this discourse has evolved. We have seen the appearance of many qualified blockchains “d’Ethereum Killer”. The latter use new consensus mechanisms or technological innovations to push back the limits encountered by Ethereum.

Of course, we can cite Solana who became one of the leading networks in the ecosystem. Other solutions like Avalanche or Phantom also appeared and met with great success.

Polygon was able to capitalize on its anteriority but Solana gradually gained popularity especially in the field of non-fungible tokens. Solana offers a blockchain efficient, with more than reasonable transaction costs. A true NFT ecosystem has thus been formed around marketplaces such as Magic Eden.

By comparing the transaction data of the 2 blockchains on OpenSea, we realize this mass exodus to Solana.

NFT transactions on the Polygon network (source: Footprint analytics)

NFT transactions on the Solana network (source: Footprint analytics)

Polygon is not dead

However, be careful not to jump to conclusions too quickly. If Polygon is no longer the first choice behind Ethereum for NFT projects, it continues to attract big names like Coca-Cola who choose layer 2.

However, Solana has succeeded in a few months in establishing herself as the undisputed number two in the sector. Despite recurring breakdown problemsthe network enjoys many competitive advantages over other blockchains.

The Merge will surely have its impact on the activity of Ethereum. The transition of the network from proof of work to proof of stake is good news for the Ethereum NFT sector. This toggle indeed allows Ethereum to improve its performance even the scalability of the network is still under development. In particular, much is expected of the implementation of the sharding which will take place in the near future.

It is also difficult to draw conclusions from the market conditions. In the wake of the crypto market, weighed down by the macro-economic situation, the NFT sector is taking a hit. After an exceptional performance in 2021, NFT transaction volumes have heavily fallen since the beginning of the year.

In January 2022, more than $17 billion in volume which were exchanged. In September 2022, this figure was only 466 million dollars. A good indicator that allows you to grasp the considerable fall in the market in recent months.

All these elements are not favorable to Polygon and the situation could change in the event of a resumption of the bullish trend. Additionally, Polygon continues its development and remains one of the projects the most recognized of the blockchain industry right now.

To learn more about Bitcoin’s energy consumption explosion, find our article here.

Exit mobile version