Decrypt’s 2022 Crypto Project of the Year: Polygon

Amid a contagion-fueled crypto winter that has sent a chill through VC firms, coin holders, and NFT collectors alike, one project above all has made undeniable strides towards onboarding the masses and having the infrastructure to support them: Polygon, Decrypt’s pick for crypto project of the year.

In 2022, Polygon’s perception evolved from one of many Ethereum scaling networks into a platform favored by major household brands and companies looking to harness Web3 tech, powering everything from customer loyalty programs to web and metaverse identity. And it made progress in its plans to support that growth through zero-knowledge proof scaling technology.

Over the past several months, despite crumbling confidence in the crypto space due to the collapse of Terra and more recently FTX, Polygon has attracted a wide array of massive, well-established brands that are building applications atop the Ethereum scaler.

Starbucks, Instagram, Reddit choose Polygon

Online discussion community Reddit was among the major announcements, and it’s the first to show tangible results. Reddit rolled out “Collectible Avatar” NFTs this summer based on its Snoo mascot, and rather than charge money for all of them and make it a pure revenue play, the firm increasingly offered them up for free to its most active users as rewards.

Within a few months, a Reddit executive announced that users had created more than three million Polygon wallets to claim the NFTs. Now, more than 5 million of the colorful avatars have been minted across more than 4.3 million unique wallets—a meaningful surge of adoption, despite some corners of Reddit being famously anti-crypto.

Other brands’ efforts, which are earlier in deployment or still to come, could potentially reach a much broader (and perhaps less online) contingent of users.

Meta, for example, is rolling out NFT minting through Instagram, eventually letting its billion-plus users mint their photos and images on Polygon.

Coffee giant Starbucks is launching a new NFT-driven rewards program that’s already seen “unprecedented interest” despite just opening up to beta testers. And Nike plans to put digital apparel on Polygon in early 2023.

“Even in the wake of FTX, I don’t see people pulling back. I see people thinking of Web3 as a core part of their strategic future, from a tech perspective,” Ryan Wyatt, CEO of Polygon Studios, tells Decrypt. “The conversations continue, and I think every single one of these companies that thinks about Web3 will think about Polygon first when making a decision.”

Wyatt adds that while Polygon Studios supports brands and partners through various means, whether it’s investment, strategy, or technical guidance, the ultimate goal is to become more and more hands-off over time.

“The further along that we get in this, the easier these companies are going to be able to just self-serve onboard,” he says.

Polygon pushback

Wyatt joined Polygon Studios, the business development firm supporting the decentralized blockchain platform, in March after leading YouTube Gaming for several years.

As a crypto industry newcomer, he told Decrypt previously that he saw a need for savvy Web2 tech veterans to pair with the Web3 minds behind Polygon, to better speak to companies considering moves in this space. He described that mixture as his team’s “secret sauce” in attracting brands that might have considered other platforms.

But amid the rise in major brands picking Polygon has come fresh backlash that goes beyond the oft-tribal disputes that spill out over social media. Recently, Polygon co-founder Sandeep Nailwal got into in a Twitter dispute with Mert Mumtaz, co-founder of Solana-centric startup Helius, over Polygon Studios’ investments and onboarding.

“Polygon uses the money to pay people to use the chain and acquire companies,” Mumtaz wrote, alleging that Polygon’s core team pays builders to choose the platform. Nailwal defended Polygon and railed against Solana in a quote-tweeted thread, noting Solana’s downtime issues, and triggered a discussion that dominated Crypto Twitter for a couple days.

“All this is not to say that Polygon is not open to strategic deals, but we are not stupid to give millions of dollars for free,” Nailwal wrote in the thread. “The truth is all brands want to build on Ethereum and not on half-baked L1s. Polygon is just a medium for them to access Ethereum.”

The thread drew input and criticism from across the industry as other founders and builders weighed in on the debate. Mike Dudas, founder of VC firm 6th Man Ventures, suggested that Polygon leadership wasn’t being truthful about its brand deals.

“Polygon absolutely pays for enterprise deals,” Dudas wrote in a since-deleted tweet. “Many of the big names building on Polygon were encouraged to do so by financial support, among many other factors. That’s fine and great business, but don’t lie about it.”

Asked about the role of financial incentives in bringing brands to Polygon, Wyatt tells Decrypt, “Polygon has a $100M ecosystem fund where we invest in developers of all sizes. While this strategy isn’t unique, as most of the major protocols were significantly funded in the last few years with a clear mandate to build and advance their ecosystems, the network effects have been substantial. Builders want to be where other builders are, and it’s a key reason they continue to build on Polygon without other financial incentives.”

And despite Nailwal’s criticism of Solana’s issues, Polygon has faced technical problems too. In March, the sidechain network went offline for approximately 11 hours due to a node issue. And last December, a surprise (and controversial) hard fork of the Polygon blockchain was executed to patch what was described as a “critical network vulnerability.”

zkEVM incoming

To support its growing mainstream adoption ambitions, Polygon is also developing the technology to power projects creators of all sizes through its three zero-knowledge proof (zk) scaling programs. Such solutions roll up bundles of transactions on a separate chain and then commit them to the main blockchain (Ethereum), enabling much higher transaction throughput.

The standout among the pack appears to be Polygon’s zkEVM, which promises full compatibility with the Ethereum Virtual Machine through an equivalent environment. As such, developers’ existing Ethereum smart contracts, wallets, and development tools can effortlessly utilize it.

Polygon zkEVM was fully revealed this summer and launched its testnet in October, with the team claiming it’s the first zkEVM to have a public testnet with source code proving that it’s producing ZK proofs. The platform aims to handle 2,000 transactions per second (tps)—up big from 30tps on Ethereum’s mainnet, but still below Solana’s recent average.

“Every researcher in the community agrees that zk is the future,” Nailwal tells Decrypt, adding that “intermediate technologies” of today like optimistic rollups are simply stopgaps.

He says that development on zkEVM, including testnet deployment, has already beat expectations, and that a mainnet implementation may not be far off. “I think we are very, very tantalizingly close to the mainnet, or some form of early mainnet,” Nailwal adds.

Polygon has acquired and implemented three different zk scaling teams, with Polygon Zero and Polygon Miden rounding out the set. Nailwal says that taking a multi-pronged approach to zk models will enable more flexibility for creators as they look to scale their decentralized apps (dapps) to reach large audiences.

“We are extremely confident—more confident than when we took these large bets last year—that these were done in the right way,” Nailwal affirms.

A ‘bright spot’ amid price drops and bankruptcies

Amid discontent from some corners of the crypto world, Polygon’s contributors and supporters keep building. Nailwal describes this year’s growth as “surreal,” and says that while the brand moves grab the headlines, he’s also seen increased activity from Web3-native builders.

Polygon certainly hasn’t been immune to market woes. Its MATIC token is down 69% from the start of the year, nearly on par with the losses of ETH (-68%) and a few points worse than BTC (-65%), but dramatically better than SOL (-93%).

In weathering the crypto market decline better than many other top coins, aided by occasional pops recently tied to brand moves, MATIC has climbed to the 10th-largest cryptocurrency in terms of market cap. Nailwal describes it as an achievement for the ecosystem and his team, but says that Polygon builders and supporters can’t let it go to their heads.

Wyatt says that the crypto collapses of 2022 revealed “what had been perceived as the golden children of crypto [to] be complete scammers and frauds, and not represent this space.” Polygon leadership aims to focus on building, control what they can, and avoid “self-inflicted wounds,” he adds.

Polygon’s growth in 2022 and ability to attract major mainstream brands has been a rare bright spot in an extremely rough year for the crypto industry. Wyatt’s proud of that distinction, but he doesn’t want that to be an uncommon attribute for crypto projects in the future.

“I want us to be a bright spot every year for the space,” he says. “But I think for the space to truly grow and get to where we need it to, we need a lot of bright spots.”