Key Insights & Takeaways
Q2 2023 marked a dynamic period of growth for the Polygon staking ecosystem. The announcement of Polygon 2.0, featuring the transition to zkEVM Validium, promises enhanced scalability and efficiency for MATIC delegators.
In summary, the Q2 2023 report on the Polygon MATIC staking ecosystem reveals positive dynamics:
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A notable increase of 2.49% in the number of delegators highlights the growing interest and active involvement in staking MATIC tokens.
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MATIC`s stake exhibits resilience and stability despite Polygon crypto price fluctuations, with a sharp upward trend observed in total stake during the period.
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41.74% of delegators opt for validators with 0% commission, emphasizing the importance of attractive reward structures.
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The dominance of the six largest validators, holding 26.55% of delegators but representing 48.2% of the total stake, underscores the need for a more diverse and decentralized validator ecosystem.
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The delegator distribution is diverse, with most stakeholders holding stakes exceeding 1 million MATIC tokens.
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The decline in APR reflects the maturation of the staking ecosystem as more MATIC tokens are locked, aligning with the tokenomics of the network.
This is the first report in the series, and Everstake intends to publish regular updates on the Polygon staking ecosystem. For any inquiries, please contact our Business Manager on Twitter.
If referencing or using materials from this report, kindly attribute Everstake and provide a link to the original piece.
Introduction: Exploring Polygon and MATIC Staking
As the Polygon ecosystem thrives, there is a rising demand for comprehensive staking data. With Everstake`s extensive and in-depth analysis, you`ll gain a deeper understanding of the Polygon network`s performance and be well-equipped to make informed decisions in your staking endeavors.
What is Polygon?
Polygon is a layer 2 scaling solution for Ethereum, developed to solve the scalability and high transaction fees issues that Ethereum faces. It aims to make blockchain technology more accessible and efficient for developers and users alike.
Polygon achieves scalability by using a network of sidechains connected to the Ethereum mainnet. These sidechains, also called "Polygon chains," can process transactions more quickly and at a lower cost than the Ethereum mainnet. They accomplish this by bundling multiple transactions and confirming them in a single batch.
Known initially as Matic Network, it rebranded to Polygon in February 2021 to better represent its expanded capabilities beyond just being a sidechain. In the second quarter of 2023, the team announced the Polygon 2.0 launch – a set of proposed upgrades aiming to integrate all Polygon protocols with ZK (zero-knowledge) technology, creating a seamless and limitless block space.
MATIC is the native cryptocurrency of the Polygon network. It is used as a utility token to pay for transaction fees, secure the network, and for staking.
What is MATIC staking?
Staking MATIC means locking up MATIC tokens to participate in the proof-of-stake consensus mechanism of the Polygon network. In return, users earn rewards in the form of additional MATIC tokens.
Staking serves two primary purposes:
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Security: In a proof-of-stake system, validators are chosen to create new blocks and validate transactions based on the number of tokens they have staked. Validators have an economic incentive to act honestly since they stand to lose their staked tokens if they validate fraudulent transactions.
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Consensus and Governance: Token holders can vote on proposals and changes to the protocol, helping to shape the platform`s future direction.
Overall, Polygon staking is vital in making the blockchain ecosystem more scalable, efficient, and sustainable while providing users with opportunities to earn rewards and actively engage in the network`s governance.
The Everstake Approach: Methodology of Our Polygon (MATIC) Staking Report
We employ a comprehensive framework for conducting on-chain data analysis of the Polygon blockchain and the MATIC token. Here are the primary steps we undertook:
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Gathering on-chain data for the Polygon blockchain and the MATIC token by utilizing raw transaction data from the blockchain and data obtained from APIs, such as Polygon and third-party APIs. The collected data includes staking information, transaction details, inflation rates, staked ratio, and other pertinent metrics.
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Cleaning and preparing the data for analysis using data analysis tools like Python and PowerBI. This involves filtering the data, merging multiple data sources, and formatting it in a manner conducive to further research.
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Analyzing the data to discern trends and patterns within staking, transactions, and other relevant metrics. This includes visualizing the data through graphs and charts, calculating statistical measures, and testing hypotheses regarding the data.
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Interpreting the results of the analysis and offering insights and conclusions concerning the state of the Polygon blockchain and the MATIC token based on our extensive expertise. This process entails discussing the implications of the analysis, comparing the results with other data sources or benchmarks, and providing recommendations for subsequent actions or further research.
Staking Polygon Insights: Q2 2023 Analysis
In this part, we will delve into the organic growth of delegators who stake Polygon and the stability of MATIC`s stake despite market fluctuations. We also explore delegator choices and the performance of top validators, providing insights into the evolving dynamics of the Polygon network.
Growth of Delegators in MATIC Staking Ecosystem
Despite relatively stable total stake indicators, the second quarter of 2023 witnessed a notable increase of 2.49% in the number of delegators on the network, signifying a significant development of the Polygon ecosystem.
This surge in delegators highlights individual token holders` growing interest and active involvement in staking MATIC on the platform.
Stability of MATIC Stake Amid Price Fluctuations
In early June 2023, the Securities and Exchange Commission (SEC) mentioned MATIC and 11 other tokens as securities in its lawsuit against Binance. Despite Polygon Labs` strong denial of the SEC`s security allegations, the news harmed Polygon MATIC price.
However, despite the market fluctuations, MATIC`s stake has shown resilience and stability. You can observe the impact of these developments on Polygon staking in the chart below.
The graph shows a temporal correlation between the decrease in the price indicator and a decline in the total stake from May 28 to June 11.
Interestingly, despite the MATIC price drop, the total stake exhibited a sharp upward trend, indicating a significant increase in staking activity.
Indeed, it is crucial to highlight that Polygon Labs has firmly denied the SEC`s security allegations concerning MATIC. The network`s response to these developments, which may involve legal defenses and efforts to address regulatory concerns, will significantly influence the long-term impact on the Polygon network.
To ensure the network`s growth and adoption in the face of evolving regulatory challenges, continued transparency, compliance, and engagement with regulatory bodies will be of utmost importance for Polygon. By navigating these issues adeptly, Polygon can maintain its position in the market and foster a thriving ecosystem in the ever-changing regulatory landscape.
Understanding Delegator Choices in Polygon Staking
In this section, we will analyze the behavior of delegators, focusing on indicators like commission rates and total validator stake. Our investigation aims to determine if delegators display loyalty to the largest validators and examine how various groups who stake MATIC are distributed.
Out of the 100 network validators, a notable 28 operate with a 0% commission structure. The zero-commission offering has garnered considerable attention from users. This is evident from the fact that there are 10,153 delegators, accounting for 41.74% of the total number of Polygon delegators.
The significant interest in validators with 0% commission indicates that users prioritize maximizing their rewards and are attracted to the potential for higher returns on their staked assets.
The fact that so many delegators are going for these validators highlights how vital Polygon staking rewards are in their decision-making. It`s essential to offer competitive and attractive reward structures to keep the delegators engaged.
The Dominance of the 6 Largest Validators
As of June 2023, it is worth noting that the network has six major validators, each holding more than 200 million MATIC tokens. Despite their substantial stakes, these validators make up only 26.55% of the total number of delegators.
However, their combined stake of over 1.73 billion MATIC tokens represents a significant 48.2% of the entire network`s total stake.
This concentration of stake among a few validators highlights the importance of promoting a more diverse and decentralized validator ecosystem. Encouraging broader participation from additional validators and delegators can enhance the network`s robustness.
Top Validators Performance
When analyzing the performance of validators with the most delegators, we focus on three crucial metrics: checkpoints signed, Heimdall blocks signed, and Bor blocks produced.
Only two validators – Everstake, and Abyss Finance – have accomplished 100% signed checkpoints over the past three months. Moreover, six validators have achieved a flawless 100% record in signed Heimdall blocks, while an additional seven validators have demonstrated an impressive Bor block production rate of over 99%.
Notably, nine of the top ten validators have met the network performance threshold and hold the Healthy status. This indicates a thoughtful approach by delegators in choosing validators, prioritizing network performance and reliability.
Delegators Distribution
This diverse delegator distribution underscores the network`s inclusivity, as stakeholders actively participate in the Polygon staking process, fostering a dynamic and secure ecosystem.
The distribution of delegators by stake on the Polygon network reveals a fascinating pattern. The majority, 91.7% of delegators, hold stakes exceeding 1 million MATIC tokens, indicating a significant presence of large stakeholders actively involved in securing the network.
In the mid-range, delegators with stakes ranging from 50,000 to 500,000 MATIC tokens represent 3.99% of the total, while those holding stakes between 500,000 and 1 million make up 1.94%. Additionally, delegators with stakes ranging from 5,000 to 50,000 MATIC tokens contribute 1.88% to the distribution.
Interestingly, smaller delegations of less than 5,000 MATIC tokens account for 0.49% of the total stake, showcasing a minority yet diverse group of smaller-scale participants playing a part in the decentralized consensus mechanism of the Polygon network.
Total Stake, APR and Polygon Staking Rewards
Based on the comparison of the Staked Ratio and APR shown on the graph, it is evident that as the Staked Ratio increases, the APR gradually decreases.
This trend aligns with MATIC tokenomics, where the decrease in APR is expected as more MATIC tokens are locked in staking contracts. Initially, rewards are higher, but they decrease as the percentage of locked supply rises. As the interest in MATIC staking continues to grow, the APR is anticipated to decline further.
At the end of Q2 2020, the Staked Ratio was recorded at 11.60%, leading to an APR of 63.71%. Fast forward to the end of June 2023, and the Staked Ratio had significantly increased, nearing the 40.21% mark. Consequently, this growth led to a substantial reduction in the APR to 5.41%.
The distribution schedule of MATIC staking rewards in the Polygon PoS network supports this expectation of a declining APR over time. As more users participate in staking and lock their MATIC tokens, the overall supply available for staking decreases, leading to a reduction in the APR.
This natural progression ensures a sustainable and balanced staking ecosystem within the Polygon network.
Q2 2023: Polygon`s Expansion and Achievements
In Q2 2023, Polygon established partnerships with prominent enterprises like Google Cloud, Mastercard, Sports Illustrated, Formula 1, and Deutsche Telekom. These collaborations helped much in driving substantial adoption of the Web3 space, enabling gentle onboarding of new users into the world of Web3 and staking.
Various NFT collections that chose Polygon as their preferred platform also raised the network`s significant adoption. For example, new collections like Reddit Collectible Avatars and Starbucks Odyssey captured lots of attention and sparked a surge in network activity.
A significant milestone of this quarter was the announcement of Polygon 2.0, a transition from the PoS consensus mechanism to zkEVM Validium. This innovative L2 solution is secured by zero-knowledge (ZK) proofs, marking a significant shift towards scalability, efficiency, and sustainability for the network.
With zkEVM Validium, delegators staking Polygon can expect faster transaction processing times, reduced fees, restaking for ecosystem chains, and improved overall network performance.
Polygon Labs` remarkable achievements led to its place in TIME`s list of 100 most influential companies. This recognition further solidifies Polygon`s position as a key player in the blockchain technology realm.
