Polygon outpaces Ethereum in NFT transactions, but challenges loom ahead
- Polygon outperformed Ethereum in NFT transactions, solidifying its layer 2 position.
- Despite growth in the NFT market, the network faced declining dApp activity and token volume.
Polygon [MATIC], a layer 2 scaling solution for Ethereum [ETH], has been outperforming the latter in terms of the number of NFT transactions made on each protocol. Moreover, the increasing NFT transactions are strengthening Polygon’s position in the layer 2 space.
The number of Polygon NFT transactions in January exceeded Ethereum NFT for the second consecutive month, but the average transaction fee was much lower. Various data of the NFT lending ecosystem have hit record highs, with BendDAO’s borrowing volume exceeding $36 million.
— Wu Blockchain (@WuBlockchain) February 1, 2023
Read Polygon’s [MATIC] Price Prediction 2023-2024
The Polygon NFT market has been growing, and even though the number of transactions has been high, the average fees generated by these transactions were low.
The low fees could affect the network’s overall ability to generate revenue, however, it could also be why many users were opting for this layer 2 solution.
However, the fees did not impact Polygon‘s overall TVL, which increased by 2.26% over the last 30 days, according to L2Beats data. Notably, the TVL amounted to $2.50 billion.
Not all good news for MATIC
A potential threat to Polygon could be the decline in daily activity on its dApps. Popular dApps like Balancer and Planet IX have witnessed a decrease in unique active wallets, with a 35% decrease for Planet IX and a 12.6% decrease for Balancer in the last 24 hours. The number of transactions on Planet IX also fell by 36.95% in the last seven days.
A decline in dApp interest could reduce Polygon’s dominance in terms of daily active users. A large part of activity on the Polygon network directly resulted from the popularity of its dApps. If this pattern continues, Polygon would be affected negatively in the coming future.
Despite the growth of the NFT market, Polygon‘s token, MATIC, has not seen a corresponding increase. According to data from Santiment, the overall volume for MATIC fell from 2.06 billion to 908.67 million.
How much are 1,10,100 MATIC worth today?
Additionally, the development activity of Polygon declined as well. This suggested that the contributions made by Polygon’s team to its GitHub have fallen, which could have an impact on the protocol’s future growth and development.
Overall, while the growth of the Polygon NFT market is a positive sign, the decline in daily activity on its dApps and the falling volume of its token need to be monitored closely to ensure the protocol’s continued success.