Polygon surpasses Ethereum in NFT transactions, but challenges lurk
- Polygon surpassed Ethereum in NFT transactions, solidifying its tier 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 surpassed the latter in terms of the number of NFT transactions made on each protocol. In addition, the increasing NFT transactions strengthen Polygon’s position in the tier 2 area.
The number of Polygon NFT transactions in January exceeded Ethereum NFT for the second month in a row, but the average transaction fee was much lower. Various data from the NFT lending ecosystem have reached record highs, with BendDAO’s lending volume exceeding $36 million.
— Wu Blockchain (@WuBlockchain) 1 February 2023
Read Polygon’s [MATIC] Price prediction 2023-2024
The Polygon NFT market has grown and although the number of transactions has been high, the average fees generated by those transactions were low.
The low fees may affect the network’s overall ability to generate revenue, but it may also be why many users chose this layer 2 solution.
Source: Dune Analytics
However, the fees did not affect Polygon’s total TVL, which increased by 2.26% over the past 30 days, according to L2Beats data. In particular, TVL accounted for $2.50 billion.
Source: L2BEATS
Not all good news for MATIC
A potential threat to Polygon could be the decline in daily activity on dApps. Popular dApps like Balancer and Planet IX have seen a drop in unique active wallets, with a 35% drop for Planet IX and a 12.6% drop 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 the activity on the Polygon network came directly from the popularity of dApps. If this pattern continues, Polygon will be adversely affected in the future.
Source: Dapp Radar
Despite the growth in the NFT market, Polygon’s token, MATIC, has not seen a corresponding increase. According to data from Santiment, the total volume for MATIC fell from 2.06 billion to 908.67 million.
How much is 1,10,100 MATIC worth today?
In addition, the development activity of Polygon also fell. This suggested that contributions from Polygon’s team to GitHub have dropped, which could have an impact on the protocol’s future growth and development.
Source: Sentiment
Overall, while the growth of the Polygon NFT market is a positive sign, the decline in daily activity on dApps and the falling volume of the token must be closely monitored to ensure the continued success of the protocol.
