Polygon
August saw a significant decline in the market due to the Evergrande issue in China. It was a negative month for key metrics of Polygon PoS and zkEVM.
Polygon still managed to establish various collaborations with traditional corporations. Among the major collaborations in August were with SK telecom, the largest telecommunications company in South Korea, and Lufthansa, the largest airline in Germany.
On August 30th, the Polygon CDK was released. This will assist developers in easily developing zk L2 chains, potentially activating the Polygon 2.0 ecosystem.
In August, due to the Evergrande issue in China, Bitcoin's price dropped from the $29K level to the $26K level, leading to a decline in the prices of many tokens. As a result, MATIC's market capitalization decreased significantly. However, compared to the decline in market capitalization, the TVL (Total Value Locked) of the Polygon PoS network decreased by a smaller margin. The activity of the Polygon PoS network, which had been on an uptrend for the past three months, decreased in August, and the network's fee rewards also decreased. The Polygon zkEVM network also experienced a slowdown in the growth of its Unique Addresses, and its TVL and average daily transaction count decreased for the first time.
The protocol that contributed the most to the decline in the Polygon zkEVM's TVL was, unsurprisingly, Quickswap, which holds the highest TVL. Quickswap currently accounts for more than half of the TVL on Polygon zkEVM, and its TVL dropped by about 40% in a month. Particularly, a significant drop in TVL was observed in QuickPerps, a perpetual DEX service provided by Quickswap on Polygon zkEVM; it decreased from $11M on August 1st to $6.2M on September 1st.
Source: Polygon
On August 30, 2023, Polygon Labs released an open-source codebase called Polygon Chain Development Kit (CDK) that allows for easy development of zk L2 chains. The Polygon CDK is an upgraded version of the existing Polygon Supernets and facilitates the building of not just L1 but also zk L2. The Polygon CDK allows the development of not only zk rollups but also validium. Validium, instead of storing transaction data on the Ethereum network, delegates storage to the Data Availability Committee (DAC). This compromises a bit on security but offers greater scalability.
With the Polygon CDK, apart from data availability, various components can be customized, such as virtual machines, fee tokens, sequencers, whitelisting, and ZKP submission period. Chains created using Polygon CDK automatically connect to Polygon 2.0's Interop layer, enabling seamless cross-chain communication in a trustless manner via ZKP. This offers users an experience as though they are operating within a single network, even when multiple networks exist. Notable projects that use the Polygon CDK include Aavegotchi, Immutable, Gnosis Pay, and Palm Network.
Although various under-collateralized lending protocols like Maple Finance and TrueFi were impacted by the past FTX incident, the demand for under-collateralized lending protocols targeting institutions remains high. Clearpool is a credit-based lending protocol where specific institutions can create a pool to borrow from, and users can deposit their funds into this pool and earn interest. Clearpool also operates on Polygon zkEVM.
So, what happens if the institution that borrowed the funds gets liquidated? To minimize the impact of such an event, Clearpool has integrated Idle Finance's tranche system. The lending pool is divided into Junior tranches and Senior tranches. Funds deposited in the Junior tranches earn higher interest but bear a greater risk during liquidation. Conversely, funds in the Senior tranches earn lower interest compared to Junior tranches but have lesser risk during liquidation. The interest rates for each tranche are determined automatically based on the proportion of funds deposited in Idle Finance.
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Thanks to Kate for designing the graphics for this article.
