One of the biggest breakout successes this year for the team behind layer-2 blockchain Polygon is Polymarket – the decentralized prediction market that users have flocked to this year to place bets on everything from presidential politics to the conclusion of an HBO documentary.
What is less clear to crypto analysts examining Polygon’s performance metrics is whether the coup will bring relief to holders of the project’s distressed tokens. down 65% this year.
Polymarket has become extremely popular among regular users, allowing them to bet on the upcoming US presidential elections. Polymarket bettors added nearly $2.4 billion on whether that’s true Donald Trump or Kamala Harris will win the November elections. Gamblers have also recently created a market where they recently debuted HBO documentary about Bitcoin would try to identify Satoshi Nakamoto as the inventor.
Polymarket is built on the Polygon PoS blockchain and the application is one of the first major organic successes for the team – known for a previous marketing strategy of paying partners such as Starbucks to use the network.
Given the massive increase in usage of the application, why has the Polygon team delivered only a small amount in dollar figures, and barely any increase in the price of the original POL token?
As of October 23, Polymarket has only collected about $27,000 in transaction fees for Polygon PoS in 2024, according to data from Token Terminal.
The answer, in part, is that the fees are competitive. And lately, transactions on Polygon PoS have been extremely cheap.
The average transaction fee on the Polygon PoS chain on the same day was $0.007.
Every time a Polymarket user places a bet, he creates a transaction on Polygon PoS. As part of these transactions, they pay fees to Polygon PoS, which is split into a base fee and a priority fee. The base fee does not go to validators; instead, it is burned – sent to a zero address that should theoretically benefit token holders by helping reduce supply.
“That base fee is adjustable and is based on network congestion,” Marc Boiron, CEO of Polygon Labs, told CoinDesk in an interview. “So as the network becomes more congested, the base rate increases.”
The priority fee is paid to a validator.
“You pay the validator to say please include me in a block,” Boiron added. “The higher the fee you pay, the sooner the validator will include you in a block if there are more traffic jams.”
If there is sufficient block space, you will have to pay less.
Another problem is that while Polymarket’s gamblers are quite active, the volume of transactions in the grand scheme of things doesn’t come close to the level of high-intensity applications like decentralized crypto exchanges (DEXs).
So far this month, 5.2% of transactions on the Polygon PoS chain came from Polymarket, according to Polygon’s research team. Chainlink accounts for 10.38% of transactions on PoS, while transfers of the stablecoin USDT make up 4.89%.
To take the example of a recent day’s activity. As of October 23, Polymarket was responsible for approximately 8% of the “gas” used on Polygon PoS, based on data from the blockchain explorer PolygonScan. This made it the largest individual contributor. In blockchain terminology, gas is a measure of the computational intensity required for a given batch of transactions.
“I look at how it was built,” says Boiron. “I would never expect much cost from Polymarket because it doesn’t offer as many compounding options as Uniswap does. It has some, but not many. It’s actually just users who come there. They execute a transaction and then stop. So it will inherently never drive that much until the number of users soars.
Attention is the reward
Polygon has long awaited its mainstream breakthrough moment, pouring millions into partnerships with Starbucks and Meta to try to bring Web3 to the masses. Those deals never really got off the ground.
The Polygon team is encouraged by the tremendous attention Polymarket has received, hoping the attention will lead to greater numbers in the broader Polygon ecosystem.
Boiron told CoinDesk: “The question is: why is Polymarket so interesting if they only make $20,000? The obvious reason is: let’s draw attention to it.
The success shows that “you can have an incredibly successful app on Polygon PoS where, just like you can, you barely know you’re using a blockchain,” he said.
To look on the bright side, “Frankly, paying just $20,000 in transaction fees just reflects how cheap it is to use Polygon PoS,” Boiron said.
Polymarket’s organic explosion has contributed to Polygon’s success because of the attention it pays to its ecosystem, he said.
“Different applications have different roles,” says Boiron. “For me, Polymarket’s role includes this: we give them super cheap transactions that make it very easy. And attention is what – that is the added value – that Polymarket brings to us.”
“That’s very different from, let’s say there’s someone who comes and builds an order book DEX on Polygon PoS,” he said. “If they were to receive $20,000 in fees over several months, that would be a huge failure, because if you expect huge numbers of orders placed and canceled and fulfilled, then that would mean huge numbers of transactions. So the key here is: different applications have different intended purposes.
Read more: Polymarket reportedly seeks $50 million in funding, considers token as election bets rise
