High-yield blue ocean attracts a large number of users and developers to join, Polygon TVL grows over 20 times in two months!

Despite the significant decrease in Gas fees on the Ethereum blockchain, funds and developers are still flowing into the Layer 2 solution Polygon.

Polygon On-Chain Data Performance

According to data from Debank displayed, the total value locked (TVL) of Polygon has surged from around $400 million to $8 billion over the past two months, a 20x increase.

On the other hand, from on-chain transactions and gas consumption perspective, Polygon far surpasses Ethereum, indicating rapid growth in network adoption and user numbers.

High Returns and Low Costs Attract Users

Polygon's ability to surpass Binance Smart Chain as the new favorite of retail investors is closely related to the high returns brought by DeFi liquidity mining in its ecosystem. Typically, in the DeFi space, "Degen" or "Ape" users are like moths, with "high-yield protocols" being the "light, fire," even though high returns usually come with high risks, users are still willing to chase after profits, like moths to a flame.

Currently, in the Polygon ecosystem, protocols like Adamant, Polycat, yield aggregators, and stablecoin protocols like Iron Finance, QiDao, are offering users annual returns of tens to hundreds or even thousands of percent, which is clearly the biggest incentive attracting users to the network.

Incentives for Developers to Join

Similar to the reasons why Binance Smart Chain gained widespread adoption in the past, Polygon also boasts low transaction costs, fast transaction processing speeds, and compatibility with Ethereum contracts. The difference is that Polygon has the support of Ethereum-native DeFi projects like SushiSwap, Aave, Curve, and the support from these projects has yielded significant results for Polygon.

Data provided by DappRadar shows that the automated market maker protocol SushiSwap has over 15,000 unique active wallet addresses interacting on Polygon, compared to only 4,194 on Ethereum. Additionally, the TVL of DeFi lending protocol Aave on Polygon also holds billions of dollars in asset value, and more and more Ethereum and Binance Smart Chain native projects with low adoption rates are flocking to Polygon, gaining a large user base and funds. The success of these projects demonstrates that the Polygon ecosystem has a sufficient user base, attracting more and more development teams to join.

Retail Investors Leading the Way

However, it is worth noting that users entering the Polygon ecosystem may still be predominantly retail investors. According to DappRadar data, the trading volume of SushiSwap on Ethereum is still significantly higher than on Polygon. Just on June 14, the trading volume of SushiSwap on Ethereum reached around $200 million, while the volume on Polygon during the same period was only about $47 million. This may indicate that Polygon's growth is mainly driven by small-scale trades by retail investors. DappRadar researcher Ian Kane stated:

This indicates that whales still choose to pay higher fees and use more secure and trusted decentralized applications on Ethereum. However, new retail investors do not have faith or loyalty to Ethereum; they will only choose towards higher returns, good user experience, and a low fee ecosystem.