Bernstein says Polygon blockchain is bringing crypto to consumers

The success of the Polygon blockchain in bringing scalability to Ethereum shows that developers have to reach out to mainstream consumers and not operate solely within the “crypto cult,” Bernstein said in a research report Wednesday.

Polygon has a large user base of about 170 million addresses, of which some 300,000 are classed as active, Bernstein said. It’s growing at a pace of 80,000 new users a day.

The network was the first platform to offer scalability for Ethereum with its proof-of-stake (PoS) chain, Bernstein said, which encouraged leading decentralized finance (DeFi) and non-fungible-token (NFT) applications to offer their products on the system. Polygon also has lower fees, making it easier for applications such as trading platforms Uniswap and OpenSea to cater to retail demand.

The broker notes that Meta (META), Stripe, Starbucks (SBUX) and Robinhood (HOOD) all chose Polygon as their “first integration partner to build Web3 experiences.” A strong partnership pipeline gives Polygon growth and on-ramps to millions of users, it added.

The “other secret” behind Polygon has been organizational. The blockchain has hired from YouTube, Airbnb (ABNB), Electronic Arts (EA), Amazon Cloud and other large corporations to build a “truly global organization,” analysts Gautam Chhugani and Manas Agrawal wrote.

DeFi is an umbrella term used for lending, trading and other financial activities carried out on a blockchain without the use of traditional intermediaries. NFTs are digital assets on a blockchain that represent ownership of virtual or physical items and can be sold or traded.

With Ethereum’s recent migration to PoS, known as the Merge, the blockchain is building a “rollup-centric scalability roadmap,” the note said.

Given this context, “the supporting ecosystems such as Polygon would continue to invest in building rollup technologies such as zero-knowledge rollups, but their success is likely to be more determined by organizational and business development efforts,” Bernstein said, adding that “they are more business-orientated ecosystems focused on building a consumer gateway leveraging partnerships with leading consumer brands.”

Polygon’s success so far, has shown its ability to build a “more mainstream customer gateway,” the note added, with focus now on the zero-knowledge (ZK) ecosystem.

The Merge is the first of five upgrades planned for the Ethereum blockchain. Rollups scale the Ethereum network by processing transactions and executing smart contracts - computer programs that run on some blockchains - on their own chains.