Bessie Liu

Polygon Labs has reimagined Polygon Village — a new place for grants, mentorship and networking for Polygon ecosystem developers.



More than 110 million Polygon MATIC (~$78 million) will be distributed to projects and builders in the Polygon ecosystem as part of its relaunch, in hopes of spurring more on-chain activity.



Polygon PoS is one of the largest blockchains today, with a total value locked (TVL) of $1 billion, according to information on DeFiLlama. Polygon’s zero-knowledge (zk) solution, Polygon zkEVM, on the other hand, has a <a href="https://defillama.com/chain/Polygon%20zkEVM">TVL</a> of roughly $22 million.&nbsp;



Projects at any developmental stage and of any type will be able to apply for grants. This includes <a href="https://blockworks.co/tag/defi">DeFi</a> projects, app chains, gaming, infrastructure and social startups.



Up to 2 million Polygon (<a href="https://blockworks.co/price/matic">MATIC</a>) will be given as direct grants to later-stage projects from the <a href="https://blockworks.co/tag/polygon">Polygon</a> Foundation, and early-stage teams will be able to apply for quadratic funding grants.&nbsp;



There are two quadratic funding grants that will be available as of today, with more grants to be revealed in the near future.



Read More: <a href="https://blockworks.co/news/kevin-owocki-permissionless-gitcoin">Kevin Owocki on building a ‘pro-topian’ future for blockchains</a>



Beyond grants, Polygon Village will also provide other support for projects in its ecosystem. It will also offer mentoring opportunities and introductions to VCs.



Founders who are a part of Polygon Village will also gain access to builder houses and co-working spaces located in New York and Lisbon.&nbsp;



Vouchers and discounts in security and smart contract audits, storage, computing, oracle infrastructure and others will be offered to interested founders.&nbsp;



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Polygon wants to hand out $78M to boost on-chain activity

The new native token of Ethereum scaling solution Polygon has gone live on Ethereum mainnet.&nbsp;



Polygon first revealed its intention to revamp its native MATIC token in July this year. This new token is designed to be &#8220;hyper-generational&#8221; and support a vast ecosystem of various zero knowledge layer-2 chains through a native re-staking protocol.  



This means that POL holders will be able to use the token to validate various chains across Polygon, including Polygon PoS and Polygon zkEVM.&nbsp;



Polygon PoS is currently one of the largest blockchain ecosystems today. It has a <a href="https://defillama.com/chains">$758.28</a> million total valued locked (TVL) and a stablecoin market cap of almost <a href="https://defillama.com/chain/Polygon">$1.7 </a>billion, according to information available on DeFiLlama. There are <a href="https://defillama.com/chains">480</a> dapps currently deployed on the network.&nbsp;&nbsp;



The transition from Polygon (<a href="https://blockworks.co/price/matic">MATIC</a>) to POL <a href="https://blockworks.co/news/polygon-matic-crypto-upgrade">is part of Polygon’s 2.0 plans</a>, where the project aims to become the “value layer” of the internet.&nbsp;



Read more: <a href="https://blockworks.co/news/polygon-matic-becoming-pol">Polygon’s MATIC is getting a makeover: Founders release white paper for POL</a>



A <a href="https://blockworks.co/tag/polygon">Polygon</a> representative did not respond to a request for comment by press time.&nbsp;



Since the announcement of the news on <a href="https://twitter.com/0xpolygonlabs/status/1717134336104038580">X</a>, Polygon’s existing native token, MATIC, has seen its price dip by <a href="https://blockworks.co/price/matic">0.84%</a>. POL, which has just launched, has seen its price increase to <a href="https://www.coingecko.com/en/coins/polygon-ecosystem-token">2.6%</a>, according to information available on CoinGecko.



At the time of writing, the POL token has seen a 24-hour trading volume of<a href="https://www.coingecko.com/en/coins/polygon-ecosystem-token"> $97,795</a> and a fully diluted valuation of over <a href="https://www.coingecko.com/en/coins/polygon-ecosystem-token">$6.4 billion</a>.&nbsp;



Users will have up to four years to transition their tokens from MATIC to POL,&nbsp;though the implementation has no specific deadline. Users who wish to transfer their tokens can do so by sending MATIC tokens to a designated POL <a href="https://etherscan.io/address/0x455e53CBB86018Ac2B8092FdCd39d8444aFFC3F6">smart contract</a> that will automatically convert the deposited tokens.



Updated Oct. 26, 2023 at 10:05 am ET: Added quote from Polygon PR representative stating that POL is designed to be &#8220;hyper-generational.&#8221;



Updated Oct. 25, 2023 at 3:59 pm ET: Clarified context provided by Polygon PR representative. A previous version of this article described POL as &#8220;zk-based&#8221; instead of &#8220;zk powered.&#8221;



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Polygon’s new zk-powered token is live on Ethereum mainnet

David Canellis

Crypto investors holding bags of polygon (<a href="https://blockworks.co/price/matic">MATIC</a>), chainlink (<a href="https://blockworks.co/price/link">LINK</a>) and aave (<a href="https://blockworks.co/price/aave">AAVE</a>) look out: Celsius’ estate is apparently liquidating $160 million in crypto ahead of user payouts.



Celsius was first given the nod to start selling crypto for bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) and ether (<a href="https://blockworks.co/price/eth">ETH</a>) starting July 1.&nbsp;



The firm however hadn’t made any on-chain moves until last Wednesday, when it pulled more than $60 million in tokens from cold storage with Fireblocks.&nbsp;



Native cryptocurrencies for DeFi aggregator 1inch (<a href="https://blockworks.co/price/1inch">1INCH</a>) and decentralized exchange SushiSwap (<a href="https://blockworks.co/price/sushi">SUSHI</a>) were part of the haul, among about a dozen others.



As of this morning, Celsius has been sending crypto to <a href="https://blockworks.co/news/falconx-drops-bank-silvergate">FalconX</a>, an institutional exchange. At time of publication (2:00 pm ET), those funds have amounted to $63.3 million — mostly LINK and AAVE with smaller amounts of tokens such as binance coin (<a href="https://blockworks.co/price/bnb">BNB</a>) and synthetix (<a href="https://blockworks.co/price/snx">SNX</a>).



No bitcoin or ether have flown back into Celsius wallets as yet, so it’s still unclear whether the estate is actively selling what it deposits on FalconX.



Some analysts have suggested that Celsius’ liquidations <a href="https://blockworks.co/news/celsius-altcoin-liquidations">could drag down crypto prices</a>, especially those included in the fire sale.



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AAVE, SNX, bancor (<a href="https://blockworks.co/price/bnt">BNT</a>), LINK, kyber network (<a href="https://blockworks.co/price/knc">KNC</a>) and MATIC have all dropped between 7.4% and 3.7% since Friday night. BTC has only slipped 0.45%.&nbsp;



But other tokens included in Celsius’ remaining crypto portfolio have fared much better. 1INCH, SUSHI and compound (<a href="https://blockworks.co/price/comp">COMP</a>) have jumped between 11.3% and 31.5%.



<h2 class="wp-block-heading">Celsius has stablecoins to be “sold” for bitcoin and ether</h2>



With such mixed results, it’s probably too early to tell whether Celsius is directly impacting markets. Its portfolio set for liquidation may also be small potatoes compared to the total trading volume of even some of the smaller assets.



Celsius may opt to sell its cryptocurrency through over-the-counter (OTC) channels rather than spot markets. This approach would not impact prices.



There’s also millions of dollars in stablecoins to be “sold” for bitcoin and ether (actually buys, which would be somewhat positive for prices).



Holders should still brace. Celsius may not have enough to crash prices, but crypto markets are notorious for overreacting. Both scenarios share the same outcome: volatility.



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Celsius filed for bankruptcy last July, having <a href="https://blockworks.co/news/voyager-celsius-bankruptcy-update">collapsed under contagion</a> resulting from the Terra and Three Arrows Capital implosions.&nbsp;



Founder and CEO Alex Mashinsky was arrested last week, <a href="https://blockworks.co/news/cftc-ftc-sue-celsius">charged with market manipulation</a> alongside securities, commodities and wire fraud, among others.&nbsp;



All while Celsius earns additional miner extractable value (MEV) from its staked ETH, now <a href="https://blockworks.co/news/celsius-earning-mev">$10 million in 10 months</a> and counting.



Celsius is said to owe $4.7 billion to creditors. A <a href="https://blockworks.co/news/celsius-ceo-absent-from-4-7b-ftc-settlement">recent settlement</a> with the Federal Trade Commission demands an equivalent amount on behalf of users.



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Celsius crypto fire sale is starting: $63M out of $160M sent to exchange

Polygon, a layer-2 network built on top of the Ethereum blockchain, is planning to revamp the tokenomics of matic, its native token.&nbsp;



The tokenomics revamp is part of the network’s “<a href="https://blockworks.co/news/polygon-matic-crypto-upgrade">Polygon 2.0” plans</a>. A handful of the network’s founders and researchers proposed the change.



A <a href="https://polygon.technology/papers/pol-whitepaper">white paper</a> that outlines the new design explained how the network intends to introduce POL — a new native token that will replace <a href="https://blockworks.co/price/matic">MATIC</a>.



POL is what the Polygon team calls a “hyperproductive token,” similar to “productive tokens” which can be used by validators to secure a network and reap benefits. The team said the upgraded token will have all the critical aspects of a productive token, but it can also be used by validators to secure multiple chains. Every chain can likewise offer multiple roles to these validators.



<a href="https://blockworks.co/tag/polygon">Polygon</a> noted in a <a href="https://polygon.technology/blog/polygon-2-0-protocol-vision-and-architecture">blog post</a> that different chains can offer roles including: accepting transactions and block generation, creating zero-knowledge proofs, and participating in data availability committees.



<figure class="wp-block-image"><img decoding="async" src="https://lh5.googleusercontent.com/zwyswTW2afvO7xesRcSxWNiIql8Mslir0a1xlez47CI7pF8VJIa7lugfwYPqBD1pIYnpgAEDyKDRVEz5wPMTQWu81Mdjt3HAKCg4L9zf2QUePa8xs6HmBYwYJhy45DIyoptJR-ZDvCv3XegUYUQHmko" alt=""/><figcaption class="wp-element-caption">Source: Polygon</figcaption></figure>



Migrating MATIC tokens to POL will be achieved by sending the MATIC tokens to a designated smart contract. This smart contract will handle the conversion process automatically, converting the deposited MATIC into an equivalent amount of POL.



To ensure that all token holders have enough time to transfer their assets, the Polygon team is planning to give users more than four years to change their tokens.&nbsp;



The initial supply of the token will be capped at 10 billion, and most of these tokens will be reserved for transitioning MATIC to POL. Following the initial supply, the white paper proposes that the token’s emission rate, the speed at which a token can be created, be capped at 1% each year for the next ten years.



Following the announcement, Polygon’s community governance will <a href="https://forum.polygon.technology/t/polygon-2-0-tokenomics/12365">discuss and provide feedback</a> on the proposal before determining next steps.



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Polygon’s MATIC is getting a makeover: Founders release white paper for POL

Sebastian Sinclair

Polygon (<a href="https://blockworks.co/price/matic" target="_blank" rel="noreferrer noopener">MATIC</a>) is mounting a comeback this month following a poor showing throughout most of the year.



The native token for the popular Ethereum scaling network was up 12% in July as of Tuesday afternoon. Bitcoin (<a href="https://blockworks.co/price/eth">BTC</a>) was about flat and ether (<a href="https://blockworks.co/price/eth">ETH</a>) had dropped 3.2%&nbsp;



Cryptocurrencies tied to layer-2 solutions Arbitrum (<a href="https://blockworks.co/price/arb">ARB</a>) and Optimism (<a href="https://blockworks.co/price/op">OP</a>) had respectively sunk 3.5% and 8.9% over the same period.



MATIC’s comparatively strong performance could stem from speculation about a major network update, <a href="https://polygon.technology/roadmap" target="_blank" rel="noreferrer noopener">Polygon 2.0</a>, according to a FalconX research note.



“The Polygon upgrade is the most relevant technical announcement in the industry at the moment,” David Lawant, the firm’s head of research, said.&nbsp;



“We expect MATIC to keep closing its gap versus peers as more details of the upgrade roadmap become more apparent to the market.”



<figure class="wp-block-image size-full"><img decoding="async" loading="lazy" width="900" height="400" src="https://blockworks-co.imgix.net/wp-content/uploads/2023/07/unnamed.png" alt="" class="wp-image-61456" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2023/07/unnamed.png?w=900 900w, https://blockworks-co.imgix.net/wp-content/uploads/2023/07/unnamed.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2023/07/unnamed.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2023/07/unnamed.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2023/07/unnamed.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2023/07/unnamed.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2023/07/unnamed.png?w=80 80w" sizes="(max-width: 900px) 100vw, 900px" /><figcaption class="wp-element-caption">MATIC has enjoyed a healthy July</figcaption></figure>



The update is labeled a “vision for unlimited scalability and unified liquidity, powered by Zero-Knowledge technology,” per the <a href="https://polygon.technology/roadmap" target="_blank" rel="noreferrer noopener">project’s roadmap</a>.



Polygon Labs, the primary studio behind Polygon, collaborated with developers, researchers, node operators, validators and other stakeholders as part of its process.



Polygon 2.0 is expected in a number of phases with the first geared towards establishing what’s dubbed a &#8220;value layer,” mirroring how the “<a href="https://polygon.technology/blog/introducing-polygon-2-0-the-value-layer-of-the-internet" target="_blank" rel="noreferrer noopener">rest of the internet operates</a>.” 



Architectural overhauls, including a <a href="https://blockworks.co/news/polygon-pos-to-validium" target="_blank" rel="noreferrer noopener">validium</a>, are intended to reduce costs and boost transaction throughput. There’s also plans to revamp tokenomics and governance processes, FalconX noted.



Zooming out, though, and MATIC still has a ways to catch up. 



Despite outperforming most of the market directly following <a href="https://blockworks.co/news/ftx-this-week" target="_blank" rel="noreferrer noopener">the FTX scandal</a> last November, MATIC is down 3.2% over the year to date, underperforming against BTC, ETH, ARB and solana (<a href="https://blockworks.co/price/sol">SOL</a>), all of which are up more than a third.



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Polygon 2.0 is crypto’s ‘most relevant technical announcement’: FalconX

Macauley Peterson

Polygon, the platform builder for Ethereum scaling, recently unveiled their upcoming project known as Polygon 2.0. Polygon Labs and its ecosystem partners have been hinting at this development on Twitter for several days, often emphasizing the number 2.



Initial details are scant, but Polygon is laying claim to the “value layer” of the internet — a concept that nearly all blockchains aspire to achieve, including Ethereum itself.



“Over the coming weeks, we will detail each component of Polygon 2.0, addressing topics like the future of the Polygon PoS chain, the utility and evolution of the Polygon token, and the transition to greater community governance of the protocol and treasury,” Polygon said in a <a href="https://polygon.technology/blog/introducing-polygon-2-0-the-value-layer-of-the-internet">blog post</a>.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">3/ In the coming weeks, we will detail every component of Polygon 2.0 in a series of posts, AMAs, and more, including: → Future of Polygon PoS chain → Utility and evolution of the native token → Transition to greater community governance of the protocol and treasury <a href="https://t.co/ciu9WdCuKm">pic.twitter.com/ciu9WdCuKm</a>&mdash; Polygon (Labs) (@0xPolygonLabs) <a href="https://twitter.com/0xPolygonLabs/status/1668312620649127936?ref_src=twsrc%5Etfw">June 12, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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<h2 class="wp-block-heading">Emphasis on community decisions made outside the US</h2>



Polygon’s native token (<a href="https://blockworks.co/price/matic">MATIC</a>) has been in retreat since the SEC <a href="https://blockworks.co/news/sec-coinbase-binance-security">name-dropped</a> it in its pending Coinbase and Binance lawsuits. That <a href="https://blockworks.co/news/robinhood-nixes-ada-matic-sol">prompted Robinhood to delist</a> the token days later, effective June 27.



The communications response from Polygon following the SEC’s latest actions emphasized its roots outside the US, as well as the technical role of the MATIC token in staking to provide network security to Polygon’s PoS layer-1 network.



“We are proud of the history of the Polygon network — developed outside the US, deployed outside the US, and focused to this day on the global community that supports the network,” Polygon <a href="https://twitter.com/0xPolygonLabs/status/1667643925232852996?s=20">tweeted</a>. “MATIC was a necessary part of the Polygon technology from Day 1, ensuring that the network would be secure — and remains so to this day.”



Originally called the Matic Network, prior to its Polygon rebrand, the team conducted an ICO-style <a href="https://icodrops.com/matic-network/">token sale</a> in April 2019, raising $5.6 million, followed by several seed and venture <a href="https://www.crunchbase.com/organization/polygontechnology/investor_financials">funding rounds</a>, culminating in <a href="https://blockworks.co/news/polygon-closes-450m-raise-led-by-sequoia-india">a private token sale</a> that was good for $450 million.



The funding included participation from US investors and firms such as Kevin O’Leary, Galaxy Digital and <a href="https://blockworks.co/news/polygon-and-seven-seven-six-launch-200m-social-media-web3-initiative">Alexis Ohanian’s Seven Seven Six</a>, but Polygon says although they “made sure MATIC was available to a wide group of persons,” its fundraising “did not target the US at any time.”



MATIC currently has no role in <a href="https://blockworks.co/news/polygon-zkevm-live-on-ethereum">Polygon’s zkEVM rollup</a>, although co-founder Mihailo Bjelic <a href="https://blockworks.co/news/polygon-unveils-zkevm-the-holy-grail-of-scaling">told Blockworks in July 2022</a> that upgrading the proof-of-stake chain was “probably the end goal.”



That appears to be the definite plan now, with the rollout of Polygon 2.0, described as “a network of ZK-powered L2 chains, unified via a novel cross-chain coordination protocol,” according to the blog post.



“For a user, the entire network will feel like using a single chain,” they said.



The announcement stressed that the community was calling the shots. “Only the Polygon community, who controls the Polygon protocol, has the right to accept and implement Polygon 2.0.”



Polygon Labs, of course, wields tremendous influence, so the extent of the community’s ability to exercise governance control is limited.



Other projects are similarly grappling with issues of decentralization and jurisdictional nexus as the US regulatory crackdown kicks into high gear.



“There&#8217;s no doubt that crypto will thrive. The only question is where,” Jake Chervinsky <a href="https://twitter.com/jchervinsky/status/1668239820445962250?s=20">tweeted</a> earlier today, in response to news of <a href="https://blockworks.co/news/a16z-uk-office-london">a16z’s new London office</a>. “US policymakers need to think hard about whether this is the outcome they want,” he said.



But other teams have signaled their intention to stick it out, despite policy headwinds.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">The core dev teams of dYdX, Uniswap, Open Sea, Alchemy, and many other top web3 projects are still based here in the US There’s a reason for that. The US got tech so right all it has to do is be at least reasonable and it will win web3 too&mdash; Antonio | dYdX (@AntonioMJuliano) <a href="https://twitter.com/AntonioMJuliano/status/1668257649559760905?ref_src=twsrc%5Etfw">June 12, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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“The core dev teams of dYdX, Uniswap, Open Sea, Alchemy, and many other top web3 projects are still based here in the US,” said dYdX’s co-founder Antonio Juliano.



“There’s a reason for that. The US got tech so right all it has to do is be at least reasonable and it will win web3 too,” he said.



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Proudly un-American: Polygon 2.0 will be ‘developed and deployed outside US’ too

Casey Wagner

Over the last few months, the SEC has taken to unilaterally labeling certain crypto assets as securities in unrelated lawsuits. But some industry participants say the agency doesn’t understand the technology behind these tokens well enough to make this claim.&nbsp;



In its complaint <a href="https://blockworks.co/news/sec-sues-coinbase">alleging Coinbase violated securities laws</a>, the SEC listed 12 additional crypto tokens as securities.&nbsp;



The SEC’s suit against Coinbase, announced one day after similar charges were <a href="https://blockworks.co/news/binance-changpeng-zhao-face-sec-charges">unveiled against Binance</a>, focuses on claims that Coinbase facilitated trading of unregistered securities and operated unregistered brokerage services.&nbsp;



In the <a href="https://blockworks.co/tag/coinbase">Coinbase</a> lawsuit, the SEC claims that the following tokens are securities: ADA, CHZ, SOL, AXS, FIL, ICP, FLOW, NEAR, MATIC, VGX, SAND and DASH. 



As of time of publication, Coinbase had not delisted any of the above assets.&nbsp;



In its Binance complaint, the <a href="https://blockworks.co/news/sec-10-tokens-securities">SEC claims 10 tokens</a>, separate from the exchange’s native BNB and BUSD tokens, are securities. The tokens listed in the suit are: SOL, ADA, MATIC, FIL, ATOM, SAND, MANA, ALGO, AXS and COTI.&nbsp;



The <a href="https://blockworks.co/tag/sec">SEC</a>’s move to list tokens in these exchange lawsuits is not new. In its July 2022 <a href="https://blockworks.co/news/wahi-brothers-settlement-sec">lawsuit against a former Coinbase employee</a> for alleged insider trading, which settled on May 20, 2023, the SEC listed nine tokens as securities.&nbsp;



These nine tokens are: AMP, RLY, DDX, XYO, RGT, LCX, POWR, DFX and KROM. Coinbase has delisted only two of these tokens since the lawsuit was announced; Rally’s RLY and RGT, Rari’s governance token. 



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<h2 class="wp-block-heading">News analysis by Bessie Liu</h2>



<h3 class="wp-block-heading">The SEC does not understand crypto tokens</h3>



The SEC has been declaring crypto assets securities — a designation that brings tokens into the same US regulatory fold as stocks and bonds.&nbsp;



The regulator’s reasoning is, however, opaque. And at least in some cases, erroneous. As demonstrated by the SEC’s <a href="https://storage.courtlistener.com/recap/gov.uscourts.dcd.256060/gov.uscourts.dcd.256060.1.0.pdf">lawsuit</a> against Binance on Monday, there are significant inaccuracies underpinning the agency’s move.&nbsp;



It all adds up to a demonstration that the SEC has a general lack of understanding when it comes to the relationship between individual tokens and protocols.&nbsp;



For example, the SEC has <a href="https://storage.courtlistener.com/recap/gov.uscourts.dcd.256060/gov.uscourts.dcd.256060.1.0.pdf">claimed</a> that the “New Tendermint” is a significant contributor to the ATOM token.



“That’s not true, just because someone has made a website and claims they contribute to Cosmos, doesn’t mean they contribute to Cosmos,” Zaki Manian, the cofounder of Sommelier Finance, a protocol in the Cosmos ecosystem, told Blockworks on Tuesday.&nbsp;



Another instance: The SEC has said the Interchain Foundation sold ATOM tokens in 2017.&nbsp;



The Cosmos Hub, the issuer of the ATOM token, <a href="https://blog.cosmos.network/cosmos-hub-to-launch-mainnet-a453d2247a34">launched in March 2019</a>, and ATOM tokens were not transferable at launch — meaning they could not be bought or sold. It was not until April 2019, after a hard fork that transfers were enabled.&nbsp;&nbsp;



“There’s a lot of history to the Cosmos approach to compliance, what you see from the SEC is a very superficial and largely inaccurate characterization of blockchain networks,” Manian said.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">The SEC’s facts on ATOM are pretty poorly researched. The SEC claims that ATOMs were sold in 2017. No one received an ATOM until April 2019 when the network voted to enable transfers. The claim NewTendermint is a significant contributor to Cosmos. No contribution occurred.&mdash; Zaki ⚛️🍷 (@zmanian) <a href="https://twitter.com/zmanian/status/1665778966043475971?ref_src=twsrc%5Etfw">June 5, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



The ATOM token itself, according to Manian, does not meet the SEC’s standard to be a security, as determined by the Howey test, because the founding entity of the project has collapsed.&nbsp;



One characteristic of the Howey test is that investors can reasonably expect growth “derived from the efforts of others.” There is also an expectation of profit under Howey — often from the security’s originators.



When it comes to ATOM, though, many contributors to its fundraise were also developers behind the project. Thus, the developers of the network and the investors were, at least in some cases, one and the same.



“In the history of Cosmos we recruited as many of the people who had been in the fundraiser as possible, to work, to run nodes and testnets and help build the project, build infrastructure during the launch of every step of way,” Manian said.



<h3 class="wp-block-heading">‘Deflationary model’ token test incorrectly applied</h3>



When it comes to other tokens, including SOL and MATIC, the SEC has designated them securities at least partly due to their “deflationary model.”&nbsp;



Referring to <a href="https://blockworks.co/price/SOL">SOL</a>, the SEC <a href="https://storage.courtlistener.com/recap/gov.uscourts.dcd.256060/gov.uscourts.dcd.256060.1.0.pdf">wrote</a> that “this marketed burning of SOL as part of the Solana network’s ‘deflationary mechanism’ has led investors to reasonably view their purchase of SOL as having the potential for profit to the extent there is a built-in mechanism to decrease the supply and therefore increase the price of SOL.”



However, in the article <a href="https://www.gemini.com/cryptopedia/solana-blockchain#section-sol-token-structure-and-economics">cited</a> by the SEC to support their claim, the author, Anatoly Yakovenko, clearly states that SOL ‘transaction fees’ are burned, a distinction the SEC overlooks but that is critical to the <a href="https://docs.solana.com/transaction_fees">operation</a> of the blockchain, and which is described in more detail below.



The Solana Foundation has noted in its economic <a href="https://docs.solana.com/inflation/inflation_schedule">documents</a> that its token is an inflationary asset. In fact, the SOL token has always been <a href="https://messari.io/asset/solana/chart/sply-circ">inflationary</a>.&nbsp;&nbsp;



<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1152" height="591" src="https://blockworks-co.imgix.net/wp-content/uploads/2023/06/image-8.png?w=1024&amp;h=1024" alt="" class="wp-image-58200" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2023/06/image-8.png?w=1152 1152w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/image-8.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/image-8.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/image-8.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/image-8.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/image-8.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/image-8.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/image-8.png?w=80 80w" sizes="(max-width: 1152px) 100vw, 1152px" /><figcaption class="wp-element-caption">SOL circulating supply | Source: Messari</figcaption></figure>



The SEC drew comparisons to Polygon’s <a href="https://blockworks.co/price/matic">MATIC</a> token. The regulator has claimed that <a href="https://blockworks.co/tag/polygon">Polygon</a> has also marketed that it “burns” MATIC tokens accumulated as fees, indicating that the total supply of MATIC would decrease.”



But the SEC fails to understand something critical to the way blockchains work.&nbsp;



These “deflationary models” use a similar price modulation technique to Ethereum’s <a href="https://eips.ethereum.org/EIPS/eip-1559">EIP-1559 </a>— a fee-burning mechanism intended to minimize congestion. It’s designed to prevent block builders from manipulating fees in a bid to extract more from protocol users.&nbsp;



Polygon’s MATIC, in particular, is designed almost as a <a href="https://forum.polygon.technology/t/eip1559-london-fork-on-mainnet/549">copy-paste</a> from Ethereum.&nbsp;



“If EIP-1559 is a concern, then it’s going to be a concern for Ethereum too because it works exactly the same way,” Matt Cutler, co-founder and CEO of Web3 infrastructure company Blocknative, told Blockworks.&nbsp;



<h3 class="wp-block-heading">ETH gas fees…</h3>



Prior to EIP-1559, gas fees on Ethereum were purely market-based, meaning that everyone paid a gas fee associated with their transaction and whoever paid the most had their transaction included in the blockspace, a situation that created many negative externalities, Cutler said.



“Two trading bots could adversely affect the price of gas fees of the entire network,” he explained.&nbsp;



This in turn made gas prices unpredictable and raised concerns about the idea that privileged actors were able to influence the prices.



EIP-1559 was designed to introduce a base fee — which meant that for your transaction to be included on chain, you must pay the fee.



A base fee is set by the network and must be paid in the network’s native token — so in the case of Polygon, the fee would be paid in MATIC.



“This makes the price much more predictable, and the basic idea is this modulates issuance,” Cutler said.&nbsp;



It is important to note that in the case of ETH, EIP-1559 does not make the asset itself deflationary as it is dependent on marketplace demand. Although it does reduce supply, the rate of issuance of ETH continues to increase, Cutler notes.&nbsp;



Although one could argue that MATIC’s fixed supply could imply that the token has a “<a href="https://storage.courtlistener.com/recap/gov.uscourts.dcd.256060/gov.uscourts.dcd.256060.1.0.pdf">deflationary effect</a>,” its reason for burning tokens is much more complex.



“[The SEC] takes a very narrow piece of a pretty big topic and says it&#8217;s an issue without taking into account all the other reasoning and benefits for doing so. EIP-1559 does not exist purely as a price up. It is a more effective mechanism, a more equitable mechanism and an easier to work with mechanism than that which came before it,” Cutler said.



President of Polygon Labs Ryan Wyatt will also be <a href="https://d1dth6e84htgma.cloudfront.net/IDC_Wyatt_Testimony_Blockchain_Hearing_2023_06_07_e9c81155cb.pdf?updated_at=2023-06-05T15:54:09.404Z">sharing testimony</a> in Washington, DC, today.&nbsp;



“I’ll discuss the critical role Web3 and blockchain infrastructure play in protecting users and ensuring privacy, and share positive use cases,” Wyatt said.



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The SEC Says These Crypto Assets Are Securities: Their Reasoning Is Wrong

Solana&#8217;s SOL has flipped one of its primary rivals, Polygon&#8217;s MATIC, to reclaim a spot in the top 10 market caps.



<a href="https://blockworks.co/price/sol" target="_blank" rel="noreferrer noopener">SOL</a>’s valuation was more than triple that of <a href="https://blockworks.co/price/matic" target="_blank" rel="noreferrer noopener">MATIC</a>’s leading around the time of the <a href="https://blockworks.co/news/one-year-since-terra">Terra debacle last May</a> — $16.8 million to $5 billion.



But the FTX <a href="https://blockworks.co/podcast/empire/b207d7cc-72c2-11ed-8a49-037365644d93">disaster crushed</a> Solana. The native token for its layer-1 network collapsed upwards of 70% in the weeks following November’s crisis.



FTX founder Sam Bankman-Fried had been one of the protocol’s <a href="https://twitter.com/SBF_FTX/status/1347964322459262977">loudest</a> proponents (and biggest backers), with his venture capital dollars spread far and wide across Solana’s ecosystem.&nbsp;



The <a href="https://blockworks.co/news/ftx-backed-projects-plunge-as-sam-coins-underperform">market quickly rejected</a> SOL and many other tokens in Bankman-Fried’s orbit once <a href="https://blockworks.co/news/sam-bankman-fried-sbf-charges">allegations of sweeping fraud</a> came to light — while MATIC began to outperform the market significantly.



Polygon <a href="https://wiki.polygon.technology/docs/home/faq/#:~:text=blockchain%20in%20itself%3F-,%E2%80%8B,assets%20back%20to%20main%20chain.">describes</a> itself as a “sidechain solution” that assists Ethereum in running smoothly (read: helps it scale). When Solana <a href="https://blockworks.co/news/solana-flips-shiba-value-post-ftx-is-matic-next">flipped number-two dogcoin</a> shiba inu (<a href="https://blockworks.co/price/shib">SHIB</a>) in late January, the obvious question was whether MATIC was next.&nbsp;



SOL did briefly eclipse MATIC around that time, for five days in total.



<ul>
<li>But it spent most of the time since valued some $2 billion lower.&nbsp;</li>



<li>Solana now has the edge by about $123 million ($7.93 billion to $7.81 billion).&nbsp;</li>



<li>Dogecoin (<a href="https://blockworks.co/price/doge">DOGE</a>) is the next most valuable cryptocurrency at nearly $9.9 billion.</li>
</ul>



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/13719812/embed#?secret=SMDLhr1WCp" data-secret="SMDLhr1WCp" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">SOL is still about 40% below its valuation as the FTX scandal struck</figcaption></figure>



<h2 class="wp-block-heading">Why has Solana flipped Polygon?</h2>



Granted, SOL is only worth about 1.5% more right now. And it could very well be that Polygon re-flips Solana again sometime soon.



But Solana has seen some interesting developments of late. Solana Saga, a <a href="https://blockworks.co/news/solana-launches-saga-phone">branded Android phone</a> filled with Web3 apps by default in the same vein as HTC’s Exodus <a href="https://www.htcexodus.com/eu/newsroom/2019-02-15/">range</a>, is now available for public order. That’s exciting for Solana fans.



Helium, the crypto-powered incentivization system for ad-hoc wireless hotspots, also <a href="https://blog.helium.com/its-here-the-helium-network-migrates-to-solana-today-6b24d05ba57d?gi=4d65a7b7ea12">completed</a> its migration to Solana last month. Its <a href="https://blockworks.co/news/helium-token-holders-approve-switch-to-solana-blockchain">community voted to abandon</a> its own blockchain network last September.



That’s not to say things aren’t buzzing in Polygon world, what with its major corporate NFT partnerships with the likes of <a href="https://blockworks.co/news/polygon-to-power-starbucks-nft-loyalty-program">Starbucks</a> and DraftKings.



But a flippening is a flippening.&nbsp;



Is Dogecoin next?



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Solana Flips MATIC to Reclaim Top 10: Is Dogecoin Next?

Shalini Nagarajan

Polygon’s Ethereum-compatible proof-of-stake sidechain (Polygon PoS) underwent a hard fork on Jan. 17 — an upgrade intended to help address gas spikes and chain reorganization issues that have affected the network.



According to <a href="https://blockworks.co/newsletter/issue/30264806">Blockworks Research</a>, the hard fork will result in lower transaction fees and refine the security of blocks. It went live at approximately 4:00 a.m. ET at block height 38,189,056.



Polygon first officially announced the hard fork in a Jan. 12 <a href="https://polygon.technology/blog/hardfork-incoming-upgrading-polygon-pos-chain-to-boost-performance" target="_blank" rel="noreferrer noopener">blog</a>, which also mentions longer-term technical upgrades for the network. The fork was proposed based on a forum discussion and community feedback.



In its blog, Polygon laid out reasons why the upgrade was required. For one, its network faced “gas spikes,” an undesired exponential jump in price encountered during surges in demand on its network following <a href="https://forum.polygon.technology/t/impact-of-eip1559-and-future-possibilities/1749" target="_blank" rel="noreferrer noopener">Ethereum Improvement Proposal-1559</a>. The fork is expected to help smoothen fluctuations in gas prices. 



<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="780" src="https://blockworks-co.imgix.net/wp-content/uploads/2023/01/polygon-pos-gas-estimate-1024x780.jpg" alt="" class="wp-image-44188" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2023/01/polygon-pos-gas-estimate-1024x780.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2023/01/polygon-pos-gas-estimate-1024x780.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2023/01/polygon-pos-gas-estimate-1024x780.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2023/01/polygon-pos-gas-estimate-1024x780.jpg?w=337 337w, https://blockworks-co.imgix.net/wp-content/uploads/2023/01/polygon-pos-gas-estimate-1024x780.jpg?w=343 343w, https://blockworks-co.imgix.net/wp-content/uploads/2023/01/polygon-pos-gas-estimate-1024x780.jpg?w=287 287w, https://blockworks-co.imgix.net/wp-content/uploads/2023/01/polygon-pos-gas-estimate-1024x780.jpg?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2023/01/polygon-pos-gas-estimate-1024x780.jpg?w=1222 1222w" sizes="(max-width: 1024px) 100vw, 1024px" /></figure>



Coming to on-chain reorganization, Polygon said that it wanted to reduce what’s known as “sprint length” — the number of blocks produced by a validator — to reduce the time taken for validation. This results in “fewer reorgs overall,” which impacts the finality of transactions, Polygon said.



Blockworks Research noted the low level of participation in this governance proposal, as the latest fork was passed by just <a href="https://forum.polygon.technology/t/pre-pip-discussion-addressing-reorgs-and-gas-spikes/10623" target="_blank" rel="noreferrer noopener">15 votes</a>, with each Polygon validator team being able to cast one vote.



“While validators still need to implement the new software for the new chain to be canonical, Polygon governance discussions seem to leave a lot to be desired,” the research team said.&nbsp;



Governance matters should expect to see fewer participants during bear markets, according to Hendo Verbeek, head of risk at Spool Finance, a DeFi liquidity aggregator organized as a DAO.



<blockquote class="wp-block-quote">
“By no means should we label this lack of participation as a bad thing because the actors that do remain are generally very high-level and extremely well incentivized to ensure the best outcome for all parties involved,” Verbeek told Blockworks.
</blockquote>



The price of native token <a href="https://blockworks.co/price/matic">MATIC</a>, which is up nearly 20% — in US dollar terms — since the hard fork was announced, has been <a href="https://blockworks.co/news/bitcoin-price-hits-greediest-point-in-4-months-as-it-flirts-with-19k">in line with the recent market rally</a>, and is mostly flat versus <a href="https://blockworks.co/price/eth">ether</a>.



MATIC has significantly underperformed ETH <a href="https://blockworks.co/news/ftx-bankrupt-hacked-investigated-a-timeline-of-events">since the November FTX bankruptcy on Nov. 11, 2022</a>, down around 24%.



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Polygon Upgrade Goes Live Following Low Governance Vote Turnout

Jacquelyn Melinek

<div id="highlights-block_61d7689c0f2ca" class="highlights">
 <ul>
 <li>The total trading volume across 14 NFT marketplaces rose close to 23,000% year-over-year, from $85.7 million 2020 to $19.6 billion in 2021</li>
 <li>The total market cap of NFTs is about $31.4 billion, making up 1.53% of the current $2.05 trillion total market cap for cryptocurrency</li>
 </ul>
 
</div>



OpenSea overall monthly NFTs sales may be down from September 2021 all-time highs, but its Polygon-based NFT sales hit a peak of about $2 million during December, and are starting off the new year strong, according to <a href="https://dune.xyz/queries/130838/257589" target="_blank" rel="noreferrer noopener">data</a> compiled by user niftytable on Dune Analytics.



As of Thursday, there were 426,565 non-fungible token (NFT) Polygon sales in January. If this number continues to grow at the same rate, there will be about 2.2 million Polygon NFT sales for the month of January, a 10% increase from the previous month and nearly 5,000% higher than six months ago.



Polygon’s <a href="https://www.coinbase.com/price/polygon#:~:text=The%20current%20price%20is%20%242.5787,circulating%20supply%20is%207%2C086%2C960%2C741.27%20MATIC." target="_blank" rel="noreferrer noopener">MATIC</a> token spiked near all-time highs to $2.92 on Dec. 26, 2021, but was down 29.2% from that record level to $2.26 on Thursday.



In general, 2021 was an extremely strong year for NFTs. The total trading volume across 14 NFT marketplaces, including OpenSea, Rarible, Axie Infinity, SuperRare, NBA Topshot, rose from $85.7 million in 2020 to $19.6 billion in 2021, according to a <a href="https://www.1confirmation.com/2021-nft-annual-review?latest" target="_blank" rel="noreferrer noopener">report</a> by cryptocurrency-focused investment firm 1confirmation.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh6.googleusercontent.com/1Rpkt33hLzN1mVWkVMoGvJvLyrNqMj_DAsBLrG_EEko-t72k2l7aKx_cNh6qvG0tLUHkir9bYv_rxvs_QOtOF74csrJ4zTdIzDStExlOWicZUPaVkbop4P2PktpoHpyjspmMYBcu" alt=""/><figcaption>Source: 1confirmation</figcaption></figure>



“NFTs had a breakout year in 2021 but the asset class is still small relative to cryptocurrency broadly,” the 1confirmation report noted.



The total market capitalization of NFTs is about $31.4 billion, making up 1.53% of the current <a href="https://coinmarketcap.com/" target="_blank" rel="noreferrer noopener">$2.05 trillion</a> total market cap for cryptocurrency, according to data from 1confirmation and CoinMarketCap, respectively.&nbsp;



However, the investment firm said it thinks NFTs will ultimately be larger than cryptocurrencies by the end of this decade and steps taken by NFT creators in 2022 will contribute to that growth. “2021 was crazy in NFT land, and 2022 is shaping up to be crazier,” 1confirmation stated.&nbsp;



<h3 class="wp-block-heading">OpenSea sailing ahead</h3>



OpenSea, the largest NFT marketplace by trading volume, is showing no sign of slowing down in 2022. This week, the company announced a <a href="https://opensea.io/blog/announcementops/announcing-openseas-new-funding/" target="_blank" rel="noreferrer noopener">$300 million Series C</a> funding round led by Paradigm and Coatue. The latest capital raise gives OpenSea a $13.3 billion post-money valuation.



<meta charset="utf-8">“In 2021, the world woke up to the potential of NFTs to unlock utility and economic empowerment across a vast set of industries, communities and creative categories,” Devin Finzer, CEO of OpenSea, told Blockworks. “Our vision is to be the destination for these new open digital economies to thrive. We’ll start this year by lowering the barriers to entry to the NFT space on OpenSea and investing in the ecosystem and the community that powers it,&#8221; Finzer added.



Today, OpenSea has over 1.26 million active users, 2 million collections and over 80 million NFTs. It offers cross-blockchain support across Ethereum, Polygon and Klatyn. OpenSea Polygon traders have increased to record levels from just 15 users in late June 2021 to over 846,433 users as of Thursday, niftytable’s <a href="https://dune.xyz/queries/130852/257620" target="_blank" rel="noreferrer noopener">data</a> on Dune Analytics showed.&nbsp;



Total OpenSea Ethereum traders have also hit new all-time highs — from 36,540 on the year-ago date to 942,721 as of Jan. 5, <a href="https://dune.xyz/queries/2877/5680" target="_blank" rel="noreferrer noopener">data</a> compiled by user rchen8 on Dune Analytics showed.&nbsp;



“We saw the NFT ecosystem explode last year, with OpenSea’s transaction volume increasing over 600x in 2021,” Finzer wrote in a blog <a href="https://opensea.io/blog/announcementops/announcing-openseas-new-funding/" target="_blank" rel="noreferrer noopener">post</a> on Tuesday. “But we’re just getting started,” he added.&nbsp;



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