Bernstein predicts Polygon blockchain will be Web3's greatest achievement

Key points:

The Polygon was selected by Starbucks (SBUX), NuBank, Reddit, Draftkings (DKNG), Robinhood (HOOD), and Meta/Instagram (META).
Its team got two things right, the report said. It aggressively recruits talent from large global tech companies such as Amazon (AMZN), YouTube, and Airbnb (ABNB), and uses its "business development prowess" to reach consumer-focused brands.
According to the release, Polygon is transitioning from a “potential cannibalization” of the Ethereum blockchain to a freely scaling platform that brings value to the Ethereum ecosystem.

In a research note on Friday, Bernstein said the Polygon blockchain has become the primary gateway for moving Web2 consumers to Web3. The system was selected by Starbucks (SBUX), NuBank, Reddit, Draftkings (DKNG), Robinhood (HOOD), and Meta/Instagram (META).

Polygon’s native cryptocurrency, MATIC, surged 30% in two days last week after Meta announced it would launch a toolkit that would allow Instagram users to mint and sell Polygon-powered non-fungible tokens (NFTs).

The Polygon team got two things right, the report said. It aggressively recruits talent from large global tech companies such as Amazon (AMZN), YouTube, and Airbnb (ABNB), and uses its "business development prowess" to reach consumer-focused brands.

"This puts Polygon in a unique position to be a Web3 ramp for millions of users," and with MATIC tokens trading around $1.13, "the market has started to reward it for its development in a bear market," analysts Gautam Chhugani and Manas Agrawal wrote.

Web3 represents the next generation of the internet, promoting decentralized protocols designed to reduce reliance on big tech companies.

Bernstein pointed to two criticisms against Polygon: its current proof-of-stake (PoS) chain is not a long-term solution because it is effectively a sidechain, and "Polygon is parasitic on Ethereum."

The broker says Polygon has been smart, making strategic acquisitions during the bull market that ended last year. It acquired multiple teams building zero-knowledge layer 2 scaling products (zk-rollups) on Ethereum, and during the current bear market has built a working live solution for zk-rollups, with an impending launch.

This allows Polygon to overcome a technological barrier and to build a long-term scaling platform that can support Web2-like scale. Because it was built as an Ethereum VM (virtual machine)-compatible platform, it uses standard Ethereum language and tools, and uses ether (ETH) as the gas currency across the platform, the note said.

According to the release, Polygon is transitioning from a “potential cannibalization” of the Ethereum blockchain to a freely scaling platform that brings value to the Ethereum ecosystem. Hence, “The success of Polygon becomes the success of the Ethereum ecosystem.”

Zk-Rollups is an Ethereum layer 2 protocol that helps process transactions separately from the main network to increase speed and reduce costs. Layer 2 refers to independent blockchains built on top of Layer 1, reducing scale and data bottlenecks. Layer 1 is the base layer or underlying infrastructure of the blockchain