After the explosion of Polygon, India is moving towards the center of the crypto world

Source: Tech in Asia, with some edits

Compiled by: Hailsman, Chain Catcher

Polygon is headquartered in India. In May last year, Polygon became the focus of attention after being invested in by American billionaire Mark Cuban.

Polygon co-founders (from left): Mihailo Bjelic, Jaynti Kanani, and Sandeep Nailwal

In a panel discussion a month after investing in Polygon, Cuban praised that Polygon was "sweeping the field" in the crypto space. A few months before public interest in Web3 and blockchain peaked, Cuban made a bullish bet on Polygon.

Subsequently, Polygon began to take the lead and put India on the global blockchain map. Earlier this month, Polygon raised $450 million in a strategic financing round led by Sequoia India, with participation from SoftBank Vision Fund.

Why did the Polygon ecosystem explode?

Polygon's mission is clear: to become the "Amazon Web Services (AWS)" for Web3. Polygon co-founder Sandeep Nailwal believes that developers prefer to choose Polygon over Ethereum to build dApps because the former is more scalable.

Nailwal told Tech in Asia that this advantage could make Polygon a major player in the crypto space after Bitcoin and Ethereum.

Polygon's confidence comes from its Layer 2 scaling solution, which acts as an intermediary between Ethereum and dApp creators. It speeds up transactions by processing blockchain transactions on "sidechains," thereby relieving pressure on the main blockchain. At the same time, Polygon's solution allows developers to build user-friendly dApps within the Ethereum ecosystem. Through this, Polygon is addressing the long-standing issues of slow speeds and high transaction costs that have plagued users.

Polygon is a collection of technologies. "They call themselves an Ethereum scaling solution aggregator, meaning developers can choose the solution that suits them instead of being offered a one-size-fits-all approach," mentioned Manan Shah, CEO and founder of cybersecurity company Avalance Global Solutions.

In the past year, Polygon has gained quite a number of major Web3 projects from companies such as DeFi protocols Aave and Uniswap, metaverse platform Sandbox, and NFT marketplaces like OpenSea and Cuban's Lazy.com. Currently, there are over 7,000 dApps being deployed on Polygon, making it one of the largest dApp platforms in the world.

The adoption of Polygon's proof-of-stake protocol has also seen exponential growth, with transaction volumes nearing 1 billion by 2021. Polygon has over 2.67 million active users monthly, generating about 3 million transactions daily, nearly double that of Ethereum's transaction volume. This also explains why Polygon's native token Matic has a market capitalization of about $11 billion.

Polygon's next big bet is ZK Rollup, which promises faster transaction speeds than the currently used Optimism Rollup. Under its Polygon Zero initiative, Polygon has made significant investments. In December 2021, it acquired the ZK technology startup Mir for $400 million.

Related reading: “Polygon's Scaling Solution Journey: Investing $1 Billion, Targeting 1 Billion Users”

Polygon has also partnered with the venture capital firm Seven Seven Six, owned by Reddit co-founder Alexis Ohanian, to invest $200 million in social media projects in the web3 space.

Ohanian stated that Seven Seven Six will leverage Polygon's scalable infrastructure to seek more opportunities in gaming and social media. Seven Seven Six holds a diverse portfolio, including the popular blockchain game Axie Infinity's developer Sky Mavis.

A Humble Beginning: The Company Faced Many Instances Where Funds Were Only Enough to Pay Salaries for a Month or Two

However, so far, Polygon's journey can only be described as a grueling struggle.

In 2015, Sandeep Nailwal was running a B2B marketplace. There, he discovered the potential of crypto and realized that decentralized networks had uses beyond cryptocurrency.

Nailwal utilized his programming expertise to write some dApps for clients. After achieving some success, he began to pursue it as a full-time job.

Around that time, Nailwal connected with Jaynti Kanani, who had resigned from his data scientist position at Housing.com. The two decided to join forces to create Polygon, and soon after, the third co-founder Anurag Jain joined them.

In the initial months after its establishment, Polygon struggled to cope with an unexpected market downturn.

Nailwal told Tech in Asia that it became more challenging to start a business because not many people believed that a team from India could build groundbreaking infrastructure protocols.

Additionally, in the early days of Polygon, raising funds was a significant challenge. Nailwal mentioned that even small-scale investments were difficult to secure. The volatility of Bitcoin prices also deterred investors.

In many cases, the company's account balance was only enough to pay salaries for a month or two. They even had to make very personal requests to investors, such as seeking about $5,000 in emergency funds to keep the company afloat for another five months.

When some dApps based on Polygon began to gain popularity, the company finally gained recognition both in India and internationally.

However, Polygon's exponential growth has not come without challenges. Once scalability issues are resolved, Ethereum itself may become a force to be reckoned with, although this will take time. Challenges also come from "Ethereum killers" like Avalanche, Fantom, Solana, and BNB Chain, which offer attractive alternatives for dApp developers.

Meanwhile, Polygon's ever-expanding scale also means that its processing speed may struggle to keep up with transaction volumes.

Garg pointed out that Polygon and other networks are working hard to improve throughput and scalability, but it may still not be enough to handle heavy traffic. This was evident in the recent "Sunflower" incident, which caused severe congestion on the Polygon network.

Related reading: “Polygon Gas Fees Surge Over 10 Times, Is P2E Game Sunflower Farmers to Blame?”

Laying the Foundation for India's Web3 Boom

Polygon still has the potential to help India establish a foothold in the cryptocurrency world. Investor interest in India's Web3 space has been increasing—Sequoia Capital India made as many as 19 investments in Web3 startups in the second half of 2021.

"We are seeing extraordinary innovation in DeFi," said Rajan Anandan, managing director of Sequoia Capital, last December, "2022 will see a key catalyst for Web3 as the L2/Rollup ecosystem goes live at scale."

Another top VC actively pursuing Web3 is Antler.

In December 2021, Antler announced that it would allocate one-third of its investment plan in India to blockchain and Web3 projects, specifically planning to fund 30 early-stage projects in India in the future. Antler has also brought in Polygon, Solana, and Avalanche as ecosystem partners to help new Web3 founders navigate the complex environment.

In addition to attracting investor interest, some Indian startups are also pushing the possibilities in the Web3 space.

Anshul Rustaggi founded Totality Corp in 2019 as an Ethereum-based NFT play-to-earn game. The company plans to create collectible and playable NFTs based on Indian mythology. As of December 2021, it had raised $1.8 million and plans to raise more funds this year.

Additionally, the TikTok-like short video app Chingari is another Indian startup making headlines in the Web3 world. The platform bets on a social token called $GARI, which can be used for various purposes, such as governance, tipping content creators, and purchasing NFTs from its marketplace. $GARI launched on a dozen cryptocurrency exchanges in January, and on its first day, its token market cap exceeded $100 million.

In addition to having a mature investment and startup environment, India has another key advantage: it boasts the largest developer base in the world and has witnessed explosive growth in the number of Web3 projects. "India provides fertile ground for Web3, and we will see many new use cases," added Lakhani from Sequoia Capital.

Compared to its competitors, Polygon has gained a favorable position by leveraging the resources provided by India's Web3 ecosystem, such as talent and funding. If Polygon can successfully realize its potential, it may achieve a larger vision—placing India at the core of the next wave of foundational technologies.