🧘‍♂️ALERT: This Project is Making History

Market Meditations | August 17, 2021

Never seen or done before in #crypto.

Dear Meditators

Many people think they have arrived to the crypto scene too late.

? It’s strange really, given it is still so early. 

Assets are making new ATHs, new projects are launching in Parachain auctions and as of recently – we’re even seeing token mergers!

? The future is bright and we’ll be sharing all the hottest news, trends and assets along the way.

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Our Market Meditations are longer format educational segments. Each letter features a Market Meditation which will deep dive and analyse a relevant crypto event, theme or tool. 

✅ This Project Is Making History

For one reason or another, Polygon tends to find its way into major headlines. Here’s a few things you should know about it:

  • Polygon, formerly known as the Matic Network, is a scaling solution; it provides multiple tools to improve the speed and reduce the cost and complexities of transactions on blockchain networks.

  • It operates as a layer-2 network. This means it acts as an add-on layer to Ethereum. It does not seek to change the original blockchain layer. 

  • In a nutshell, Polygon allows customizability. Polygon network makes it easier for new projects and apps to select which scaling solutions they want. There are different preferences when it comes to: security, speed, independence and transaction costs. Polygon allows you to optimise these needs all in one network. 

Polygon’s use case has proven attractive to a plethora of projects like NFT marketplaces and gaming; projects that are interested in launching on Ethereum but may differ in what their platform needs. Investors have also been quick to rally behind Polygon; on March 25th, Mark Cuban announced he was working to integrate polygon within his NFT website after investing in it. 

In the latest news, Polygon has acquired Hermez Network (a ZK-Rollups-based Ethereum scaling solution) for $250 million. This acquisition is interesting in its own right but noteworthy because the two blockchain projects are also merging their native tokens – MATIC and HEZ. The HEZ token will be integrated into the Polygon ecosystem. 

DEFINITION: A ZK-Rollup is a type of scaling technology that helps bundle transactions onto a network. This in turn reduces the load on the Ethereum blockchain because transactions are executed outside the mainnet (leading to cheaper transactions). Now that you understand the Polygon network, perhaps you can also understand why they pursued this acquisition. 

This is the first ever such deal in the crypto space. While we have experienced mergers and acquisitions, the tokens have usually stayed separate. It is functioning by way of a peg. 3.5 MATIC: 1 HEZ. In other words, HEZ token holders will be able to swap their tokens for several of Polygon’s MATIC tokens. This will occur via the swapping contract that the projects will publish “soon”. The HEZ token will cease to exist after a specific date, which is to be confirmed. 

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⚽ Doge is Coming Home

Which Premier League football team will be sporting the Dogecoin Logo on their shirts thanks to a sponsorship with Stake.com?

  1. Leicester City

  2. Tottenham

  3. Watford

? Parachain Reaction

Two months ago we covered the launch of the first Kusama parachain auctions. Let’s take a look at how they went, when the next auctions are and the knock-on effect on KSM.

  • Five auctions took place in June, and you can see the list of project winners here.

  • About 1.1 million KSM tokens were locked from approximately 28,500 participants to fund the auction slots. This represented ~13% of KSM’s current supply.

  • One of those winners was Karura, who allocated about 10 million native KAR tokens to crowd loans (those who locked their KSM for the 48 week period). Since just over 500,000 KSM tokens were locked up for this project, it resulted in about 20 KAR tokens being allocated per KSM token

  • Because KSM’s inflation mechanism is directly linked to the amount of staking in the network, participants take the risk that their KAR tokens will be worth more than what would’ve been rewarded through staking.

  • To give an example: a current KSM staking rate via Kraken is 12%, meaning the maximum price ratio of KSM to KAR to breakeven at the end of the term is 20 (KAR tokens) divided by 12% = 166. The current ratio is 35.

One of the knock-on effects of these auctions is that KSM’s effective circulating supply is reduced more concretely than via flexible staking and may lead to short-term deflation. There are also rumours that the next Kusama auctions are coming soon, which could quickly lock-out more supply for longer.

To see which projects might be coming up in the next auction slots, start by exploring the Polkadot JS App (click top-left for a list). Remember, project fundamentals are critical, as is the ratio of native tokens allocated per KSM token, and if the market crashes, those locked KSM tokens cannot be sold.

3. Watford

The new partnership Watford FC has entered into with Stake.com has the players wearing the Dogecoin logo. Stake.com is a crypto betting platform and casino that allows players to remain anonymous while using the platform. The deal is reportedly worth around $970,000 (£700,000) and Stake.com is celebrating its new partnership by giving away 10 million DOGE ($3.5 million). Now whilst we don’t endorse gambling here at Market Meditations, it’s exciting to see crypto more and more integrated with the world of sport.

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??‍♂️✍️ Stories in this newsletter were written by Isambard FA, Nick T., Max P., Kimia K., Ellen B. and Koroush AK. Graphics were produced by Gerasimos P.

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