Question in detail:

ETH-scaling project Polygon completed a hard fork last month in hopes of reducing gas fees, as well as disruptive chain reorganizations known as "reorgs,” according to Coindesk. Let’s dive into the network’s health and performance leading up to and since the hard fork.

Has the software upgrade led to lower gas fees as hoped? Have these changes affected any meaningful user metrics, such as volume, activity, monthly active users, or others?

Back up your assertions with data.

Overview of analysis:

According to the question, Polygon completed its hard fork on January 17, 2023. The aim of this dashboard is to find the impacts of this software update on the Polygon network. To track the impacts of the hard fork in early 2023, this investigation is divided into the following parts:

• Investigation of Polygon network before and after Hard fork
• Sectoral analysis on paid fee after Hard fork
• Compare paid fees on various L2 chains after Hard fork

About Polygon network and hard fork:

Polygon has a different approach from other projects in providing solutions to increase the scalability of Ethereum. Changing the correct strategy and rebranding the MATIC network to Polygon increased the capital locked in this network from 40 million dollars to 10 billion dollars within one year. Perhaps the most important feature of Polygon is the support for most scaling methods. Also, this network provides the interaction of different chains.

The Polygon networks layer is a mandatory layer that forms the ecosystem of blockchain networks built on a Polygon. These networks have an exclusive forum that is responsible for local consensus and block production. Another mandatory layer is the implementation layer of the Ethereum Virtual Machine (EVM) on Polygon, which is used to execute smart contracts.

Hard fork on Polygon:

> Ethereum scaling project Polygon has announced a proposed hard fork to its proof-of-stake (PoS) blockchain. > > If approved, the software upgrade is set to take place on Jan. 17, and will address gas spikes and chain reorganization (reorgs). > > The hard fork discussion was first introduced to the Polygon community in December 2022. > > The first change in Polygon’s new fork involves an adjustment to how it sets gas fees – a kind of tax one pays out to a blockchain in order to transact on it. With the fork, Polygon aims to reduce the spikes in gas prices that tend to occur when there is a lot of activity on the chain. > > The goal is to smooth out spikes and ensure a more seamless experience when interacting with the chain. > > Reference

Methodology:

The data provided by Flipside has been used to handle this analysis. To handle this investigation the following steps have been passed as below:

The time period of this investigation is considered the past 60 days. The exact time of the hard fork is considered as January 17th, 2023. According to this date, the following parts and metrics have been covered.

• Comparison of paid fees on Polygon before and after Hardfork
  • Metrics:
    • Total amount USD of gas spent on the chain.
    • The average cost of gas in USD per $1,000,000 of liquidity transferred.
    • Daily amount spent on gas
    • Minimum, maximum, and Median of gas usage in USD
    • Average gas usage in USD per day
• Sectoral analysis on selected L2 chains:
  • The general assessment of the most popular sectors on Polygon after the hard fork
  • Fee analysis on various sectors after the hard fork
• Compare Polygon with other L2 chains
  • Blockchains→ Polygon, Arbitrum, and Optimism
  • Metrics→ Volume of transactions, count of active and new users, USD value of transactions, Average and total paid fee in USD

Part 1: Investigation of Polygon network before and after Hardfork

Useful links:

• Polygon Network
• Hardfork on Polygon
• Gas fee on Polygon

Author:

Credited by MZG

Discord handle: m.zamani#0361

Twitter handle: @GargariZamani

Conclusion:

According to the results of the previous sections, the following decisions can be made about the impacts of Harfork on Polygon and other L2 chains:

• It’s not acceptable to compare the chains from total amounts point of view but the best way is to make the comparison by average paid fee per transaction/block/wallet/etc. The most expensive blockchain to execute a transaction is the Optimism network and the numbers related to transaction fees in USD are far larger than other L2 chains.
• The Polygon network is dominating the layer 2 chain space on Ethereum, as it offers a wide range of features and benefits that make it attractive to developers. Its low transaction fees and scalability make it an ideal choice for businesses looking to use layer 2 solutions. With its increasing popularity, we can expect to see more projects utilizing layer 2 solutions on Ethereum in the future.
• The recent hard fork has decreased the share of the Polygon network from transactions on L2 chains as well as the attraction of new users on L2 chains.

Part 4: Summary and references

Part 3: Compare paid fee on various L2 chains after Hardfork

Key Findings:

• The average and median paid fees on L2 chains after Hardfork shows that the Optimism network is the most expensive one.
• Hardfork on Polygon caused the volume of transactions on this network to increase over time and the volume of transactions on the Arbitrum network enhanced in that time period.
• The normalized chart of new users on selected L2 chains reveals that the domination of the Polygon network has decreased over time.

Key Findings:

• According to the outcomes of average and median paid fees, the Polygon network is still the cheapest L2 chain despite the Hardfork.
• The Optimism network has the highest amount of average paid fee (in USD) per wallet among L2 chains and the Polygon has the lowest volume.
• The average paid fee for transferring 1 million liquidity on L2 chains shows that Arbitrum has the lowest average paid fee and the outcomes of the Polygon and Optimism are really close together.

Key Findings:

This part aims to determine the paid fees on various sectors of the Polygon network (after Hardfork):

• According to the results, the DEX and DeFi programs are two of the most popular sectors that users spent the highest share of fees on them.
• The highest level average paid fee (in USD) belong to DeFi programs. Also, the median paid fee for the NFT sector is larger than any other sector on Polygon.
• The cumulative analysis of various sectors reveals that after February 17, the DEX sector passed the DeFi programs on total paid fees in USD.
• The average paid fee (in USD) on various sectors demonstrates that the paid fees on DeFi programs were 4 times larger than any other sectors on the daily basis.

Key Findings:

• The average and median paid fees in USD have been increased after Hardfork.
• According to the definition, the aim of Harfork is to smooth out spikes and ensure a more seamless experience when interacting with the chain. But due to the results, the maximum paid fee on Polygon after Hardfork is 2 times larger than the maximum paid fee before Harfork.
• The average paid fee in USD per 1 million liquidity transfer on the Polygon network enhanced after the recent Hardfork.
• The average paid fee per block as a crucial indicator is grown by about 400% after Hardfork.

Part 2: Sectoral analysis on paid fee after Hardfork

Key Findings:

• The scatter plot related to the average paid fee (in USD) demonstrated the considerable increase in paid fees after the recent Hardfork.
• The count of active wallets and new users have been decreased after Hardfork as can be seen from the results.
• The daily total paid fee (in USD) has increased significantly after the software update and reached its highest level on Feb 16.