Blockchain Data shows Institutional Investors Have Arrived on Polygon.


Retail Investors and traders are not alone among decentralized finance (DeFi) users flocking to Ethereum layer-2 solution protocol Polygon. An increasing number of institutions and DeFi whales are also joining the Polygon throng, according to blockchain data.

In the beginning of June, approximately 65% of daily stablecoin transaction volume on Polygon belonged to transactions with values above $1 million, according to data compiled by blockchain data research firm Nansen. That percentage underscores the shift of decentralized finance (DeFi) “whales” from Ethereum to Polygon.

“Most addresses classified as institutions and funds that we’ve found aren’t yet on Polygon, but the number is growing day by day,” Ling Young Loon, a research analyst at Nansen. 

Ling said that institutions’ growing interest in Polygon could have come after the liquidity in the protocol started growing much higher compared with its initial capital base. 

Many Ethereum-native DeFi protocols have moved or started migrating to Polygon, including the popular money market protocol Aave. Most recently, Ethereum-based decentralized exchange Kyber Network announced that it will integrate Polygon with the launch of “Rainmaker,” a new market maker protocol by Kyber.

The cheaper yield farming and high frequency trading opportunities are another factor driving institutions to Polygon, said Mira Christanto, an analyst at Messari.

“Even if Ethereum fees are not that prohibitive for [whales] for infrequent trades, they can do high frequency trades on Polygon, which is still prohibitively expensive on Ethereum,” Christanto said.

At press time, there are more than $12 billion worth of funds locked in Aave’s Polygon deployment combined with Aave V2, according to Aave’s website. The DeFi protocol announced its migration to Polygon at the end of March.

“I have been using Polygon almost 100% in the last 3 months,” John Lilic, a ConsenSys alum and crypto investor, said. “We can also see a tremendous growth for Aave on Polygon, for example, so it’s clear that there are big whales migrating.”