The platform by Polygon has become highly successful, and MATIC token owners are omitted. The token economics architecture derives value off retailers and redirects it to validators, insiders, and operators of the platform. Although the network has billions of dollars in transactions and thousands of apps, the revenue of the protocol is accrued by all actors except the token holders who injected capital in growth. Essential to the flow of value, it is clear that sophisticated tokenomics can conceal the extraction of wealth as a monetary policy.
The primary source of revenue is transaction fees, but they are directed to virtually all of the validators. Gas is paid by users in MATIC and validates get such payment to secure the network, which provides them with a constant income but does not assist passive token holders. The new upgrades introduce mechanisms of burn that eliminate a small percentage of these fees. The burns currently form a deflationary narrative that is appealing to marketers but they are too minimal to affect the circulating supply in any meaningful way, particularly when validator rewards continue to inflate the total supply.
The inflation in Polygon inflates the network at the expense of current token owners. Although transaction costs are sufficiently high to offset the cost, the protocol continues to give out high volumes of MATIC as block rewards. This keeps inflation going and transfers the wealth of those who have it to those who have not. Indeed, proponents argue that inflation is required to provide security and in case of lack of it validators would abandon the network. Nevertheless, the validator profitability numbers indicate that the fees would still be sufficient to draw enough miners making the inflation unwarranted.
Major enterprise alliances, like with Starbucks and Nike generate only a small payoff to token holders. Validators, and not holders to a great extent, receive the resulting transaction fees. Since such companies do not require having MATIC other than paying fees, the partnerships do not generate extra demand of the token. Partnership announcements are essential to hype Polygon Labs by publicists, and mechanics that would increase the value of tokens are missing. Speculators will respond with price spikes but no long term value will be accrued by the holders of the token.
The treasury which is operated by Polygon gathers the sales of tokens to the market and diverts the sales into grants, subsidies and strategic investment. Such funds might be recycled back to holders through dividends, buy backs or burns but instead to bail out developers and competitors. Although the advocates argue that such investments will improve the long-term token value, the argument is based on the indirect benefits, which never assure holders a direct value.
Governance is a right that is given to token holders to exercise their right to vote, however, the value is not strong in practice. The participation is low and lots of voting is concentrated in the few holders of large portions and insiders. The majority of the proposals concentrate on technical changes or fund-allocation modifications that can hardly impact the token value. In the case of regular shareholders, the payoff of governance in the real world is minuscule in comparison with the desire to be exposed to platform success.
The multi-chain approach by Polygon diversifies its value capture to multiple networks, which have various economic models. Certain chains will take MATIC as gas, and others will take other types of tokens. Since each chain applies MATIC in a different way, the growth of the platform does not equally affect the token holders. Investors would thus require to evaluate the movement of values throughout the entire ecosystem, which is best handled by insiders than retail traders who engage in marketing.
The token structure is obviously prejudiced against holders in comparison with traditional equity. Common shareholders receive dividends, buy-backs, and proportional voting rights; MATIC holders do not receive any of the benefits despite the fact that Polygon generates substantial revenue. The holders of tokens have no claim to profits and platform assets and their voting power does not have a lot of meaning. The design, therefore, takes the capital away of investors through token sales with little to no value created on the ground.
Staking creates two levels: stakers receive rewards and non-stakers experience dilution. Validators should be compensated; however, their compensation is considerably higher than the market. Polygon can reduce the validator payouts and redistribute to all holders, however it excessively rewards the validators, redistributing wealth between the passive and active participants. The complexity of staking also discourages the majority of holders to engage in staking and therefore not enjoy yields to cover the debt.
Late issue of locked tokens continue to dilute holders. MATIC is offered to early investors, team members and advisors at significantly lower prices and then vested over an extended time. The pressure of these insiders to sell continues over years. Since they purchased the tokens at a little proportion of the existing price, they will be able to make enormous profits and still lower the market prices. This insiders selling has to be faced by retail investors having to purchase at a higher price, the tokenomics deal with the dilution by further inflation rather than restricting supply.
Uncertainty in regulations puts holders of tokens into risk with unproportional pay. In case the SEC considers MATIC a security, token sales holders would lose their liquidity when delisted by an exchange, but they would not have gotten any share of the capital raised by token sales. Those that obtained tokens early when they could be valued and sold by their platform operators and even by the early investors who sold their value early on may be free of regulatory complications, and those that purchased their tokens late on are stuck with illiquid assets. Such an unequal proportion of risks and rewards is an indication of a design that does not favor future investors.
