The crypto benefiting from Terra's $40 billion collapse

To an outsider, "crypto" might seem like a catch-all term that casts the entire space as a monolith of projects working in tandem. The truth is, sometimes it's a chain-eat-chain world out there.

Take, for example, what's been happening after the $40 billion implosion of the once heralded Terra project. After the project crashed, many competing blockchain projects started offering juicy grants to Terra developers in an attempt to woo talent away from the Terra 2.0 reboot and instead tempt them to jump from what they projected to be a sinking ship.

One of those blockchains, Polygon, has seen a notable uptick in traction recently. And in a certain way, it kind of makes total sense.

As ethereum had increasingly grown congested with an explosion of NFT activity last year, fees to send a transaction on the Ethereum blockchain also exploded. People essentially had two options, either pay higher transaction fees, or turn to another solution. One solution, for many, was simply to launch their projects on other chains, which gave rise to competing blockchains like Avalanche and Solana and Terra. But, another option was to use a so-called second layer protocol, like Polygon, which sat on top of the Ethereum network. Basically, to alleviate congestion, transactions could happen on Polygon, and settle on ethereum later.

But as Polygon scaled, it has become a worthy powerhouse of its own, even separate from ethereum. Various big name projects have migrated over, due to Polygon's cheaper transaction fees. NFT horse racing project ZED Run was among the first projects to jump ship, followed by a slew of others.

But things really accelerated right after the wake of Terra's collapse (arguably while the pain was still raw for a lot of Terra developers) Polygon announced a $20 million grant fund for any project migrating over from Terra to Polygon.

This post is no longer available. It may have been removed or the privacy settings of the post may have changed.

The update last week from Polygon Studios CEO Ryan Wyatt made it clear that a lot of Terra developers took them up on that offer. Polygon was able to poach "over 48 projects and counting," according to his tweet.

That has provided a little wind in Polygon's sails, which has seen its price fare much better than ethereum through the broader crypto sell off. Over the last month, Polygon is only off by about 3%, while ether is off by about 30%.

Ether and Polygon relative performance over the last month. (Source: Fundstrat and Tradingview data)

On top of wooing Terra developers, Polygon has been growing organically by attracting its own interest as well. Two weeks ago, Polygon had announced Coinbase integration and privacy ID tooling for decentralized autonomous organizations, or DAOs. Then, Reddit chose Polygon for its collectible avatar marketplace. And this week, Polygon's native token MATIC popped 20% after the company announced it was selected as the only blockchain among six Web3 companies to make it into Disney's accelerator to search for innovation in augmented reality, virtual reality, and NFTs.

Given all that, it's been an incredibly strong month for people betting on Polygon. Being able to show any traction in crypto is key to separating from the pack. And right now, it's all about attracting an ecosystem. Given how well Polygon works with ethereum, it was already an easy sell. Given how cheap transactions are on its chain, it's also an easy sell to any project looking to deploy something that might be too costly elsewhere.

With one fewer alternative out there to turn to after Terra's collapse, it really did become a chain-eat-chain world. So far, Polygon has proven to have consumed a good chunk of whatever was left of its competitor.

Thanks for supporting Crypto Uncomplicated. Your premium subscription helps make this all possible. While we appear to be entering a longer bear market, we are approaching a phase where making project specific bets might pay dividends over the long-run. This month, premium subscribers will get a first look at some of the most promising builders.

If you see other things you want explained, please don't hesitate to hit us up!