I will keep this short and simple 🦐 Here is how I approach projects:
Value Creation =>Value Capture => Happy Bloke
*Bloke = Australian for “dude”. I just watched too much Ozzy recently.
Value creation: what the product is, who would use it and why it’s better than alternatives. Basically, figuring out whether adoption is even possible.
From a high-level view, Matic is permissionless Plasma chains. If you look into the Plasma Cash implementation, that one is very much centralized. In this setup, the token incentivizes validators via economic rewards. Matic can have this 2.5 Layer approach set up on any chain, whether it’s Cosmos, EOS or whatever else.
Ok, so this is what they do. The why question has an even simpler answer: scalability play. Scalability: fast, cheap, nice UI, blabla…
However, I really hate pure scalability-focused projects.
The reason for that is the loss of network effects. If you tell a developer to go join Tron community just because Tron is faster, he will never do it, because everyone loves the Ethereum community. It’s vibrant, supportive, the ecosystem has a lot of plug-and-play tools. Therefore, the value proposition “we are technically better” (while those are usually not) will not cut it. Imho, if your use case is the same (dApps, DeFi) as Ethereum, then you are gonna have a hard time. Dozens tried, dozens failed. As they should have.
Now imagine you don’t have to leave your community in order to get scalability. You stay within the ETH community, same group, but simply utilize plasma for better speed. That’s it, very trivial. But who needs it?
So far the biggest application of Ethereum, next to NFTs like CryptoKitties, is DeFi = Decentralized Finance.
Don’t shout NFT left and right, NFT is just a way to represent a unique asset, the psychology of collecting is coming outside of that. By itself, an NFT is just a number.
When you own Ethereum or some ERC-20 token and don’t actively trade it — and then loan it and get your APR (annual percentage rate). It’s like owning houses and renting them on AirBnb, the same principle essentially. This way you actually own revenue-generating assets, putting the volatility of those assets aside for a moment.
It’s basically constructing financial pyramids yet again (wait, they call it banking?) but now you are early to the party. Derivates, margin, credit, etc. Kyle wrote a nice piece:
How Decentralized is DeFi? A Framework for Classifying Lending Protocols
We gathered input from every major DeFi lending project to create a framework that places them on a decentralization…
So what I see is that Dharma, Compound, and other big DeFi shots can benefit from Matic’s infrastructure without risking or leaving the existing ETH community. Of course, it’s a matter of business development. So far they have done well with the Decentraland migration in the future onto Matic Network.
Value Capture: how a token model retains value created by the product.
Usually projects absolutely disregard this part and do some weird stuff. Matic just uses a simple Proof of Stake model, which so far seems to yield the most value capture. Anyway, they properly explained it, nothing I can add here.
- Technology: Permissionless Plasma chains, agnostic to Ethereum and other chains. Able to improve Layer 1's in a permissionless way.
- USP (unique value proposition): UX-friendly toolkit for scaling dApps without compromising network effects of existing Layer 1's.
- Product-market fit: DeFi applications, payments. Fast Ethereum.
This is basically how I see it. However, it’s not an easy task. They still need to release the mainnet and get proper developer approval on the seamless onboarding process onto plasma chains which should be easy enough for end users as well. Next to that, business development will be a lot of work. Crypto still lacks a user base, most of it is payments. And since Matic is mostly focused on within-crypto rather than the outside-crypto, it’s not as easy.
They managed to restore trust in Indian teams, which was harshly killed by scams of the past. Guys from InstaDapp are cool too! I think they have potential to move into becoming the Indian window for crypto devs. That will add value regardless of how DeFi goes, just another bizdev angle.