Risk of a Polygon ETN: You may lose money up to the total loss of your investment due to the extreme volatility of this asset class and the Main Risk Factors of a Polygon ETN described below and additional risks described in the sales prospectus.
Already in 2017, only 2 years after the launch of Ethereum, 4 visionary computer scientists saw the need to provide a solution allowing to increase the number of transactions on Ethereum. Fast forward to today and their platform Polygon has become the global #1 Ethereum scaling solution, employing 100 staff of which 80% software engineers.
Polygon contains a rare combination of strengths, explaining its phenomenal increase in market cap.
Ethereum scaling solutions (“rollups”) comprise several different technologies, including optimistic rollups, ZK rollups, state channels, payment channels, commit-chains, and sidechains. Of these, ZK rollups hold particular promise, according to Ethereum founder Vitalik Buterin, but have been hampered by long development times and the technical challenges associated with decentralizing such a complex compression system. As ZK rollups have matured, Polygon has made two acquisitions in the space (Hermez & Mir) and now sports the widest network of layer 2 rollups.
Well aware of the fact that in ultra-fast-moving sectors, like digital assets, joining with the right party can be the make-or-break, Polygon has created a treasury of not less than USD 1 billion to finance acquisitions. It recently acquired Mir Protocol and Hermez Network, two leaders in zero-knowledge (ZK) proof-based consensus software development.
On 14 september 2021, one of the big four accounting firms Ernst & Young announced it is using the Polygon protocol and framework to deploy EY blockchain solutions on the public Ethereum blockchain ecosystem. Paul Brody, EY Global Blockchain Leader, noted that Polygon provides “a powerful set of tools to scale transactions for clients and offers a faster roadmap to integration on the public Ethereum mainnet”.
Polygon is leading the way in developing the innovative Zero Knowledge (ZK) consensus mechanism. The ZK consensus is one of the most promising leads to solve the blockchain trilemma of simultaneously optimizing scalability, security and decentralization. Essentially, ZK proofs form the mathematical backbone of a data compression technique allowing for off-chain transactions to be stored on the blockchain without their underlying data taking up space.
At what ever metric you look, adoption of Polygon has been stellar.
Polygon ETN by VanEck is based on the MarketVector™ Polygon VWAP Close Index and closely tracks the polygon price.
Source: VanEck, MarketVector. The performance quoted represents past performance which is not a reliable indicator of future results. Future performance may be lower or higher than current performance. Investment returns will fluctuate so that investors' shares, when redeemed, may be worth more or less than their original cost.
Despite all the hype, digital assets are a highly risky investment. Below are key risk factors that need to be considered before making an investment in a Polygon ETN.
The trading prices of many digital assets have experienced extreme volatility in recent periods and may well continue to do so. Digital assets were only introduced within the past decade and regulatory clarity remains elusive in many jurisdictions. Digital assets' value depends on such regulation remaining favorable, as well with the technological capabilities, the development of protocol networks, competition from other digital asset networks and from forks. Volatility can be strongly amplified by transactions from speculative investors, hedge funds and other large investors. You may experience losses if you need to sell your Shares at a time when the price of the underlying digital asset is lower than it was when you made your prior investment. Even if you are able to hold Shares for the long-term, your Shares may never generate a profit. Thus, an investment in a Polygon ETN may lose money.
If the currency of the Product differs from the currency you invest in, your final return depends on the exchange rate between your investment currency and the currency of the Product. Thus, it is worth considering this factor when making an investment in a Polygon ETN.
Trading venues and systems used by market participants to trade MATIC may be subject to hacking and could result in loss of MATIC. This is another risk factor to take into account before investing in a Polygon ETN.
For more information on risks, please see the “Risk Factors” section of the relevant ETN’s prospectus, available on www.vaneck.com.