I've been closely following Polymarket’s developments lately, and news that this prediction market platform might be leaving Polygon is quite noteworthy.

Here's the situation. Polymarket’s new DeFi engineering VP, Josh Stevens, publicly stated at the end of April that the platform’s trading volume has far exceeded the capacity of its current infrastructure. Latency caused by high-frequency trading, poor order cancellation experience, and system congestion leading to decreased efficiency have directly impacted user retention and trading activity. So, the team has decided to undertake a major technical upgrade, with one of the core components being “chain switching.”

Polymarket needs larger block space, lower Gas costs, and faster block times. In the early days, Polygon was indeed the best choice—low fees, quick settlement, and a mature Ethereum ecosystem. But now, it has become a bottleneck for platform expansion. Interestingly, immediately after, a bunch of public chains like Sui, Solana, Sonic, Algorand, Sei, and others have come forward, emphasizing how fast, cheap, and suitable they are for high-frequency trading applications. For these chains, if they can host a phenomenon-level application like Polymarket, it’s not just about adding a project; it’s about bringing real trading volume, active users, and increased attention to their entire ecosystem.

But this is a big problem for Polygon. According to data from Dune, Polymarket has contributed 56.3% of Polygon’s trading fees. In other words, for every $100 Polygon earns in fees, $56 come from Polymarket. By the end of April 2024, Polymarket’s accumulated fee contribution reached $72.9 million, accounting for 61.3% of Polygon’s total fee revenue (about $119 million). Essentially, Polymarket is the largest single driver of Polygon’s growth. If it leaves, Polygon will not only lose revenue but may also face a decline in ecosystem activity and market confidence.

Interestingly, Polygon’s official response has yet to be made. However, there are reports that Polygon is working with Polymarket to address current issues. As for where Polymarket might move, the market generally believes that building its own Layer 2 is more likely. If they do, Polymarket will have full control over block space, block times, and Gas fees, allowing targeted optimization for prediction markets, achieving low latency and high throughput.

In addition to the chain switch, Polymarket is also undergoing comprehensive upgrades. On the product side, they are optimizing website speed and interaction experience, planning to launch a unified TypeScript SDK; on the business side, they are confirming the launch of perpetual contracts; organizationally, they are hiring key positions and restructuring into smaller, more focused teams; on security, they are working daily with four security teams. Most importantly, they are rebuilding the central limit order book (CLOB) from scratch because the existing matching system can no longer keep up with trading demand growth.

Josh Stevens also admitted that the company’s engineering capacity has not kept pace with business growth, which has indeed disappointed users in the past, but they will continue to push for major improvements in the coming months. They upgraded on April 28, launching the new smart contract CTF Exchange V2, restructuring the order book system, and most importantly, migrating collateral assets from USDC.e to their own issued Polymarket USD (pUSD).

This change is quite critical. USDC.e is Circle’s bridged version, and multiple cross-chain bridge attacks in the past have demonstrated the risks of such assets. pUSD is Polymarket’s own ERC-20 token, backed 1:1 by real USDC. After the migration, Polymarket not only reduces systemic risk but also gains control over minting, redemption, and settlement logic. According to DeFiLlama founder, Polymarket’s user wallets hold about $1.25 billion, and if they retain interest income, they could earn an additional $54 million annually at current rates. Having their own stablecoin also helps reduce regulatory gray areas, paving the way for entering the US market or attracting institutional capital.

Ultimately, what Polymarket needs now are system stability, reliable settlement, and optimized user experience. As prediction markets become more competitive, it also needs to find more stable and diversified revenue streams. This round of upgrades and potential chain migration are all preparations for the platform’s next phase. For the entire Polygon ecosystem, this also signals that reliance on a single application does carry risks.