Polygon Marketing Scandal: Desperate Attempts to Attract Listed Companies as Nodes, DraftKings’ Incompetence Leads to Removal from Verification Program
CoinDesk has compiled a report on the partnership between Polygon and the US-listed company and sports betting platform, DraftKings. Polygon initially claimed that DraftKings becoming a validator was a “significant milestone”, but it was merely a marketing stunt that sacrificed the rights of retail stakers and created false hype for mainstream adoption.
Marketing Stunt: Publicly Listed Company DraftKings Becomes a Polygon Validator
On October 18, 2021, DraftKings signed a strategic cooperation agreement with Polygon, becoming one of the first corporate validators. DraftKings would establish a validation node and potentially contribute to Polygon’s governance and network security. However, undisclosed to the public, DraftKings received 2.5 million MATIC tokens (approximately $3.2 million at the time) from Polygon. Furthermore, Polygon entrusted a significant amount of tokens to DraftKings for staking purposes.
Note: CoinDesk is uncertain whether DraftKings paid for these tokens. Representatives from Polygon and DraftKings refused to discuss transaction details, citing confidentiality agreements.
DraftKings Receives Tens of Millions in MATIC Funding, Poor Performance Results in Removal of Validation Node
Throughout most of 2022, DraftKings staked 65.5 million MATIC tokens, of which 60 million tokens (91%) were entrusted by Polygon. The majority of the remaining tokens were owned by DraftKings itself, including the 2.5 million MATIC tokens received from Polygon and the 3 million MATIC tokens earned by DraftKings through staking. After becoming a validator, DraftKings reinvested the staking rewards back into staking until November 7, 2021, when it stopped reinvesting. Its validation node continued operating for nearly a year until September 2022 when its performance deteriorated. On October 19, Polygon removed DraftKings and assigned the vacant validation slot to the exchange Upbit.
DraftKings
Unlike other validators who charge a commission of 5%-10% on the staked tokens, DraftKings charged a 100% commission, keeping all the staking rewards for itself. This suggests that Polygon likely initially gave 2.5 million MATIC tokens to DraftKings for marketing purposes and later entrusted the foundation’s 60 million MATIC tokens to DraftKings. Polygon did not seek any returns but only aimed to have a US-listed company become a validator on its network.
CoinDesk points out that DraftKings’ earnings came at the expense of Polygon stakers. The annual distribution of staking rewards for MATIC issued by Polygon is limited and proportionally distributed to stakers. However, at least 80% of DraftKings’ MATIC tokens were directly entrusted by the Polygon Foundation, meaning these tokens were not previously staked, diluting the staking rewards that other stakers should have received.
DraftKings
Polygon
Staking
Validation
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