Introduction

Polygon is a layer 2 scaling solution that runs alongside the main Ethereum blockchain. While Ethereum has more features and a vast range of decentralised applications, Polygon provides its users with faster transactions and lower fees.

In this report, we’ll look at the transaction fees on Polygon and Ethereum and compare them to uncover any correlation between the two blockchains.

Methodology

In this analysis, we’ll utilise the transaction data from 1 July 2022 onwards.

For both blockchains, we’ll be using their native cryptocurrencies when reviewing the transaction fees:

• Polygon: MATIC
• Ethereum: ETH

To begin with, we’ll look at each blockchain separately using the following data:

• Total daily fee: sum of all the transaction fees in a day
• Cumulative fee: accumulation of all the transaction fees since the start of the blockchain

From there, we’ll compare the two blockchains using the following data to check for any possible correlation:

• Average fee: average of all the transaction fees in a day / hour

Results and key findings

I. Polygon

• From 1 – 8 July 2022, the cumulative fee on Polygon has grown from 2.26M to 2.61M MATIC.
• Over these 8 days, the total transaction fee on Polygon is about 0.35M MATIC.
• Looking at the total daily fee, we can see that it has been decreasing, which led to the slower growth in the cumulative fee.

II. Ethereum

• From 1 – 8 July 2022, the cumulative fee on Ethereum has grown from 6.62M to 6.64M ETH.
• Over these 8 days, the total transaction fee on Polygon is about 0.02M ETH.
• Similar to Polygon, we can see that the total daily fee has also been decreasing.

III. Polygon vs Ethereum

• Based on the average hourly fees, we can observe that there is some positive correlation between Polygon and Ethereum. When there is a spike in Ethereum fees, it is followed by a spike in Polygon fees.
• However, looking at the average daily fees, we can see a divergence in the Polygon and Ethereum fees on 5 July 2022, whereby the relationship has become inversed—meaning that as Ethereum average fee increases, the Polygon average fee continues to decrease.
• These findings suggest a weak correlation between Polygon and Ethereum fees. This is supported by the scatter plot, which illustrates that an increase in Ethereum average fee somewhat correlates to an increase in Polygon average fee. Using this data and applying Python scipy.stats.pearsonr, it was calculated that the Pearson correlation coefficient, r = 0.17 (i.e., weak positive correlation).

Analysis

• Comparing the Polygon and Ethereum total daily fees side by side, we can see that both blockchains are exhibiting an overall downward trajectory.
• On 7 July 2022, the Polygon and Ethereum total daily fees showed a decrease from the previous day. In contrast, this relationship is inversed when looking at the average daily fees.
• It can be hypothesised that other factors are affecting the Polygon and Ethereum fees, such as transaction volume. Looking at the total transaction volume, we can observe that the Ethereum transaction volume dropped drastically on 7 July 2022, which could have influenced the Ethereum total daily fee to decrease.
• Hence, given that there are other factors involved, we can expect the Polygon and Ethereum fees to have a weak correlation.

In summary

• This dashboard looks toward understanding (1) the transaction fees on Polygon and Ethereum and (2) how the two blockchains are correlated.
• Metrics used to discern the hypothesis were:
  • Total daily fee
  • Cumulative fee
  • Average fee
  • Transaction volume
• On (1) transaction fees:
  • Overall, total daily fees were decreasing on both Polygon and Ethereum
  • Possible reasons could be attributed to the overall macroeconomy, where cryptocurrency transactions have slumped across the board (source: Financial Times)
• On (2) correlation between Polygon and Ethereum transaction fees:
  • A weak positive correlation (r = 0.17) was observed between the two blockchains
  • This could suggest that while Polygon acts as a layer 2 of Ethereum, both chains still act independently from each other.