CoinDesk has compiled a report on the partnership between Polygon and the US-listed company and sports betting platform, DraftKings. Polygon claimed that DraftKings becoming a validator was a “significant milestone,” but it was merely a marketing ploy that sacrificed the rights of retail stakers to create mainstream adoption.
Marketing Ploy: Public 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, what was not disclosed is that DraftKings received 2.5 million MATIC tokens from Polygon (approximately $3.2 million at the time), and Polygon subsequently entrusted a large number of tokens to DraftKings for staking.
Note: CoinDesk is uncertain if DraftKings paid for this transaction. Representatives from Polygon and DraftKings refused to discuss the transaction details, citing a confidentiality agreement.
DraftKings Receives Tens of Millions of MATIC Tokens, Incompetent Validation Node Gets Kicked Out
For most of 2022, DraftKings staked 65.5 million MATIC tokens, with 60 million tokens (91%) being entrusted by Polygon. The remaining majority consisted of DraftKings’ own MATIC, including the 2.5 million MATIC given by Polygon and the 3 million MATIC earned by DraftKings through staking. After becoming a node, DraftKings continuously reinvested the staking rewards into staking until November 7 of last year when it stopped reinvesting. Its validation node continued to operate for nearly a year until September of this year when it started exhibiting poor validation performance. On October 19, Polygon removed DraftKings and allocated the validation vacancy to the exchange Upbit.
DraftKings
Unlike other nodes, most validators charge a commission of 5% to 10% on the tokens entrusted to them, but DraftKings charges a 100% commission, keeping all the staking rewards for themselves. This suggests that Polygon likely initially gave 2.5 million MATIC tokens to DraftKings for marketing purposes and subsequently entrusted 60 million MATIC tokens from the foundation to DraftKings.
Polygon didn’t seek any return but only aimed to make a US-listed company become a validator on Polygon?
CoinDesk points out that DraftKings’ earnings come at the expense of Polygon stakers. The staking rewards for MATIC issued by Polygon each year are limited and distributed proportionally to the stakers. However, at least 80% of the MATIC tokens are directly entrusted to DraftKings by the Polygon Foundation, meaning these tokens have not been staked before, diluting the staking rewards that other stakers should have received.
DraftKings
Polygon
staking
validation
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