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Polygon acquires ZK-rollups project Hermez for $250M

Layer 2 scaling protocol Polygon Network has acquired (Zero-Knowledge) ZK-Rollup project Hermez Network for $250 million worth of MATIC tokens based on MATIC’s price on August 4.

The Acquisition

On August 13, Polygon announced on its website that Hermez is merging into the Polygon ecosystem.

It will be operating under the new name, ‘Polygon Hermez’.

Polygon Hermez will become a part of Polygon’s products and services suite, including Polygon PoS Chain, Polygon SDK, and Polygon Avail.

Hermez’s whole 26-member team will be merging with Polygon, including team member Jordi Baylina, one of the most prominent contributors to Ethereum.

Holders of Hermez’s native token HEZ will be able to exchange at a rate of 3.5 HEZ:1 to MATIC token, Polygon’s native token.

Reasons for Acquisition

Polygon has cited some important reasons for acquiring Hermez, especially EVM (Ethereum Virtual Machine) compatibility and decentralization.

As the announcement states, EVM compatibility is uncompromisable for the company. The community adoption of their PoS chain also happened because of it.

Most of the ZK projects are in the research phase and have centralized operators. But, Hermez is the only decentralized-rollup solution in the market and is live on the mainnet.

This deal is strategically quite fruitful as Polygon now possesses an existing ZK-Rollup solution. Also, it has helped the startup bypass the long journey to build one from scratch.

“[Mergers and acquisitions] M&As in the traditional tech world are an everyday thing. In blockchains, however, they are a new and very interesting concept. We believe this is in a way a historical moment since this will be (to the best of our knowledge) the first full-blown merger of two blockchain networks,” said Polygon.

What are ZK-Rollups ?

ZK-Rollups are a type of blockchain scaling technology that helps aggregate and push batches of transactions onto a network. Computation happens on an outside network that executes the transactions and generates validity proofs for these transactions. These proofs are ultimately merged in the original blockchain. 

This solution decongests the blockchain, because transactions are executed outside the mainnet, and it makes transactions faster and cheaper.

Polygon had asserted in the past about its ZK-Rollup ambitions. It has sanctioned $1 billion to build ZK-based solutions and plans to continue growing its suite of solutions.

“We consider ZK cryptography the single most important strategic resource for blockchain scaling and infrastructure development, and we have a clear goal of becoming the leading force and contributor in this field in years to come,” said Polygon Cofounder, Mihailo Bjelic.

Nielsen’s law states that the user bandwidth increases by around 50% every year. Blockchain might get to see similar growth with the rapid emergence of new scaling solutions. Moreover, it is creating a new space for different kinds of digital business and financial services.

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