• Polygon acquires Hermez for $250 million, including the first-ever token’merger.’

  • Polygon (formerly Matic Network), an Ethereum scaling project, has paid $250 million for Hermez Network, a ZK-Rollups-based Ethereum scaling solution. In addition, the two projects are merging their native tokens — MATIC and HEZ — in the first such transaction in the crypto space.

    Polygon told The us exclusively on Friday that Hermez’s offerings will be merged into Polygon, and the new project will be called “Polygon Hermez.” As part of the agreement, Hermez’s 26 employees will join Polygon’s team of 80.

    “To the best of our knowledge, this is the first-ever full-fledged merger of blockchain networks, in which one network completely absorbs the other, including its token,” Polygon co-founder Mihailo Bjelic told us.

    Earlier this year, two Ethereum projects, Keep and NuCypher, merged their protocols as well, but they kept their brands separate and their tokens separate.

    Polygon and Hermez reached an initial agreement last week, on August 4, when Hermez announced it was in “discussions for a potential merger with a public network.” At the time, the two projects agreed on a token peg or swap ratio based on their prices at 11:00 CET on August 4.

    The peg, which was announced today, is 3.5 MATIC: 1 HEZ, which means that HEZ token holders will be able to exchange their tokens for a variety of Polygon’s MATIC tokens. This will happen through the swapping contract, which the projects will publish “soon.”

    When asked if token holders had a say in the deal, Bjelic stated that Hermez’s largest token holders, who account for more than 90% of total token holders, were aware of the peg and all agreed with it. The transaction was made possible because HEZ is still a “fairly early stage token,” he explained.

    Polygon has committed a total of 250 million tokens from its treasury for the merger, or roughly $250 million, based on the token prices as of August 4. According to Bjelic, this equates to 2.5 percent of Polygon’s treasury. According to CoinGecko, the total supply of MATIC tokens is 10 billion, and the current price of the token is around $1.40.

    Investing in solutions for scaling

    Polygon has committed an additional $1 billion from its treasury to ZK-based solutions. “We regard ZK cryptography as 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 the coming years,” Bjelic said.

    ZK-Rollups are a type of scaling technology that aids in the consolidation of transactions onto a network, such as Hermez in this case, and the publication of their validity proof on Ethereum. Because transactions are executed outside of the mainnet, the load on the Ethereum blockchain is reduced, and transactions are cheaper.

    Polygon, on the other hand, provides a number of Ethereum solutions. Polygon Hermez will be the company’s fourth solution, following Polygon Commit Chain, Polygon SDK, Polygon Avail, and now Polygon Hermez, according to Bjelic. Polygon Commit Chain is the company’s flagship proof-of-stake blockchain, built on Ethereum. Polygon SDK is a software development kit that allows you to create Ethereum-compatible blockchain networks. Polygon Avail, on the other hand, is a scalable data availability layer for standalone chains and sidechains, while the new Polygon Hermez solution is an Ethereum Layer-2 scaling solution based on ZK-Rollups.

    Hermez Network will “focus on developing the zkEVM technology to provide native smart contract scalability inside a ZK-Rollup” as part of Polygon, according to Antoni Martin, business development lead at Hermez Network. “This merger should help us achieve our common goal of building a more inclusive financial system that is secure, decentralized, and permissionless on top of Ethereum. “We are dedicated to working hard to make this dream a reality,” Martin said.

    According to Bjelic, there are over 350 projects in the Polygon ecosystem, and the Hermez merger will help them have more scalability for their applications.

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