Polygon (POL): Q3 2025 Activity and Financial Report

Key takeaways

• In Q3 2025, Polygon shipped several major upgrades that significantly improved throughput and transaction finality.
• Polygon had a relatively soft Q3 2025, with growth trailing other EVM chains.
• Polygon launched Katana, a Polygon CDK-based L2 designed to serve as a liquidity hub for the AggLayer. It has already attracted 600 million dollars in TVL.

Background on Polygon

Launched in 2019, Polygon was among the pioneers tackling Layer 1 scalability for networks like Ethereum. The project saw breakout success in 2021, reaching nearly 10 billion dollars in TVL and quickly establishing itself as a major player in crypto.

The 2022 bear market was tough for Polygon, which was gradually overshadowed by new entrants and never fully regained its former leadership.

That said, 2025 may mark a turning point for Polygon. Since the start of the year, the project has undergone several major changes:

• Sandeep Nailwal took over leadership after Mihailo Bjelic’s departure in June 2025. He quickly executed a strategic pivot, aiming to restore a startup mindset to accelerate innovation and re-energize the ecosystem.
• Gigagas, a roadmap centered on Polygon scalability with a goal of reaching 100,000 transactions per second in 2026 with near instant block-by-block finality. The objective is to make Polygon a reliable infrastructure for institutional use cases and digital stablecoin payments.
• The progressive sunset of zkEVM, which will be officially retired in 2026. This is another difficult but necessary strategic choice in a context where ZK L2s have struggled to find product-market fit.

Today, the project rests on three main pillars:

• Polygon, the historical sidechain, secured by its own validator set and POL staking.
• Polygon CDK (Chain Development Kit), an open-source toolkit for deploying custom L2s. It allows third parties to easily create interoperable blockchains based on a common standard.
• AggLayer, an aggregation protocol that synchronizes chains to deliver a smoother user experience without sacrificing the sovereignty of each L2. It is the keystone of the Polygon ecosystem.

Before discussing upcoming developments across the Polygon ecosystem, let us review a few key data points to evaluate Polygon’s performance since the major changes in early summer.

→ For further reading, see our full overview of Polygon (POL):

On-chain activity on Polygon in Q3 2025

TVL and stablecoins

During Q3 2025, Polygon’s TVL increased by 3 percent to 1.36 billion dollars. The project has grown steadily since the beginning of the year, up 35 percent over the last nine months.

This trajectory should be compared with the broader DeFi TVL trend, which is up 30 percent year to date but 35 percent since the start of the quarter. The implication is that DeFi on Polygon saw a shallower dip at the start of summer, but also a weaker rebound than the rest of the ecosystem.

The main driver is the high share of stablecoins on Polygon, which account for 54 percent of value secured on the sidechain versus an average of 39 percent on other EVM networks.

Since stablecoins are now a core objective for the project, let us analyze their evolution. Through the end of September, stablecoin TVL had grown significantly and even crossed the symbolic 3 billion dollar threshold.

This increase was quickly erased by roughly 500 million dollars of USDT outflows. The cause was the launch of Plasma, a network specialized in stablecoins and particularly Tether’s USDT, which siphoned liquidity from other blockchains at launch.

Today, Polygon secures a little more than 2.5 billion dollars of stablecoins, up 7 percent versus 21 percent growth for the total stablecoin market capitalization. Polygon is therefore losing a bit of ground here, with its stablecoin market share declining from 0.95 to 0.85 percent.

Revenues, expenses, and POL price

Polygon’s revenues increased in Q3 2025, reaching their highest level since 2021. Even so, net revenues remain negative at minus 6.5 million dollars. Fees generated on Polygon are not nearly enough to cover validator operating costs.

In Q3, Polygon generated about 880 thousand dollars in gross revenue on 3.67 million dollars in network fees. In parallel, the network distributed 6.6 million dollars in validator rewards via POL emissions. Net revenue is therefore deeply negative.

There is a direct correlation between Polygon’s cumulative losses and the decline in the POL price. Conversely, the revenue uptick this quarter is directly tied to the drop in POL’s value since early 2025, which reduced the dollar value of validator incentives.

DeFi ecosystem

Despite hundreds of projects on Polygon, DeFi activity is relatively concentrated, with a few key protocols capturing the majority of TVL and volume. These include the DEX Quickswap, Securitize’s institutional tokenization infrastructure, the Aave lending platform, and the prediction market Polymarket.

In Q3 2025, QuickSwap’s TVL rose by roughly 40 percent. Even so, trading volumes increased only slightly this quarter, in line with other EVM networks. This suggests the growth is more a function of market conditions than a structural increase in activity.

Aave is another major DeFi protocol on Polygon, but results were underwhelming, with TVL down 7 percent for the quarter. Where Polygon stands out is Polymarket, which saw an activity rebound in Q3 with a 100 percent increase in TVL. However, Polymarket remains an exception and is still a minority share of Polygon’s total TVL.

Overall, these data show activity on Polygon is growing, but only marginally relative to competitors. There is no strong trend indicating a broad return of user interest, with the exception of Polymarket, even though the platform is likely to expand to other networks.

Note that Polygon still attracts stablecoins. Excluding the late September outflows, Polygon has performed reasonably well at attracting capital and stablecoin trading volumes, notably via Aave and Fluid.

Major events in Q3 2025

Launch and development of Katana

This quarter saw the launch of Katana, a new Layer 2 powered by Polygon CDK and designed to become a liquidity hub for all blockchains connected to the AggLayer.

Katana aims to mutualize liquidity across several key dApps (Sushi, Morpho, Vertex) and make it available to other chains in the Polygon ecosystem.

Katana is built on several pillars:

• Vault Bridges, smart contracts acting as bridges between Ethereum and Katana. Their distinguishing feature is that they place assets in low-risk strategies on Ethereum to optimize yields generated on Katana.
• Chain Owned Liquidity (CoL), a mechanism that allows the network to own a portion of liquidity deposited in key protocols, financed via sequencer fees. This bolsters available liquidity on Katana.
• uAssets, non-EVM assets such as XRP, SOL, or DOGE bridged to Katana through Coinbase Prime custody.
• AUSD, a native stablecoin backed by U.S. Treasuries, providing stable and durable income.

Since early-quarter launch, Katana has already attracted nearly 600 million dollars in liquidity. Much of this growth has been driven by incentives that offer up to 45 percent APY on stablecoins, with a majority of the yield coming from pre-emissions of the KAT token.

The KAT token uses a ve(3,3)-style governance where locked KAT into vKAT votes weekly on emissions distribution across protocols in exchange for a share of generated fees.

This well-known model relies heavily on emissions and often struggles to establish a sufficient user base to retain large, sticky liquidity. The KAT token is expected to be tradable before the end of February 2026. Katana’s TVL will likely continue to rise at least until then.

→ For more detail, see our explainer on the ve(3,3) tokenomics model in DeFi:

Real World Assets

In Q3 2025, Polygon deepened its focus on the growing RWA segment. Two milestones stood out:

The partnership with Cypher Capital, a Dubai-based investment fund, opens the door to institutional exposure to POL in the Middle East. The aim is to channel institutional capital into the Polygon ecosystem, strengthen market liquidity, and facilitate institutional yield strategies around the token.

The launch of the Real Yield Token (RYT) by AlloyX in collaboration with Standard Chartered Bank introduces a tokenized money market fund on Polygon. RYT combines the security and compliance of traditional finance with DeFi’s programmability and transparency. It allows investors to access institutional yields while benefiting from fast, low-cost execution on Polygon.

These initiatives confirm Polygon PoS’s positioning as a reference infrastructure for RWAs, a segment that aligns with stablecoin usage both as a retail payment rail and as a bridge for the arrival of traditional finance.

AggLayer

Central to Polygon’s vision, the AggLayer continues to evolve rapidly into the backbone of interoperability within this ecosystem. Over the previous quarter, two major updates transformed how it works: the integration of pessimistic proofs and opening support for multiple technical stacks.

Previously restricted to blockchains built with Polygon CDK, the AggLayer now extends to chains using other architectures such as OP Stack and Arbitrum Orbit. Thanks to pessimistic proofs, it guarantees secure communication between chains built on heterogeneous infrastructure.

Pessimistic proofs require each chain to prove it is not withdrawing more funds than it has received. This approach allows any fraudulent chain to be immediately isolated without compromising the entire network.

The CDK and AggLayer duo is more than ever the cornerstone of the Polygon ecosystem. With CDK Erigon, an alternative version of the CDK, developers can create custom ZK chains with much higher performance, capable of several thousand transactions per second.

The headline innovation is CDK Enterprise, another CDK variant designed for institutional blockchain deployments. It introduces privacy levels comparable to traditional finance, with opacity for non-involved users but the ability to disclose specific information upon regulatory request. These new blockchains remain compatible with the AggLayer, eliminating the trade-off between performance, privacy, and openness.

Another evolution this quarter is AggKit, a toolkit that connects any blockchain to the AggLayer, allowing rapid network expansion without manual integration. With AggSender and AggOracle, chains can synchronize and read the global network state while preserving their sovereignty. The latest release strengthens security by removing certain centralization points.

Polymarket

Polymarket is not the dApp with the largest TVL on Polygon, but it is certainly the most talked about. In recent months, Polymarket has seen rising interest, with processed volumes doubling since the start of the quarter. The buzz is also driven by expectations of a token and airdrop potentially slated for 2026.

History shows a single popular dApp can be enough to push a network into the spotlight and drive significant volumes. As the leader in prediction markets, Polymarket may continue to play an important role in Polygon’s expansion. This is especially true since Polymarket settles positions in stablecoins, which increases available liquidity on Polygon and aligns with the roadmap.

Major improvements in Q3 2025

Bhilai hard fork and Heimdall v2

In Q3 2025, Polygon reached a technical milestone with two important upgrades: the Bhilai hard fork and the deployment of Heimdall v2. Together they overhaul the network’s consensus layer and put Polygon back in the scalability race.

The Bhilai hard fork in early July enabled throughput above 1,000 TPS and introduced compatibility with EIP-7702 to facilitate account abstraction. It also stabilized gas fees, a first step toward the Gigagas roadmap that targets more than 5,000 TPS by the end of 2025.

Heimdall v2 then rebuilt the network’s consensus layer. By replacing Tendermint with CometBFT and modernizing the Cosmos SDK version, Polygon reduced transaction finality to about 5 seconds, versus 1 to 2 minutes previously. This is a game-changer for on-chain payments and financial apps, which can now deliver a smooth experience without sacrificing network security or decentralization.

Rio hard fork

Deployed in early October 2025, the Rio upgrade marks another major step in Polygon’s transformation into a global payments network. Presented as the largest payments-centric upgrade in its history, Rio enables Polygon to hit its 2025 target of 5,000 TPS with near-instant finality.

The new production model is called Validator-Elected Block Producer (VEBloP). It elects block producers in a way that virtually eliminates the risk of chain reorganizations.

Rio also introduces stateless validation, allowing nodes to verify blocks without storing the full blockchain history. This significantly reduces compute and storage costs, making network participation more accessible for institutions, startups, and new validators.

Economically, the upgrade redefines reward sharing between block producers and validators to ensure fairer distribution of transaction fees, including MEV-related revenue.

With Rio, Polygon becomes a global payments infrastructure capable of competing with traditional systems, while retaining the advantages of a decentralized network: lower costs, enhanced security, and full transparency. This strengthens Polygon’s vision of becoming the reference chain for payments, stablecoins, and tokenization.

By combining Bhilai (1,000 TPS), Heimdall v2 (5 second finality), and Rio (5,000 TPS and instant finality), Polygon is moving quickly along its Gigagas roadmap, which targets 100,000 TPS in 2026. These changes are an important step to make Polygon competitive again in the stablecoin and tokenization race.

Conclusion

Q3 2025 confirms that Polygon is moving in the right direction, even if there is still a long way to go. On the technology front, the network has made impressive progress. The Bhilai, Heimdall v2, and Rio upgrades have already modernized the core infrastructure, while the ecosystem around CDK and the AggLayer continues to expand and consolidate.

However, despite these advances, growth remains below expectations. Polygon is progressing, but without yet standing out from competitors, especially in the key segments of stablecoins and RWAs where it aims to become a major player. The network is still in transition. The foundations are now solid, but economic results and adoption will need to follow over the coming quarters.

This new roadmap, pushed by Sandeep Nailwal, clearly gives the project fresh momentum. Polygon has regained an innovation cadence and a coherent positioning for the years ahead. If this trajectory holds, the coming months could mark Polygon’s real return to the forefront.