Indian crypto startup Polygon buys Hermez for $250 mn; firms to merge tokens

MUMBAI: In the first-ever merger of crypto tokens, Ethereum scaling project, Polygon, has announced that it will merge with Hermez, a zero-knowledge (ZK) cryptography-based scaling project in a $250 million deal. A zero-knowledge technology enables verifying data such as transactions and personal information or identification without handing over control of the information.

The Indian crypto startup will now be operating under the new name, Polygon Hermez. Moreover, all components of the Hermez project--technology, live solutions, its team of 26, and HEZ token--will be integrated into the Polygon ecosystem.

“The maximum amount that will be committed for this merger from the Polygon treasury is 250 million Matic tokens, or roughly $250 million based on the price at the time of reaching the agreement (4 August). This merger is our first big foray into the ZK scaling field after we publicly announced ZK-based solutions as our strategic focus moving forward,” Polygon said in a blog on Medium, an online publishing platform.

According to Polygon, only a few actual attempts have so far been made on merging two networks. “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.”

Polygon also announced that HEZ token holders will be able to swap their tokens for Polygon’s native token (Matic) via the swapping contract that companies will announce soon.

The swap ratio has been set at 3.5 Matic:1 HEZ. Moreover, the HEZ token will cease to exist after a specific date, which is yet to be announced.

Matic is among the top 20 cryptocurrencies with a market capitalization of over $9.5 billion. As of Friday night, the token was trading around 13% higher at $1.51, which is 42% lower compared to its all-time of $2.62 that it had hit on 18 May.

On the other hand, the HEZ token commanded a market capitalization of around $55 million and was trading 16% higher at $5.

Polygon (formerly Matic Network) was co-founded in 2017 by three Indian software engineers — Jaynti Kanani, Sandeep Nailwal and Anurag Arjun.

Polygon is the first well-structured, easy-to-use platform for Ethereum scaling and infrastructure development.

The company tries to solve pain points associated with blockchains such as high gas fees and slow speeds, without sacrificing on security.

In recent times, the demand for layer 2 scaling solutions has been attracting capital inflows, which is, in turn, has been fueling the rise in Matic tokens, which is the native cryptocurrency of Polygon.

Earlier this year, US-based billionaire investor, Mark Cuban, had made an investment in the Indian startup.