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Polygon is a Layer 2 scaling solution built on top of Ethereum. This addresses the scalability problem of the Ethereum network. The project, however, is currently outperforming the network in NFT transactions. According to WuBlockchain, a crypto news reporter, various metrics of Polygon’s NFT market have gone up with BendDAO, Polygon’s NFT lending platform, reaching a lending volume of $36 million. Related Reading: AVAX Jumps 22% As Avalanche Records Another Win For Institutional Adoption This has been the second consecutive month that the L2 performed better than Ethereum in terms of NFT activity. However, Polygon is facing major headwinds in other aspects.  The number of Polygon NFT transactions in January exceeded Ethereum NFT for the second consecutive month, but the average transaction fee was much lower. Various data of the NFT lending ecosystem have hit record highs, with BendDAO’s borrowing volume exceeding $36 million. — Wu Blockchain (@WuBlockchain) February 1, 2023 Major Win For Polygon WuBlockchain’s news report references NFTGators’ recent analysis of NFT activity in both Ethereum and Polygon. They found out Polygon has outperformed Ethereum by a small margin.  According to the report, Ethereum saw 1.1 million NFTs sold this January which is outnumbered by Polygon’s 1.5 million NFTs sold in the same time frame. Image: NFTGators Number of traders, however, favor Ethereum with 319,641 traders against Polygon’s 224,719 traders. But Polygon NFT traders enjoy lower fees on average, paying only $69 on average fees on chain.  NFTfi on Polygon is also booming according to the report. Over 17.9k ETH worth of NFTs was lent during this time period in the platform. BendDAO, an NFT lending platform on Polygon, became the most ubiquitous, sporting $36 million worth of NFTs lent.  Monthly NFT loan volume (ETH). Source: Dune/rchen8 No Sunshine And Rainbows The NFT space for Polygon grew beautifully with the migration of y00ts and DeGods last month. But bad news is in store for the ecosystem in the dApp side of things. According to dAppRadar, Polygon is experiencing lower activity on its dApps in the daily time frame.  Planet IX, an NFT game on the platform, saw a 45% decline in unique active wallets on the dApp. Another popular dApp on Polygon, Galxe, experienced a 15% decrease in the same time frame. This is especially disturbing since this might signal a loss of interest in Polygon’s dAppp space.  MATIC total market cap at $10.3 billion on the daily chart | Chart: TradingView.com Related Reading: AAVE Seeks Proposal To Clear Itself Of Bad Debt – Can It Overcome These Obstacles? Development activity on-chain is somewhat weaker. However, it has experienced a continuous upward movement since the start of the year, which might give users confidence in the long term growth prospect of the ecosystem.  MATIC Showing No Confidence In Recent Developments The governance token of Polygon, MATIC, recently paused its climb with the bulls exhausted after smashing through $1.16. The recent developments are sending mixed signals to investors, making the token consolidate above $1.16 support.  If the dApp situation improves, we might be able to see the token break $1.2753 resistance in the near future. However, this will only happen if the ecosystem shows investors and traders that the girth of Polygon won’t be hindered in the long term.  Featured image from Unify Health Labs