Polygon Labs has reportedly been paying a publicly-traded sports betting firm millions in crypto to run one of its now-defunct network validators.
This is despite convincing the rest of the community that the company was just another validator.
As reported by CoinDesk, DraftKings was announced as a Polygon validator in early 2022 in what the crypto company called “an important milestone.” However, Polygon failed to make public the special arrangement that would see it pay DraftKings millions of MATIC tokens over the next 20 months.
According to CoinDesk’s extensive research, the sports betting firm received a lump sum of millions of MATIC tokens at the very beginning of the partnership in late 2021 followed by millions more through a special staking relationship.
Though it’s not uncommon for high-profile firms to be paid by blockchain companies to work with them, this particular offer wasn’t offered to the vast majority of Polygon’s validators. In other words, DraftKings was far from the “equal community member” Polygon claimed.
DraftKings wasn’t giving value for MATIC
At the beginning of the relationship, Polygon reportedly set aside 10 million MATIC for DraftKings but handed over 60 million in total to the validator.
This allowed DraftKings to take more than 3 million tokens out of the network, making it somewhere in the region of $2 million at today’s prices. Without the 60 million MATIC donated to it by Polygon, DraftKings would likely have made less than 5% of this figure meaning that, far from being an equal community member, it was more or less totally reliant on Polygon.
Not only that, as these tokens were not previously staked, they severely reduced the rewards available to other validators. DraftKings also charged 100% commission — a far cry from the more traditional 5% — 10% charged by other validators.
However, despite these massively unfair advantages and the wildly preferential treatment shown to it, DraftKings still couldn’t keep up its end of the bargain.
Polygon validators are expected to carry out a number of tasks, including checking the chain. Unfortunately, DraftKings failed at this spectacularly, receiving warnings in September and October of this year. On October 19, it was eventually yanked from the network and its 60 million MATIC tokens were moved, fee-free, to a different validator.
According to a DraftKings employee, “We are working with a third-party provider to have our validator node reinstated on the Polygon network adhering to standard procedures that all Polygon validators must follow. This will not impact our customers.”