Polygon Secretly Funded DraftKings to Run Validator Node

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  • Polygon funded DraftKings and gave it special treatment to run a validator node on the network
  • Polygon categorically withheld information about the special treatment describing DraftKings as an equal member of its validator pool
  • DraftKings however failed in its duty and was eliminated from the validator pool

Ethereum scaling layer Polygon funded sports-betting firm DraftKings to run a validator node on the network but indicated that the validator was an equal member among other validators on the protocol. The secret funding was unearthed by sifting through blockchain data linked to the protocol’s validator program. Despite getting special treatment, DraftKings failed to hold its part of the deal leading to its disqualification as a validator, raising questions as to why the layer 2 platform would fund the validator.

An Important Milestone

Early last year, the layer 2 platform disclosed that the sports-betting firm was joining its pool of network validators, terming it an “important […] milestone” since DraftKings was a publicly traded company.

Polygon however failed to disclose that it was subsidizing DraftKings’ operation costs. According to an analysis by Coindesk, Polygon initially spent over 2.3 million of its former native token MATIC to fund the validator’s operations.

Apart from the undisclosed funding, the validator was also accorded special treatment that allowed it to earn more rewards through staking.

Despite having an edge over other validators, it failed to honor its part of the deal. For example, instead of taking not more than 10% of profits from delegated tokens, it charged 100% commission meaning that delegators never received profits. 

The Arrangement is Unusual

One such delegator estimated that they lost roughly $800 since they didn’t realize that the validator charged 100% on profits earned, with Polygon seemingly comfortable with such an arrangement.

Tokens staked by DraftKings averaged 65.5 million in 2022 with most of it, 91%, coming from Polygon. Although it’s not unusual for Polygon to delegate its tokens to a validator, the amount given to DraftKings combined with the special treatment is unheard of in the web3 world.

With the special treatment allowing DraftKings’ earnings to surpass those of other validators, it’s unclear how the blockchain community will react to such revelations.