Hermez Network

What is Hermez Network?

Hermez Network is an Ethereum Layer 2 zk-rollup originally designed to scale high-frequency payments and ERC-20 token transfers by moving transaction computation off-chain while publishing data and validity proofs back to Ethereum.

Its original technical premise, described in the Hermez white paper, was narrower than general-purpose smart-contract rollups: compress transfers of assets such as ETH, DAI, USDT, WBTC and HEZ into batches, generate a zk-SNARK proving batch validity, and settle the resulting state transition on Ethereum.

The moat was therefore not application breadth, but cryptographic settlement with Ethereum data availability and a coordinator auction mechanism called Proof-of-Donation, which attempted to align batch production with public-goods funding rather than simply giving sequencers a rent stream. (crebaco.com)

In market structure terms, Hermez should now be treated as a legacy or absorbed Layer 2 asset rather than an independent growth-stage network.

The project was merged into Polygon in August 2021, with Polygon stating that Hermez technology, live products, team and HEZ token would be integrated into Polygon Hermez and that MATIC would replace HEZ as the operating token of the Polygon ecosystem.

As of late July 2026, public market data still showed HEZ trading on a small number of Ethereum DEX markets, with CoinGecko ranking it around the mid-hundreds by market capitalization and reporting roughly 11 million tradable HEZ, but those residual token markets are not equivalent to evidence of a live, strategically supported Hermez protocol. The more economically relevant successor, Polygon zkEVM, has itself been deprecated, which materially weakens the case for treating HEZ as a current infrastructure token rather than a legacy claim on an abandoned design path. (polygon.technology)

Who Founded Hermez Network and When?

Hermez was developed by the iden3 zero-knowledge and decentralized-identity engineering circle during the 2020 Ethereum congestion cycle, when rising mainnet gas costs created strong demand for rollups focused on transfers rather than full smart-contract execution.

Its mainnet went live on March 24, 2021, initially supporting USDT, ETH, WBTC, DAI and HEZ transfers, with Jordi Baylina identified publicly as the technical lead. The white paper identifies a broader original contributor set including Jordi Baylina, David Schwartz, Eduardo Antuña, Arnau Bennassar, Alberto Elias, Griff Green and others, while framing Hermez as an open-source, community-oriented protocol rather than a conventional issuer-controlled network. theblock.co

The project’s narrative changed quickly. Hermez 1.0 began as a payments and token-transfer rollup, but after the Polygon merger it became Polygon Hermez and then part of Polygon’s broader zkEVM strategy, which sought Ethereum Virtual Machine compatibility rather than merely lower-cost transfers.

That pivot had strategic logic because developer mindshare in Layer 2 shifted toward general-purpose EVM-compatible rollups, but it also diluted Hermez’s original narrow product-market thesis.

Polygon later acknowledged that Polygon zkEVM Mainnet Beta had fallen short on differentiation, developer experience and technical execution, and by July 3, 2026 the zkEVM sequencer had been sunset, leaving the Hermez lineage more important as an early ZK engineering contribution than as a continuing commercial network. (polygon.technology)

How Does the Hermez Network Work?

Hermez is not a Layer 1 blockchain with independent proof-of-work or proof-of-stake consensus. It is a Layer 2 validity rollup whose security model depends on Ethereum for settlement, data publication and final verification. In the original design, users deposited assets into Ethereum smart contracts, transactions were processed off-chain by coordinators, and each batch was accompanied by a zk-SNARK proving the correctness of the state transition. Because the proof and the data required to reconstruct state were published on Ethereum, Hermez was intended to avoid the data-availability weakness associated with designs that keep transaction data off-chain. The white paper explicitly states that Hermez uses Ethereum for data storage rather than computation and that funds are held by a main-chain smart contract. (crebaco.com)

Its distinctive mechanism was the coordinator auction. Coordinators acted as batch producers, bidding HEZ for time slots that gave them the right to forge rollup batches, with the winning coordinator earning transaction fees while portions of bids were routed toward donation, burn and usage incentives. This model was called Proof-of-Donation, not because it was a base-layer consensus algorithm, but because the right to batch transactions was allocated by an on-chain auction whose economics were partly redirected to Ethereum ecosystem public goods. The security node set was therefore constrained by coordinator economics, prover implementation quality, smart-contract correctness and Ethereum finality; it was not secured by HEZ staking in the same way a proof-of-stake Layer 1 is secured by validator collateral. (crebaco.com)

What Are the Tokenomics of HEZ?

HEZ was launched as an ERC-20 utility token with an original 100 million total supply and 8.25 million initial circulating supply according to the Hermez white paper, which allocated 65% to token economy and strategic partnerships, 20% to founders and 15% to the development team.

The intended supply design had a deflationary component because a fraction of HEZ paid in coordinator auctions was to be burned whenever batches were created, while other portions could be donated or used to incentivize network activity. That said, the merger with Polygon fundamentally altered the tokenomics: Polygon announced a 3.5 MATIC-to-1 HEZ swap ratio and stated that MATIC would become the relevant token for Polygon Hermez, while HEZ would cease to exist after a future date. In practice, late-2026 HEZ liquidity is a residual market, not an actively evolving emissions system. (crebaco.com)

The original value-accrual thesis was simple but fragile: coordinators needed HEZ to bid for batch-production rights, higher network usage could increase demand for coordination slots, and burned bids could reduce circulating supply over time. Users did not stake HEZ for validator rewards in the conventional Layer 1 sense; coordinators used it in auctions, while users mainly paid fees to transact through the rollup. After the Polygon merger, that link was severed for new infrastructure development because Polygon intended MATIC, and later the broader Polygon token architecture, to carry ecosystem utility. No material recent HEZ staking yield, emissions change or active burn-mechanism update appears to define the token’s current economics; the live question is not yield sustainability but whether residual HEZ markets have any economically enforceable connection to supported infrastructure.

Who Is Using Hermez Network?

The distinction between trading activity and network usage is critical. As of late July 2026, CoinGecko data showed HEZ trading primarily through Uniswap V2 pairs with low 24-hour volume, which is evidence of residual speculative liquidity but not proof of meaningful protocol demand. For the successor Polygon zkEVM environment, Dune’s public chain page showed weak activity metrics around the time of the shutdown process, including sub-thousand weekly active addresses and low six-figure TVL, while Polygon’s own zkEVM page stated that the sequencer had been sunset on July 3, 2026. Those figures are directionally consistent with a network in wind-down rather than an application ecosystem attracting DeFi, gaming or real-world-asset usage. (coingecko.com)

The most credible adoption claim in Hermez’s history was its early support for stablecoin payments, especially USDT, and the original launch narrative around low-cost transfers for assets such as USDT, DAI, ETH and WBTC. However, institutional adoption should not be overstated. Polygon’s acquisition of Hermez for a deal described at the time as roughly $250 million was an institutional validation of the team and technology, not durable evidence that banks, payment processors or enterprises adopted HEZ as a settlement asset. The later sunset of Polygon zkEVM indicates that the market did not reward the Hermez-derived path with enough sustained usage to justify continued support inside Polygon’s resource allocation framework. theblock.co

What Are the Risks and Challenges for Hermez Network?

Hermez carries several layers of regulatory and structural risk. The white paper asserted that HEZ was a utility token, not a security, and stated that it was not intended to be offered or used directly or indirectly by U.S. citizens or residents, but issuer statements do not determine regulatory classification. As of the searched public record in July 2026, there was no obvious Hermez-specific SEC enforcement action or Hermez ETF product, but the token’s U.S. posture remains cautious because residual trading continues in a market where regulators assess facts and circumstances rather than labels. The more immediate centralization issue is operational: original Hermez repositories have been archived or redirected, Polygon zkEVM has been sunset, and users with assets in zkEVM smart contracts face recovery limitations that differ from ordinary EOA-held funds. (crebaco.com)

Competition is the larger economic threat. Hermez initially competed against Loopring, zkSync, StarkWare/Starknet and other application-specific or validity-rollup systems, then later against optimistic rollups such as Arbitrum and Optimism and EVM-compatible ZK rollups such as zkSync Era, Scroll, Linea, Taiko and Polygon’s own evolving CDK/AggLayer strategy. The market has generally favored rollups with stronger developer distribution, native application ecosystems, deeper bridge liquidity and clearer sequencer-roadmap economics. Polygon’s own explanation for sunsetting zkEVM cited technical challenges, EIP-4844 support delays, ZK counter constraints that made some DeFi transactions impractical, a custom client that complicated debugging, and insufficient differentiation. Those are not peripheral issues; they go directly to whether an L2 can attract developers and retain liquidity after token incentives fade. (forum.polygon.technology)

What Is the Future Outlook for Hermez Network?

The future outlook for Hermez as an independent network is poor, because the protocol’s original token-economic role was superseded by the Polygon merger and its main technical successor, Polygon zkEVM Mainnet Beta, has been sunset.

The verified near-term roadmap is not expansion but claims and recovery: Polygon’s zkEVM page states that the sequencer stopped producing blocks on July 3, 2026, that the claims interface for EOA-held assets was expected to be available no earlier than July 13, 2026, and that Polygon would maintain that interface through December 31, 2027.

For infrastructure investors, this means the Hermez lineage should be evaluated as historical ZK-rollup intellectual capital rather than a live protocol with a credible path to renewed HEZ utility. (polygon.technology)

A more constructive interpretation is that Hermez helped advance the industry’s transition from payment-specific zk-rollups to general-purpose validity proving, and parts of the talent and code base influenced later Polygon ZK work. But the investment case for HEZ itself is structurally impaired: no active HEZ staking economy is visible, the original coordinator-auction utility no longer drives a supported network, liquidity is thin, and the successor chain failed to reach sustainable market relevance before deprecation. Without a verified relaunch, migration right, or legally enforceable utility claim, the asset’s viability depends less on ZK technology as a category and more on residual market mechanics around a legacy ERC-20 token.