Author | Ryan sean adams Abstract: Polygon provides a general framework that allows developers to create custom, application-specific chains that leverage the security of Ethereum, providing an interoperable network that ties together a variety of different scaling solutions such as Zk-rollups, optimistic-rollups, and sidechains.
How to use Polygon
Polygon is building the blockchain internet of Ethereum. In short, Polygon provides a general framework that allows developers to create custom, application-specific chains that leverage the security of Ethereum, providing an interoperable network that ties together a variety of different scaling solutions such as Zk-rollups, optimistic-rollups, and sidechains.
This app helps with everything you can do on Polygon’s PoS chain, and there are a lot of new protocols that can be done in this emerging DeFi ecosystem.
Let’s explore it.
Everything you can do on the Polygon PoS chain
You probably don't need me to tell you this, but using Ethereum is expensive. The overwhelming demand for its block space has driven up gas prices, pushing network costs to the limit, and users have turned to other lower-cost (but more centralized) chains, such as the Binance Smart Chain (BSC).
For those of us who want to live a life without banks, or who want to spend our days and nights in DeFi, this is a letdown. Ethereum needs to scale or it risks losing users and capital and being replaced by other public chains that do not share the same commitment to self-sovereignty, trusted neutrality and decentralization.
Fortunately, this long-standing gas crisis may soon be close to being resolved. A ton of different scaling solutions are being launched as we speak, including Layer 2, sidechains with Ethereum, and of course ETH 2.0.
Of these solutions, the first to see meaningful adoption is the Polygon PoS chain. Its growth has been absolutely explosive in recent weeks, with the network supporting over $8.9 billion in value locked, with new and old protocols being deployed every day. Along with the sharp increase in the price of MATIC, Polygon became a hot topic on cryptocurrency Weibo.
After spending some time playing around with Polygon, let me tell you: it certainly lives up to the hype. Transactions are lightning fast and prices are low. As more of the Ethereum L1 applications we know and love are built, users are starting to reap the rewards of composability.
By the end of this article, you'll learn about all the different things you can do on Polygon, and how much gas you'll save.
What is Polygon?
Polygon's vision is to build an Internet of Blockchains based on Ethereum. In essence, Polygon provides a general framework that allows developers to create custom, application-specific chains that leverage Ethereum's security, as well as provide an interoperable network that ties together a variety of different scaling solutions such as Zk-rollups, optimistic-rollups, and sidechains.
This article focuses on the Polygon PoS chain, Polygon’s first product to gain significant traction. This chain is somewhere between a sidechain and a pure second-layer scaling solution such as convolutions, and it fully inherits the security of the main chain.
Architecture and security assumptions
Before using Polygon or any other network, it's important to understand its architecture and some important security assumptions you make as a user. This is a new technology after all, so use it at your own risk!
Polygon ensures security through a proof-of-stake consensus mechanism. Verifiers invest MATIC tokens into smart contracts, which are hosted on the Ethereum main chain. For reference, there are currently over $2.6 billion in MATIC staked in these contracts.
To get funds from Ethereum to Polygon, you have to go through what's called a bridge. In a nutshell, transfer bridges work by using an atomic lock and minting mechanism.
In the case of Polygon, when you deposit funds into the transfer bridge, they are actually saved (locked) in a contract on Ethereum and then recreated on Polygon. If you want to withdraw funds, you have to go back through the bridge. When doing this, the tokens you sent across the bridge will be burned on Polygon and the funds in the Ethereum contract will be unlocked.
In Polygon, you can choose to use two bridges: Plasma bridge and PoS bridge. The Plasma Bridge inherits the security of the Ethereum main chain, however, it takes seven days to complete the withdrawal process. The PoS bridge is secured by the same set of validators and pegged MATIC to secure the chain itself, with withdrawal times of approximately three hours.
Tying it all together, the contract holding the collateralized MATIC is responsible for the security of the chain and the funds locked on the PoS bridge. This is something to remember as both marking and bridging contracts can be changed by using a proxy controlled by a multi-signature wallet.
This wallet started out as a 2/3 multisig but has now been upgraded to a 5/8 scheme. Recently, the team confirmed that four of these signers are Polygon co-founders and four are prominent members from other Polygon DeFi projects.
This is a centralized carrier and is certainly a risk factor to consider when deciding to use Polygon. If this wallet were compromised, the security of the network and the ability to transfer funds back to Ethereum would be seriously compromised.
In addition to multisig, approximately 31% of MATIC’s stakes are delegated to a node run by Binance. This concentration of stake is another factor to be aware of when deciding whether to move to Polygon.
How to use Polygon
Before using Polygon, you must take several steps. First, you need to configure the network in your wallet, then as mentioned above, you must use one of the two bridges to transfer funds from Ethereum L1.
Here are some guides that will detail how to do this.
What you can do on Polygon
1. Exchange and provide liquidity on QuickSwap
Decentralized exchanges (DEXs) are the core of any blockchain-based financial system. This is no exception at Polygon, where the most popular DEX name on the web is QuickSwap. As a fork of Uniswap V2, QuickSwap has exploded in popularity in recent days. The protocol certainly lives up to its name: Transactions on QuickSwap are confirmed in the blink of an eye, thanks to Polygon’s average block time of 2.1 seconds.
In recent weeks, the protocol has attracted over $650 million in liquidity while processing $150-250 million in daily transaction volume. As a result, QuickSwap earns hundreds of thousands of dollars in fees per day for its liquidity providers.
For LPs looking to earn additional revenue streams beyond trading fees, there are currently over 100 incentive pools. LPs in these pools can earn QUICK rewards, QuickSwaps’ native governance token, as well as fees in the form of 0.25% of transaction volume.
Additionally, similar to SushiBar on SushiSwap, QUICK holders can stake their QUICK tokens to receive the 0.04% trading fees generated by the protocol in the form of dQUICK tokens.
Save Gas
While DEXs are one of the cheapest DeFi protocols to use, they are still not suitable for small transactions. At current gas prices, the cost to trade on Uniswap is around $30-$80+, while the cost of providing liquidity to the protocol is typically over $100.
These costs are significantly reduced on QuickSwap. To put this into perspective, the cost of exchanging and providing liquidity are both $0.0002, which means that trading on Polygon is 435,000 times cheaper than on Ethereum Layer 1, and initiating an LP position is 785,000 times cheaper!
This means that users with balances of any size can swap or LP to their heart’s content without having to worry about gas fees taking a chunk out of their profits!
2. Borrow and lend on Aave
Aave is one of the first major DeFi projects to announce deployment to Polygon. Following the announcement, Aave’s Polygon integration attracted over $5.1 billion in liquidity. Just like Aave on Ethereum L1, users can deposit assets to the protocol and use them as collateral for borrowing and lending.
Aave’s Polygon marketplace currently supports deposits in seven assets. USDT, USDC, DAI, wBTC, wETH, MATIC and AAVE, as well as all borrowing and lending except the latter. While the sectors are limited compared to the Ethereum market, and deposits or collateral swaps are not currently supported, users can still lend and borrow against some of the most liquid assets in DeFi and go long or short the asset with leverage.
You can also earn MATIC by using the protocol, 1% of the total supply of MATIC will be distributed to Aave users, and the annual interest rate is generally between 5-15%.
Save Gas
The gas savings of using Aave on Polygon is even more obvious than QuickSwap. At current prices, depositing funds to Aave on Ethereum L1 costs around $95, while borrowing will cost users around $125 more, meaning it costs over $200 to fully utilize the protocol.
On Polygon, these combined costs are 235,000 times lower, as deposits and borrowing cost just $0.001
3. Swaps and liquidity provision on the curve
Curve is another major DeFi project that recently deployed on Polygon. While Curve does not offer a full funding pool as we know it on Ethereum L1, it currently offers a single Polygon funding pool called "Aave" where users can deposit aTokens they received from Aave's Polygon integration. With a single click, users can deposit and stake aDAI, aUSDC, or aUSDT (or directly deposit non-aToken versions of these assets) to earn 0.02% in fees per trade, as well as MATIC rewards. This pool has attracted more than $464 million in liquidity and facilitates $50 million in daily trading volume. In addition to this, the comprehensive APY that LPs can earn has always been in the range of 35-45%. This integration is the best embodiment of DeFi’s combinatorial nature: users can make profits by adopting a strategy.
Gas Savings Gas savings are huge. At current prices, exchange fees on Curve are around $70, while depositing and staking as an LP will cost users another $110. On Polygon, these costs are reduced to a paltry $0.0002. These costs are reduced by 355,000x and 570,000x respectively! 4. Exchange, provide liquidity, lend and borrow on SushiSwap SushiSwap is another popular protocol deployed on Polygon. Within two weeks of launch, the project has secured $620 million in liquidity and is processing tens of millions per day. Just like on Ethereum, users can leverage SushiSwap to trade tokens and provide liquidity. The protocol also incentivizes nine popular trading pairs, and liquidity providers can stake their SLP tokens and earn SUSHI and MATIC rewards, as well as the usual 0.25% trading fee. While yields have compressed in recent days, bettors can currently earn annual interest rates ranging from 30-110%, depending on the trading pair. In addition to swapping, users can also take advantage of one of the newest items on the Sushi menu. Kashi! Kashi is the first application built on top of the BentoBox vault, allowing anyone to create their own lending and borrowing. To create a pairing, all you have to do is. While there is a wider service on Ethereum, Kashi on Polygon currently supports creating pairs using any combination of ETH, DAI, AAVE, MATIC, USDC, USDT and wBTC. Save Gas I have nothing creative to say, however. The savings from using SushiSwap on Polygon are huge Sushi is expensive in real life, and it's also expensive on Ethereum. At current gas prices, it costs about $57 to do an exchange, $95 to provide liquidity, and $98 to create a Kashi pair. On Polygon, these costs are reduced to $0.0002, $0.00004, and $0.0004 respectively. This equates to savings of 285,000x, 237,500x, and 245,000x! 5. Enter the Sweepstakes on PoolTogether
Now you can play again on Polygon with PoolTogether, a lossless lottery protocol that currently offers a USDT pool that pays out prizes daily. The prize pool currently holds over $8.2 million in deposits, with daily jackpots typically ranging between $1,000-$2,000. Like Curve, the protocol also bootstraps the power of DeFi portfolios by harvesting proceeds from the prize pool on Aave’s Polygon marketplace.
In addition to the chance to take home the jackpot, lottery participants can also earn a yield, as savers in the prize pool will be rewarded with MATIC, with annual interest rates hovering around 20-25%.
Save Gas
I'm a broken record at this point…but the reduction in gas bills is astronomical. The cost to participate in the PoolTogether draw is $183 on Ethereum L1 and only $0.0006 on Polygon. That’s a 305,000-fold reduction!
6. Collect NFTs on OpenSea
The top NFT marketplace also has a test deployment now on Polygon! While it doesn’t offer as wide a range of tokens as L1, collectors can still purchase a variety of different NFTs. Interestingly, gaming tokens appear to be the most popular collectibles on the market. NFTs related to ZED (a digital horse racing and ownership game) and Neon District (a cyberpunk-themed RPG game) account for more than 60% of the total listed collectibles.
Save Gas
While the cost of becoming a DeFi chad has dropped to close to zero, the cost of becoming an NFT collector on Polygon is literally zero. This is because OpenSea L2 fully subsidizes the gas cost of purchasing NFTs. What cost $72 on Ethereum L1 is now free. That's the power of Polygon, folks.
in conclusion
Ethereum’s scaling has arrived, and it’s living up to expectations. On Polygon, you can move money between applications at the speed of light and at virtually zero cost. While it doesn’t inherit all of Ethereum’s security guarantees, it’s a step toward realizing the vision of an Internet of Money we’ve signed up for.
There's a lot you can do on Polygon, and more applications are being deployed every day. As mentioned before, while there are some security trade-offs, early pioneers are currently compensated by high yields and/or usage cost subsidies, not to mention gas savings! ".
The nightmare of prohibitively expensive gas is finally over. The Ethereum economy is now available to anyone again.
You can become a Polygod and experience the future of finance.
Ryan sean adams Author translated by Zheng Qirui
Edited by Zheng Qirui
The content is for reference only and is not intended to be investment advice. Do so at your own risk.
