Polygon - one of the Ethereum layer 2 scaling solutions has been growing very fast. In this article, I will share with everyone:
- What is Polygon and a few highlights of the project.
- DeFi overview on Polygon network and some outstanding projects.
Overview of Polygon Network
What is Polygon Network?
Polygon's main idea is "Internet of Blockchain", but unlike other projects of the same idea (Polkadot, Avalanche, cosmos), Polygon focuses on the Ethereum ecosystem, taking Ethereum as the chain that connects everything.
More specifically, instead of providing a scalable solution like other projects, Polygon provides a Framework that makes it easy for Devs to build scalable solutions for Ethereum and allow them to connect to each other within Polygon. Network, the ultimate goal is to create an ecosystem of Ethereum-centric scaling solutions.
Polygon network Stats
MATIC Stats
- Mcap: 10,369,079,223 US$.
- FDV: 16,960,701,706 US$.
- Circulating: 6,113,590,937 MATIC.
- Max Supply: 10,000,000,000 MATIC
MATIC Pos chain Stats
- Mainnet: May 2019.
- TPS: Up to 7,000 TPS (theoretically up to 65,000 TPS)
- Blocktime: 2 - 3s
- Average Transaction Fee: ≈ 0.0001 US$.
- Active Validator: 99
Data collection date: May 15, 2021
Highlights of Polygon
The structure of Polygon is divided into 4 layers:
- Ethereum Layer (Optional Layer, not required): This layer is implemented as a set of Smart Contracts on Ethereum. By using them, Polygon Network can take advantage of the high security of Ethereum.
- Security Layer (Layer optional, not required): This layer provides additional security functionality for the Polygon Network. This functionality allows Polygon Chains using a set of Validators that can periodically check the validity of any Polygon Chain.
- Polygon Networks Layer (Required Layer): Consists of sovereign Blockchain Networks where each network can maintain the following functions: transaction reconciliation, consensus, and block production.
- Execution Layer (Required Layer): Responsible for interpreting and executing the transactions contained in the Polygon Chain. It includes Execution Environment and Execution Logic Sublayers.
Overall, Polygon's architecture is highly composable and customizable.
For example, networks that prioritize speed over security can simply use the top two layers, the Polygon Networks Layer and the Execution Layer. On the contrary, networks that want to increase security, in addition to the two layers above, can use more Ethereum Layer, Security Layer or both.
According to Polygon's presentation, by combining 2 mandatory and other optional layers (Ethereum Layer, Security Layer), Polygon Network supports building two main types of Blockchain Network compatible with Ethereum: standalone network (Stand- alone Networks) and the network leverages security from Ethereum (Secured Chains).
Current Situation & Roadmap
At the moment, Polygon is attracting projects in the NFT and DeFi segments to migrate from Ethereum or build directly on Polygon Network (3 - 10 projects weekly).
At the same time, Polygon is also completing the Framework to support building other extensible solutions (Stand-alone Networks, Secured Chains, Zk Rollups, Optimistic) which are expected to be released at the end of Q3 and Q4 respectively.
Once the foundation is complete, more Chains will begin to be built on the Polygon Network, eventually accomplishing the goal of “Internet of Blockchain” as mentioned at the beginning of the article.
DeFi overview on Polygon
Polygon has passed the period of explosive development, I personally see that Polygon has entered the "accumulation" phase, real developers start building applications on Polygon. The important pieces of DeFi on the polygon also appeared and initially connected with each other.
Dex
The Dex model used mainly on Polygon network is AMM, currently there are quite a few Dexs that have supported Polygon Network, of which the most prominent are 5 projects:
- Quickswap: This is a native AMM on polygon, the project started as a Fork of Uniswap v2 on Polygon. Then began to develop more features, improve tokenomics so that products in the Quickswap ecosystem capture more value for the project's native token, QUICK.
- DFYN: this is a Multi-Chain AMM. The project started in Polygon and will expand to other Blockchains like BSC, HEC, AVALANCHE, POLKADOT, ALGORAND.
- Sushiswap: Sushiswap is moving away from the shadow of an AMM and moving into a DeFi hub with many features and AMM is just one of them. Sushiswap currently supports 11 chains, including Polygon. Currently, the project is one of the AMM with the highest TVL.
- Curve: A dedicated AMM for Stablecoin Assets is also going the Multi-chain route. After supporting Polygon and using appropriate incentives, the project quickly raised a large number of TVLs from users.
- Ox: a protocol that allows building decentralized exchanges (DEXs). 0x itself is not a DEX, but an infrastructure that enables the creation of DEXs. In other words, 0x is a system of smart contracts that connect Liquidity Providers and Market Makers to provide exchange functionality in a wide range of applications. .
At the present time, Quickswap is still the top AMM when this AMM has the highest TVL & Daily Trading Volume on Polygon.
Lending & Borrowing
Not crying and unpredictable like Sector Dex, Lending & borrowing ended with the victory belonging to Aave.
Aave's debut on Polygon was impressive, in just over a month Aave has raised over $4B and maintained a TVL of close to 5B to date, which Aave took quite a while to achieve on Ethereum.
A sound liquidity Farming strategy and Aave's reputation are the main things to help the project achieve this.
A few Lending Protocols that are less popular than Aave include: EasyFi, QiDAO, Unilend,... These projects have the same concept as Aave but do not seem to compete with Aave, so their market share is quite small compared to Aave.
Yield aggregator, Yield Farming & Yield optimizer Platform
With the strong development of Dex and Lending & Borrowing, they have created a huge yield source for products related to yield mining (Yield aggregator, Yield Farming & Yield optimizer Platform).
In addition, due to the extremely low fee (000x$), the cost of smart contract operation will be significantly reduced => there are more new Farming strategies born such as:
- Auto Compounding: Allows the protocol to automatically sell part of the reward and add liquidity to automatically increase the amount of LP, thereby helping users to farm more profit.
- Auto Stake (support Quickswap): allows automatically Harvested QUICK token and staking QUICK to receive Quick profit Shared (dQICK).
Some outstanding Yield optimizer projects on Polygon include: beefy Finance, Adamant Finance, Autofarm Finance,...
Stablecoins
Most of the 3 popular stablecoins used on Polygon are DAI, USDT and USDC. They are exposed to Polygon by Wrapped, the number of these Stablecoins circulating on Polygon has increased continuously recently (over 700M$ in total):
- 191,022,457,725 DAI
- 202,364,757,945 USDT
- 345,613,034,201 USDC
Native Stablecoins on Polygon are currently still making a potential piece of the Polygon ecosystem, for example, accepting MATIC as collateral and minting out native Stablecoins on the Polygon network.
Some typical projects are OIN, Qidao. In it, Qidao is gradually becoming a force on Polygon and starting to expand to Multichain.
Oracle
Does not appear much on press releases, but currently on Polygon also supports many different Oracle platforms:
- Chain link
- Gravity Protocol
- Descartes
- THERE
- Band protocol
- tellor
- Umbrella Network
- Provable
NFT & GameFi
With the support of Polygon Studios, the NFT gaming sector on Polygon develops quite well, typically ZED RUN, Loser Chick, Decentraland have a stable number of monthly users. Of course, most of these projects are in the early stages of development, without many outstanding updates.
Projections
DeFi boom on Ethereum led to Ethereum's congestion and opened up golden opportunities for other L1s such as: BSC, Polygon, Avalanche C - Chain,...
But it's clear that Polygon's boom period is over, Polygon needs quiet time for developers to build a solid base for Polygon.
The good news is that recently we have seen more and more native projects built on Polygon, proving that Polygon is also increasingly attractive in the eyes of developers.
Besides, the zkEVM platform that Polygon is building could be a key product for Polygon's long-term growth, it will take more time to see what they can do with ZkEVM.
summary
Here are some of their brief summaries:
- Polygon is a layer 2 scaling solution for ethereum, taking the idea of "Internet of Blockchain" with Ethereum as the chain that connects everything similar to the Polkadot architecture.
- Polygon's pos chain is fast, cheap, and quite easy to use for those familiar with Ethereum.
- DeFi Ecosystem on Polygon is growing exponentially, especially DeFi and NFT key sectors.
- The yield-related sector could be one of the next thriving sectors on Polygon.
- Polygon is in a quiet period, the long-term success of Polygon will depend heavily on the zkEVM platform they are building.
