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The expansion of Ethereum has lived up to expectations. On Polygon, you can transfer funds between applications quickly and at almost zero cost.
Original title: ” New DeFi Gameplay丨What are the most worthwhile agreements on Polygon? Get started in 20 minutes! 》
Written by: Ryan Sean Adams, co-founder of Bankless Translation: Screen
With the sharp increase in the price of MATIC, Polygon has become a hot topic of discussion in the currency circle.
Polygon’s growth in recent weeks has been absolutely explosive, with more than $8.9 billion in value locked in, and new and old agreements are deployed on it every day. Polygon has indeed lived up to this hype, the transaction speed is lightning fast, and the price is low. As more applications of Ethereum L1 that we know and love are deployed on it, users are beginning to get the return of composability.
Polygon has a great reputation. If you are here and want to know what high-yield operations can be done in this emerging DeFi ecosystem, this article is right. According to the guidelines below, you can get your first one in 20 minutes. application. In addition to understanding the various operations that can only be done on Polygon, you can also see how much gas can be saved by Polygon.
Safety instructions before using Polygon
Before using Polygon or any other network, it is important to understand its architecture and the security assumptions that need to be made. This is a new technology after all, so please use it at your own risk!
Polygon provides a general framework that allows developers to create custom chains for specific applications, as well as provide an interoperable network that combines various expansion solutions, such as Zk-rollups , Optimistic-rollups and side chains. The Polygon PoS chain is Polygon’s first product and has gained tremendous traction. This chain is between the side chain and a pure two-layer extension solution (such as Rollup), and it completely inherits the security of the main chain.
Polygon guarantees security through the POS mechanism. The verifier puts MATIC tokens into the smart contract, and the smart contract is hosted on the Ethereum main chain. There are currently more than $2.6 billion in MATIC pledged in these contracts.
To get funds from Ethereum to Polygon, you must pass the so-called “bridge”. In short, bridging works by using coin-locking and coin-minting mechanisms. When you deposit funds into the bridge, they are actually saved (locked) in a contract on Ethereum, and then recreated (minted) on Polygon. If you want to withdraw funds, you must go back through the bridge. When you do this, the tokens you send through 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 types of 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 uses the same set of validators and pledged MATIC to ensure the security of the chain itself, and its withdrawal time is about three hours.
Linking all this together, the contract holding the mortgage MATIC is responsible for the security of the chain and the funds locked in the PoS bridge. This is something to remember, because both staking and bridging contracts can be changed by using a proxy controlled by a multi-signature wallet.
This wallet was originally a 2/3 multi-signature, but it has now been upgraded to a 5/8 scheme. Recently, the team confirmed that four of these signers are the co-founders of Polygon, and four are notable members from other Polygon DeFi projects.
This is a centralized carrier, and of course it is also a risk factor that needs to be considered when deciding to use Polygon. If this wallet is compromised, the security of the network and the ability to transfer funds back to Ethereum will be seriously threatened.
In addition to multi-signatures, approximately 31% of the pledged MATIC is entrusted to a node operated by Binance. This centralization of staking is another factor that needs attention when deciding whether to transfer to Polygon.
How to use Polygon
Before using Polygon, you need to take a few steps. First, configure the network in the wallet, and then as mentioned above, you must use one of the two bridges to transfer funds from Ethereum L1. Here are some guidelines:
Where to go first when you get started with Polygon
Trade and provide liquidity on QuickSwap
Decentralized exchanges (DEXs) are the core of any blockchain-based financial system. This DEX QuickSwap on Polygon is no exception. As a fork of Uniswap V2, QuickSwap has been very popular in recent days. The Quick in the name of the protocol is indeed worthy of its name: since Polygon’s average block time is 2.1 seconds, transactions on QuickSwap are confirmed in the blink of an eye.
In recent weeks, the agreement has attracted more than 650 million U.S. dollars in liquidity, while processing daily transactions of 150-250 million U.S. dollars. As a result, QuickSwap earns hundreds of thousands of dollars in fees for its liquidity providers every day.
For LPs that want to earn income other than transaction fees, there are currently more than 100 incentive pools. LPs in these pools can earn QUICK rewards, which are the native governance tokens of QuickSwaps, and 0.25% transaction fees.
In addition, similar to SushiBar on SushiSwap, QUICK holders can pledge their QUICK tokens to obtain 0.04% of the transaction fee generated by the agreement in the form of dQUICK tokens.
Although DEX is one of the cheapest DeFi protocols to use, they are still not suitable for small transactions. According to the current gas price, the transaction cost on Uniswap is about 30-80 US dollars, and the cost of providing liquidity for the agreement is usually more than 100 US dollars.
These costs are drastically reduced on QuickSwap. The cost of trading and providing liquidity is both $0.0002, which means that trading on Polygon is 435,000 times cheaper than on the first layer of Ethereum, and starting an LP position is 785,000 times cheaper!
In other words, no matter how much the user’s balance is, they can trade or do LP as much as they want, without worrying that the gas fee will take a large part of their profits!
Borrow and borrow on Aave
Aave is one of the first major DeFi projects announced to Polygon. After the announcement, Aave attracted more than $5.1 billion in liquidity on Polygon.
Just like Aave on Ethereum L1, users can deposit assets into the protocol and use them as collateral to borrow.
Aave’s Polygon market currently supports deposits of seven assets: USDT, USDC, DAI, wBTC, wETH, MATIC and AAVE, as well as all loans except the latter. Although compared with the Ethereum market, the sector is limited and currently does not support staking or collateral swaps, users can still borrow some of the most liquid assets in DeFi to obtain farm income, leverage long or short assets .
You can also earn MATIC by using this agreement, 1% of the total supply of MATIC will be allocated to Aave users, and the annual interest rate is generally between 5-15%.
The gas saved by using Aave on Polygon is even more significant than QuickSwap. According to the current gas price, the cost of depositing funds to Aave on Ethereum L1 is about $95, and the borrowing gas fee is more than $125, which means that the deposit and loan operations are completed, and the cost is more than $200.
On Polygon, these combined costs were reduced by 235,000 times because the cost of deposits and borrowing was only $0.001.
Trading and providing liquidity on Curve
Curve is another major DeFi project, which was recently deployed on Polygon. Although it does not provide a complete and crazy fund pool like the one we have on Ethereum L1, Curve currently provides a single Polygon fund pool called “Aave”. Users can transfer what they receive from the Polygon version of Aave aTokens are deposited into it.
With just one click, users can deposit and pledge aDAI, aUSDC or aUSDT (or directly deposit the non-aToken version of these assets) to earn 0.02% of each transaction fee, as well as MATIC rewards. This pool of funds has attracted more than US$464 million in liquidity and contributed to a daily trading volume of US$50 million. In addition, the comprehensive APY that LPs can earn has been in the range of 35-45%.
This kind of integration is the best manifestation of DeFi’s composability, and users can use a strategy to make it profitable:
Deposit assets in Aave and get interest and MATIC rewards
Loan stable coins with more MATIC rewards and subsidies
Deposit these stablecoins into the Curve pool to earn transaction fees and more MATIC rewards.
Surprise! Gas savings are huge. At the current price, the transaction fee on Curve is about $70, while LP’s deposit and mortgage will cost another $110. On Polygon, these costs are reduced to a negligible $0.0002. The cost has been reduced by 355,000 times and 570,000 times respectively!
Trade, provide liquidity, and lend on SushiSwap
SushiSwap is another popular protocol deployed on Polygon. Within two weeks of its launch, the project has obtained liquidity of 620 million U.S. dollars, with a daily processing volume of tens of millions.
Just like on Ethereum, users can use SushiSwap to trade tokens and provide liquidity. The agreement also incentivizes nine popular trading pairs. Liquidity providers can pledge their SLP tokens to earn SUSHI and MATIC rewards, as well as the regular 0.25% transaction fee. Although the rate of return has declined in recent days, depending on the transaction pair, the pledger can currently obtain an annual interest rate of 30-110%.
In addition to trading, users can also use one of the latest items on the Sushi menu. Kashi is the first application built on the BentoBox vault, allowing anyone to create their own loan pair.
To create a match, all you have to do is.
Choose an asset to borrow
Pick an asset as collateral
Click “Create” to activate it!
Although there are more services on Ethereum, Kashi on Polygon currently supports any combination of ETH, DAI, AAVE, MATIC, USDC, USDT, and wBTC to create a pair.
Regarding the saving of gas fee, the word is exhausted. But I still have to say it again. According to the current gas price, the cost of doing a transaction is about 57 dollars, the cost of providing liquidity is 95 dollars, and the cost of creating a Kashi pair is 98 dollars. On Polygon, these costs were reduced to $0.0002, $0.00004, and $0.0004, respectively. This is equivalent to saving 285,000 times, 237,500 times, and 245,000 times!
Participate in the sweepstakes on PoolTogether
Didn’t you get the recent Bankless badge lucky draw?
Don’t be frustrated, now you can use PoolTogether to play again on Polygon! This lossless lottery protocol currently provides a USDT pool, and bonuses are paid every day. The prize pool currently has more than 8.2 million US dollars in deposits, and the daily jackpot is usually between 1000-2000 US dollars. Like Curve, the agreement also guides the power of the DeFi portfolio by obtaining the proceeds of the prize pool from Aave’s Polygon market.
In addition to having the opportunity to take home the prize, lottery participants can also earn a rate of return, because depositors in the prize pool will receive MATIC rewards with an annual interest rate of around 20-25%.
The fee for participating in the PoolTogether lottery on Ethereum L1 is US$183, while on Polygon it is only US$0.0006, a 305,000 times reduction!
Collect NFTs on OpenSea
The top NFT market now also has a beta deployment on Polygon! Although it does not provide a wide range of tokens like L1, collectors can still purchase a variety of different NFTs. Interestingly, game tokens seem 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) accounted for more than 60% of the total listed collectibles.
The cost of collecting NFT on Polygon is almost zero. This is because OpenSea L2 fully subsidizes the gas cost of purchasing NFT. Things that cost $72 on Ethereum L1 are now free. This is the power of Polygon.
The expansion of Ethereum is already in progress, and it has lived up to expectations. On Polygon, you can transfer funds between applications at the speed of light and almost zero cost. Although it does not inherit all the security guarantees of Ethereum, it is a step towards realizing our vision of the Internet of Money.
You can do many things on Polygon, and there are more applications deployed every day. As mentioned earlier, although there are some security trade-offs, early adopters have already received high-yield and use cost subsidies, not to mention the gas savings! .
The prohibitive nightmare of expensive gas is finally over. The Ethereum economy can now be used by anyone. Come and become a Polygod and experience the future of finance!