Polygon has become a hot topic of discussion in the cryptocurrency world along with the dramatic increase in MATIC prices.
Polygon’s growth has been absolutely explosive in recent weeks, with over $8.9 billion in value locked in and new and old protocols being deployed to it every day. polygon has really lived up to the hype, with lightning fast transactions and low prices. As more of the Ether L1 applications we know and love are deployed on it, users are starting to be rewarded with composability.
Polygon is making a name for itself, and if you’re here in response and wondering what high-yield operations you can do in this emerging DeFi ecosystem, read this article and follow the guidelines below to get started with your first app in 20 minutes. In addition to learning about the various operations that can be done on Polygon only, you can also see how much Polygon can save you in gas fees.
Safety notes before using Polygon
Before using Polygon or any other network, it’s important to understand its architecture and the security assumptions that need to be made. This is, after all, a new technology, so use it at your own risk!
Polygon provides a common framework that allows developers to create custom, application-specific chains as well as provide an interoperable network that combines a variety of different scaling solutions such as Zk-rollups, optimistic-rollups, and side chains.Polygon PoS chains are Polygon’s first product that has gained tremendous traction. The chain is somewhere between a sidechain and a pure Layer 2 scaling solution such as Rollup, fully inheriting the security of the main chain.
Polygon is secured through a POS mechanism, where verifiers pledge MATIC tokens into smart contracts, which are hosted on the ethereum main chain. Over $2.6 billion of MATIC is currently pledged in these contracts.
To get money from Ether to Polygon, you have to go through what is called a “bridge”. In short, bridges work by using a locking, coin-minting mechanism. When you deposit funds into a bridge, they are actually saved (locked) in a contract in Ether and then recreated (minted) on Polygon. To withdraw funds, you have to go back through the bridge. When this is done, the tokens you send through the bridge will be burned on Polygon and the funds in the Ether contract will be unlocked.
On Polygon, you have the option to use two types of bridges: the Plasma bridge and the PoS bridge. the Plasma bridge inherits the security of the main ethereum chain, however, it takes seven days to complete the withdrawal process. the PoS bridge is secured by the same set of verifiers and pledged MATICs to secure the chain itself, and its withdrawal time is approximately three hours.
Tying this all together, the contract holding the pledged MATIC is responsible for the security of the chain and locking the funds in the PoS bridge. This is important to remember because both the pledge and bridge contracts can be changed by using an agent controlled by a multi-signature wallet.
This wallet was initially a 2/3 multi-signature, but has now been upgraded to a 5/8 scheme. The team recently confirmed that four of these signatories are Polygon co-founders, and four more are prominent members from other Polygon DeFi projects.
This is a centralized vehicle, and certainly a risk factor to consider when deciding to use Polygon. If this wallet were to be compromised, the security of the network, and the ability to transfer funds back to Ether, would be seriously threatened.
In addition to the multi-signature, about 31% of the pledged MATIC is entrusted to a node run by Binance. The centralization of this pledge is another factor to keep in mind when deciding whether to move to Polygon.
How to use Polygon
Before using Polygon, you need to take several steps. First, configure the network in your wallet and then, as mentioned above, you must use one of the two bridges to transfer funds from Ethereum L1. Here are some guidelines.
Adding the Matic master network to Metamask
Migrating funds using the Matic PoS bridge
Migrating funds using Zapper
Where to go first when you start Polygon
- Trade and provide liquidity on QuickSwap
Decentralized exchanges (DEXs) are at the heart of any blockchain-based financial system. This is no exception with DEX QuickSwap on Polygon. A fork of Uniswap V2, QuickSwap has exploded in popularity in recent days. The Quick in the protocol’s name does live up to its name: with Polygon’s average block time of 2.1 seconds, transactions on QuickSwap are confirmed in the blink of an eye.
In recent weeks, the protocol has attracted over $650 million in liquidity while processing $150-250 million in transactions per day. As a result, QuickSwap earns hundreds of thousands of dollars per day for its liquidity providers.
For LPs looking to earn revenue beyond transaction fees, there are currently over 100 incentive pools where LPs can earn QUICK rewards, QuickSwaps’ native governance tokens, as well as a 0.25% transaction fee.
In addition, similar to SushiBar on SushiSwap, QUICK holders can pledge their QUICK tokens to receive a 0.04% transaction fee generated by the agreement in the form of dQUICK tokens.
Savings on gas fees
While DEX is one of the cheapest DeFi protocols to use, they are still not suitable for small transactions. At current gas prices, transactions on Uniswap cost around $30-$80, while the cost of providing liquidity to the protocol is typically over $100.
These costs are substantially lower on QuickSwap. The cost of both trading and providing liquidity is $0.0002, which means it is 435,000 times cheaper to trade on Polygon than on the Ether layer and 785,000 times cheaper to initiate an LP position!
That means that users can trade or make LPs as much as they want, regardless of the balance they hold, without worrying about gas fees taking a big chunk of their profits!
- Borrowing and Lending on Aave
Aave was one of the first major DeFi projects to announce a deployment to Polygon. Following the announcement, Aave attracted more than $5.1 billion in liquidity on Polygon. Just as Aave did on Ethereum L1, users can deposit assets into the protocol and use them as collateral for borrowing.
Aave’s Polygon marketplace currently supports deposits of seven assets: USDT, USDC, DAI, wBTC, wETH, MATIC and AAVE, as well as all loans except the latter. While the board is limited compared to the Ether Marketplace and does not currently support staking or collateral swaps, users can still borrow against some of the most liquid assets in DeFi for farm proceeds, leveraged long or short assets.
You can also earn MATIC by using the protocol, with 1% of the total MATIC supply being allocated to Aave users at rates typically ranging from 5-15% APR.
Savings on gas fees
The savings in gas from using Aave on Polygon is even more significant than QuickSwap. At current gas prices, the cost of depositing funds to Aave on Ethereum L1 is about $95, while the borrowing gas fee is over $125, which means that the cost of doing both deposit and lending operations is over $200.
On Polygon, these combined costs are 235,000 times lower, as the cost of depositing and borrowing is only $0.001.
- Trading and providing liquidity on Curve
Curve is another major DeFi project that has recently been deployed on Polygon. While not offering the full, maddening pool of funds that we did on Ethereum L1, Curve currently offers a single Polygon pool called “Aave” into which users can deposit the aTokens they receive from Polygon’s version of Aave.
With a single click, users can deposit and pledge aDAI, aUSDC or aUSDT (or directly deposit non-aToken versions of these assets) to earn a 0.02% fee per transaction, as well as a MATIC bonus. This pool has attracted over $464 million in liquidity and facilitated $50 million in daily transaction volume. On top of that, LPs can earn a combined APY that is consistently in the 35-45% range.
This consolidation is the best example of DeFi’s combinatorial nature, and users can make it profitable by employing a strategy that allows them to.
Deposit assets into Aave and earn interest and MATIC rewards
Subsidize the lending of stablecoins with more MATIC rewards
Fatten these stablecoins into the Curve pool to earn transaction fees and more MATIC rewards
Savings on gas fees
The amount of savings on Surprise! gas is huge. At current prices, the transaction fee on Curve is about $70, and the LP deposit and collateral have to cost another $110. On Polygon, these costs are reduced to a minuscule $0.0002. The costs are reduced by a factor of 355,000 and 570,000 respectively!
- Trade, provide liquidity, lend and borrow on SushiSwap
SushiSwap is another popular protocol deployed on Polygon. Within two weeks of launch, the project has already garnered $620 million in liquidity and is processing tens of millions of dollars per day.
Just like on Ether, users can use SushiSwap to trade tokens and provide liquidity. The protocol also incentivizes nine popular trading pairs, and liquidity providers can pledge their SLP tokens to earn SUSHI and MATIC rewards, as well as the regular 0.25% transaction fee. While yields have declined in recent days, pledgers can currently earn 30-110% APR, depending on the trading pair.
In addition to trading, users have access to one of the newest items on the Sushi menu. Kashi is the first application built on top of the BentoBox vault and allows anyone to create their own lending pairs.
To create a pair, all you have to do is.
Select an asset to lend and borrow
Pick an asset to use as collateral
Click “Create” to launch it!
While more services are available on Ether, Kashi on Polygon currently supports pair creation using any combination of ETH, DAI, AAVE, MATIC, USDC, USDT, and wBTC.
Savings on gas fees
Words are running out about the savings on gas fees. But let’s say it again. At current gas prices, it costs about $57 to make a trade, $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 translates into savings of 285,000x, 237,500x, and 245,000x!
- Enter the Sweepstakes on PoolTogether
Didn’t win the recent Bankless badge sweepstakes?
No need to get frustrated, now you can play again on Polygon with PoolTogether! This Bankless sweepstakes deal currently offers a USDT pool that pays out prizes daily. The pool currently holds over $8.2 million in deposits, with daily jackpots typically ranging from $1,000-$2,000. Like Curve, this deal channels the power of the DeFi portfolio by taking the proceeds of the prize pool from Aave’s Polygon marketplace.
In addition to the opportunity to take home the jackpot, lottery participants earn a rate of return as depositors in the jackpot pool are rewarded with MATIC rates in the 20-25% APR range.
Savings on gas fees
The cost to enter the PoolTogether lottery on Ethereum L1 is $183 compared to $0.0006 on Polygon, a reduction of 305,000x!
- Collect NFTs on OpenSea
The top NFT marketplace now has a beta deployment on Polygon as well! While it doesn’t offer as wide a range of tokens as L1, collectors can still purchase a variety of different NFTs. interestingly, game tokens seem to be the most popular collectibles on the marketplace. NFTs associated with ZED (a digital horse racing and ownership game) and Neon District (a cyberpunk-themed RPG) account for over 60% of the total number of listed collectibles.
Savings on gas fees
The cost of collecting NFTs on Polygon is literally zero. This is because OpenSea L2 fully subsidizes the cost of gas to purchase NFT. What would have cost $72 on Ether L1 is now free. That’s the power of Polygon.
The expansion of Ether is already a work in progress and it lives up to expectations. On Polygon, you can transfer money between applications at the speed of light and at almost zero cost. While it doesn’t inherit all the security of Ether, it’s a step towards realizing the vision of the Internet of Money we were promised.
You can do a lot of things on Polygon, and there are more apps being deployed every day now. As mentioned, there are some security trade-offs, but early tasters have been subsidized by the high benefits and cost of use, not to mention the savings in gas fees!
The prohibitively expensive gas nightmare is finally coming to an end. The ethereum economy is now available to anyone again. Come be a Polygod yourself and experience the future of finance!
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/what-are-the-best-protocols-to-go-for-on-polygon20-minutes-to-get-started/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.