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Polygon: the Internet of Blockchains
A recent update to the Ethereum network brought a new Ethereum Improvement Proposal — EIP-1559. Among other things, 1559 changed the mechanism responsible for including transactions into blocks, and allowed for the balancing of gas prices in the network depending on market conditions. Still, because the scaling problem is so critical for the Ethereum blockchain, other solutions are being developed in addition to this recent upgrade.
In today’s article we will talk about one of those solutions: Polygon, a Layer 2 solution for creating and integrating Ethereum-compatible blockchains.
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Layer 2 Solutions
The number of dApps built on top of Ethereum is rapidly growing. But its popularity has led, at times, to slow transaction processing speed and high network fees–significant obstacles to the mass adoption.
That’s where Layer 2 protocols come into play.
A Layer 2 (L2) protocol is a general term for services built on top of existing blockchains. For example, there are a number of L2 solutions designed to solve the scaling problem on Ethereum. When the network is overloaded the speed of transactions decreases, making it difficult for users to interact with decentralized applications. But L2s can combine with the base layer blockchain, offering higher throughput with near-instantaneous transactions by processing or confirming transactions at above the main blockchain, in the system. For example, the L2 Optimistic Rollups solution allows you to execute transactions on a sidechain and then batch and broadcast them to the underlying network. The essence of the method is that all default transactions are considered valid until proven otherwise.
Polygon’s Internet of Blockchains
Polygon is Ethereum’s most popular L2. More than 350 decentralized applications and over 660,000 addresses have already been created on this network, and it has already facilitated over 340 million transactions .
Polygon runs a ‘side chain’ atop the Ethereum base layer, processing transactions in parallel to the main network. In the future, Polygon’s developers promise to create a bona fide “internet of blockchains” or “network of networks”— the only scaling solution Ethereum’s ecosystem will ever need.
A lot of the hype is backed up by Polygon’s security. The network is ensured by a hundred validators, one of them being the largest cryptocurrency exchange Binance. And nearly 2 billion coins are currently locked in Polygon smart contracts. In the future, the protocol will support both secure networks, such as Rollups, and autonomous networks, such as sidechains. Secure networks will provide a higher level of security, by interacting with the main network, which will be suitable for projects aimed at privacy or requiring a higher level of security. Standalone sidechains will be independent and more flexible than their counterparts, but less secure. Algorithms that sacrifice decentralization for scalability are not ideal, as they increase the attack surface from powerful adversaries.
The Polygon SDK–a blockchain startup solution utilizing different scaling approaches — is currently under development: Plasma, Validium, Optimistic Rollups, zkRollups, and others.
Tools for using the protocol
In order to interact with the Polygon network, you can use Ethereum’s Metamask walletAll you need to do is select “Custom RPC” in the drop-down menu, and then enter your connection details:
Network Name: Polygon (Matic) Mainnet
New RPC URL: https://rpc-mainnet.matic.network
Chain ID: 137
Block Explorer URL: https://explorer.matic.network/
Then there are bridges, which enable interoperability between different networks. To bring assets into the Polygon network, you can use the following bridges:
- Polygon’s official PoS bridge
- Connecxt’s xPollinate bridge to transfer assets from Fantom and the Binance Smart Chain network
- RenBridge direct bridge for transferring assets such as renBTC, renBCH, renLUNA, renFIL, and others.
- Zapper Bridge for one-way transfers into Polygon.
To exchange tokens inside Polygon, you can use the decentralized exchange Quickswap — a fork of Uniswap V2. The exchange is powered by automated market makers (AMMs) and liquidity pools (LPs), and over 100 coins are available for exchange on the platform. Users can also provide liquidity to LPs, or lending protocols, in order to farm yields.
Today, Polygon is integrated with some of the largest blockchain protocols in the decentralized finance niche. For example, one of the first projects to announce the use of Polygon was Aave, which leverages the L2 to allow for quick and easy lending and borrowing.
Decentralized exchange SushiSwap’s integration with Polygon allows users to provide liquidity, make deposits, and exchange tokens with significant savings on fees compared to L1.
The mStable protocol provides access to its pegged asset infrastructure using Polygon, allowing users to exchange DAI, USDT, mUSDT, and USDC stablecoins with zero fees.
The largest NFT marketplace, OpenSea, uses L2 for some of its transactions. In order to identify which NFTs can be purchased using Polygon, a corresponding logo has been added to the relevant offerings.
Plenty more projects use the Polygon network–including Balancer, Kyber Network, Curve, Dfyn, Aavegotchi, and more. Mass adoption is still far off, but growth is strong: according to TheBlock, Polygon’s TVL (the volume of assets locked in smart contracts) has grown more than 20-fold since early spring 2021 to about $6 billion.
With the growing popularity of DeFi and NFTs, the need for layer two solutions has increased. Polygon reduces fees, improves interoperability between ecosystems, and offers developers the ability to create their own networks that are compatible with Polygon and Ethereum. And given the recent news about the creation of a DAO to manage decentralized finance and the ecosystem, it could be argued that this is one of the fastest-growing Ethereum blockchain scaling solutions.