DeFi Deep Dive #4: Polygon
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DeFi is quickly moving beyond just Ethereum. Several protocols like BSC, Polkadot and Cosmos are looking to get DeFi magic served up onto its network. One of the rival chains seeing the most success is Polygon (rebranded from Matic in February).
On our DefiLlama leaderboards, Polygon can claim more than $2B in value locked, putting it ahead of chains like Mirror, Avalanche, and Solana. Only BSC and Ethereum boast higher TVL. Top projects like Aave, Curve, SushiSwap, and ParaSwap have all launched a version on Polygon, along with hundreds of other DeFi sites. A list is maintained http://awesomepolygon.com/
Unlike several other chains, Polygon was architected with EVM compatibility in mind. This has made it very easy for so many top DeFi project to port their services onto Polygon. In fact, Polygon is architected as four layers which can easily interact amongst themselves.
Of the four layers, only the Polygon Networks and Execution layers are mandatory. Polygon Networks are sovereign blockchain networks that serve a specific community. Polygon networks are independent, but can send messages to other Polygon networks using the Polygon Protocol.
The Polygon Networks are collectively governed by the Execution layer, which interprets and executes all transactions passed to it from the Polygon Networks layer. The Execution layer itself consists of two sublayers, an Execution Environment that serves as a plug-and-play virtual machine running eWASM, and a smart contracts layer that handles execution logic in EVM.
The Ethereum and Security layers are optional, but useful for interoperability and validation. The security layer can be used by any Polygon network to verify its chain integrity for a fee. The Ethereum layer allows any Polygon network to lean into Ethereum’s smart contracts, to provide functionality like checkpointing, staking, and messaging.
While it may sound like a lot, when you look over the following thread of services in Polygon’s ecosystem, you’ll notice a lot of familiar tools:
It’s a robust framework, but it’s proven useful for attracting a large number of applications and user activity.
The wallet app makes it very easy to bridge funds from Ethereum to the Polygon universe. Within the Polygon universe, activity on DeFi is currently quite cheap relative to Ethereum. As a result, Polygon has been smashing through records lately.
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