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Polygon Seeing Start of New DeFi Migration Wave

Posted by
Ilya Abugov

DeFi Update | Week #13, 2021

The Polygon blockchain may be the next destination for new and established DeFi products. Aave and Zapper are making a move, while the blockchain already has Aavegotchi and QuickSwap under its wings. Polygon does have wider support, as the NFT market has also been migrating. Nonetheless DeFi has had a very positive week as traditional finance is taking a serious look in the DeFi garden.

The DeFi market has enjoyed an upswing, with the total market capitalization, according to CoinGecko, rising above $97B. Coinbase’s direct listing on NASDAQ has been set for April 14, which adds additional excitement. As crypto company’s are bridging out to traditional finance, traditional companies are coming to blockchain. Visa for instance is utilising USDC and settling transactions on Ethereum.


Source: Coingecko

Uniswap and SushiSwap continue to one up each other. After Uniswap’s v3 announcement, SushiSwap launched Kashi. Uniswap had to deal with the volume reporting controversy stemming from the situation around Delta. However, the bigger news may be the appearance of a new contender for the DeFi crown. Integral, a project implementing liquidity mirroring, may force both AMMs like Uniswap and Sushiswap and aggregators like 1inch to rethink their approach.


Source: Twitter/Korpi87

Gas costs remain a major concern for Ethereum base projects. That’s the reason why Binance Smart Chain has been growing so much in the past 3 months. Nonetheless Aave and Zapper look to give Polygon a try.

A closer look at Polygon

Polygon is a recent evolution of Matic Network, a scalability solution network. The project was founded in 2017, and incorporated the PoS and Plasma chain approaches. It took until May 2020 for it to launch on the Ethereum mainnet, but that was just in time for the DeFi Summer.

The rise of DeFi pushed the Ethereum gas issues to the forefront, and with Ethereum 2.0 still in development, highlighted the need for L2 scaling solutions. Games were hit the hardest, and so it is not a surprise that Matic Network was able to attract major projects like Decentral Games, Neon District, MegaCryptoPolis and Aavegotchi.

However, rollup based solutions gained theoretical popularity with projects like Optimism and StarkWare working on alternatives. It appeared that DeFi projects may be favoring these approaches.

Matic Network adapted and became Polygon, and with the Polygon SDK aggregated both its own and rollup based solutions under one roof. According to DappRadar’s Q1 Dapp Industry Report, Polygon maintained its status as the number one destination for Ethereum gaming and collectibles projects looking for scalability.

However, with the news regarding Aave and Zapper it may be that DeFi projects may also start to give Polygon a try. Composability has been a critical feature of DeFi growth. This may even become more important with gaming and NFT projects starting to incorporate DeFi principles and the DeFi stack.

If Polygon can attract more DeFi dapps, it may be able to achieve networking effects that push it ahead of the competition. It will be very interesting to see how the ecosystem will respond once Ethereum 2.0 becomes fully operational. Will the project migrate away to the new L1 or will Polygon be able to satisfy their needs to the point where migration will be unnecessary.

The information provided here is for informational purposes only. This is not investment advice and should not be treated as such. Strategic Round Capital and/or the author of this article holds a position in ETH, AAVE, USDC, Axie Infinity NFTs, SLP.

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