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“If you have trouble imagining a 20% loss in the stock market, you shouldn’t be in stocks.” — John Bogle |
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In today's issue:Polygon, formerly known as Matic, is a Layer-2 scaling solution built atop the Ethereum blockchain. Its main goal is to address the scalability issues faced by Ethereum and provide faster transactions at lower costs.
In today's Ultimate Guide to the Top 10 Protocols on Polygon (MATIC),we look at the current landscape of the Polygon ecosystem. We'll unpack ten of the top projects building atop Polygon to help determine which have value for investors, and how the entire ecosystem can benefit the Polygon network itself.
To dive even deeper into the important metrics, we recommend you read our Polygon Investors Scorecard, where we rate the blockchain on items like token mechanics, user adoption, and the management/development team. |
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| | Must Read Today's most important story for crypto investors. |
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(The Wall Street Journal) |
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Today's "Must Read" explores EDX Markets, a new crypto exchange backed by Citadel Securities, Fidelity Investments, and Charles Schwab. The exchange has started executing trades and aims to attract brokers and investors interested in digital assets who are cautious due to issues at FTX and Binance.
EDX Markets will operate as a "noncustodial" exchange, meaning it doesn't directly handle customers' digital assets. Instead, it runs a marketplace where firms agree on prices and execute trades in a peer-to-peer fashion. The exchange plans to launch a clearinghouse later this year to facilitate the process of settling trades, but even then, it plans to use third-party banks and a crypto custodian to hold customer assets. |
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EDX Markets will not directly serve individual investors. Instead, it expects that retail brokerages will send investors' orders to its marketplace. This is similar to the way traditional equity markets work, in which investors don’t directly access the New York Stock Exchange (NYSE) or Nasdaq, but instead submit orders through brokerages like Fidelity and Schwab.
The exchange will offer trading in just four cryptos - bitcoin, Ether, Litecoin, and Bitcoin Cash. This is to avoid scrutiny from the SEC, as these are four cryptocurrencies that haven't been identified as securities by the regulator.
Investor takeaways: The potential for increased institutional involvement in the crypto markets will almost certainly help with liquidity and price stability. We also see the non-custodial nature of the exchange as a positive, as this should serve to increase trust and security of funds. Finally, given the vast experience Fidelity and Charles Schwab have in relation to U.S. securities regulation, this move could help pave the way to more clarity from regulators, who are more likely to work with these established traditional financial institutions. |
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Premium Power-Ups Level up your crypto investing game. |
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New Blockchain Risk Scorecard: Binance Coin (BNB) |
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Binance Coin (BNB) was launched by the leading digital asset exchange Binance to enable users to receive trading fee discounts. Today, BNB has established itself as one of the most popular digital assets in the market.
However, recent enforcement actions by the Securities and Exchange Commission against Binance may have introduced risks for those looking to invest in the BNB token.
In our new Binance Coin Blockchain Risk Scorecard, we delve into the regulatory risks of BNB while also exploring financial and team-related risks.
Not yet a Premium member? Sign up now to join and get access to our library of investor, risk, and NFT scorecards. |
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The Ultimate Guide to the Top 10 Protocols on Polygon by Anatol Antonovici |
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Executive summary: Polygon (a Layer-2 scaling solution on Ethereum) aims to provide faster, cheaper transactions. Despite accounting for 2% of total value locked (TVL) in DeFi, user growth suggests potential TVL increase. Its native crypto (MATIC) is used for fees, staking, and governance. Polygon hosts over 37,000 dapps, including popular DeFi apps, and has attracted traditional investors with companies like Nike and Reddit launching projects on it. Despite a recent price dip, MATIC remains a significant player in the crypto market.
Currently, the network accounts for almost 2% of all total value locked (TVL) in DeFi. That’s not much, but as these top protocols improve, the narrative is that Polygon will benefit and grow. We can see the growth in the number of users, which indicates that TVL should also rise over time. |
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After the bitcoin revolution started to gain traction, Ethereum introduced a game-changing blockchain network with smart contract features that enable developers to build decentralized ecosystems. Nevertheless, Ethereum’s fast-growing popularity came at a price. Excessive fees due to network congestion limited the adoption of Ethereum.
In 2017, Polygon arrived as a solution to address Ethereum’s scalability issues. In this article, we'll discuss what Polygon is and briefly mention some of the most popular projects it hosts.
What is Polygon (MATIC)?
Polygon, formerly known as Matic, is a Layer-2 scaling solution built atop the Ethereum blockchain. Its main goal is to address the scalability issues faced by Ethereum and provide faster transactions at lower costs. As the popularity of Ethereum-based decentralized applications (dapps) grows, transaction fees can become economically unviable for small or frequent investments.
Polygon acts as a sidechain that runs parallel to the main Ethereum blockchain. By bridging crypto assets to Polygon, users can interact with a wide range of popular crypto apps that were once exclusive to Ethereum, but with faster transactions and lower fees.
The network’s native crypto is MATIC, which is used for paying fees, staking, and governance.
Polygon is designed to improve the speed, security, efficiency, and usefulness of Ethereum. During the last few years, the platform has also focused on the Web3 trend while being popular across decentralized finance (DeFi) and non-fungible token (NFT) markets.
The blockchain network gained popularity among traditional investors when it was used by companies likeNike, Reddit, Meta, andStarbucks, which launched projects on Polygon in 2022. |
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Last year, there were over 37,000 Polygon dapps, and the network hosts dozens of popular DeFi apps. In this article, we’ll discuss the ten most relevant ones.
Top 10 Protocols on Polygon by Total Value Locked
Here are the ten DeFi protocols on Polygon with the largest TVL figures: |
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Uniswap V3
Type of dApp: DEX BMJ Score: 5.0
Uniswapis the largest DEX by trading volume and the second-largest by TVL after Curve Finance. It represents an AMM with standard pools of crypto pairs. The initial version was launched in 2018. The latest V3 iteration went live in 2021 and gradually deployed on six chains, including Polygon. The latest version introduced concentrated liquidity and multiple fee tiers, enabling liquidity providers to control capital allocation and compensate risk.
Uniswap claims that its V3 platform offers up to 4000x capital efficiency compared to V2, translating into higher returns and lower price slippage.
Today, V3’s TVL figure is $2.71 billion out of a total of $3.9 billion. |
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Aave V3
Type of dApp: Lending BMJ Score: 4.5
Aave is a decentralized lending protocol launched in 2017 and rebranded in 2018. It empowers users to lend and borrow digital assets in a non-custodial manner. The latest iteration, Aave V3, is available on eight different chains, including Polygon. The V3 version brings significant enhancements to yield generation and borrowing services by introducing innovative features:
- The Portal feature ensures seamless liquidity flow across all supported networks, enabling approved bridges to transfer assets between Aave V3 markets. Thanks to this feature, users can switch between Polygon and seven other networks like Ethereum, Avalanche, Optimism, and Arbitrum.
- The Efficiency Mode enables the borrowing power to be optimized for correlated assets (e.g., stablecoins), unlocking possibilities for high-leverage forex trading and efficient yield farming.
- Isolation Mode enables the listing of new assets as isolated, limiting collateral to a single asset and bolstering risk management.
- Siloed Borrowing allows separate borrowing of potentially manipulatable oracles, minimizing risk to the protocol's solvency.
As of June 2023, Aave V3's total value locked (TVL) on Polygon is about $180 million out of a total TVL of $1.56 billion. |
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Curve Finance
Type of dApp: DEX BMJ Score: 4.0
Curve Finance is the largest DEX by TVL, with over $4.3 billion locked in its pools. Unlike Uniswap or QuickSwap, Curve is an AMM trading platform focused on stablecoins like USDC, USDT, DAI, BUSD, and TUSD, though it also supports Ethereum derivatives.
Curve facilitates efficient token swaps at low costs and unnoticeable slippage thanks to a unique pricing formula.
Curve’s native token (CRV) incentivizes liquidity provision and gives holders the right to participate in the governance process. Curve's huge liquidity makes it an unmatched component of other DeFi apps, like lending platform Compound, or yield farming protocols Convex Finance and Yearn Finance. |
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Convex Finance
Type of dApp: Yield BMJ Score: 4.0
Convex Finance(CVX) is a DeFi protocol that offers boosted rewards for Curve Finance liquidity providers and CRV token holders. It simplifies staking and maximizes rewards by pooling assets and acquiring CRV to convert it into veCRV, which can boost CRV rewards for Curve LP token holders.
CVX is the native token used for receiving Convex platform fees and rewards. Convex supports various Curve liquidity pools and provides multiple income streams including base rate interest, a share of trading fees, Convex-boosted CRV rewards, and CVX tokens through liquidity mining.
Also, users can stake CRV tokens on Convex to receive cvxCRV tokens, which entitle them to veCRV rewards, Convex platform earnings, CVX tokens, and airdrops.
CVX is mostly focused on ETH, but it’s also hosted on Polygon and Arbitrum. |
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Balancer V2
Type of dApp: DEX BMJ Score: 3.5
Balancer is a DeFi protocol first launched on Ethereum. It operates as a DEX, allowing users to buy and sell various digital assets, but unlike other DEXs, it functions like an index fund, where users create Balancer pools consisting of multiple tokens from their portfolios. Liquidity providers earn rewards from trading fees and receive the platform's native token (BAL) by depositing assets into these pools.
Balancer pools (which, as a rule, contain eight different tokens) automatically adjust their token allocations to maintain desired balances despite price fluctuations. The protocol offers public, private, and smart pools, catering to different user preferences and risk levels.
Balancer V2, launched in 2021, introduced features like liquidity bootstrapping pools and a single Vault architecture for enhanced security, flexibility, and gas efficiency.
Polygon accounts for over 8% of TVL on Balancer’s four chains. |
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QuickSwap
Type of dApp: DEX BMJ Score: 3.0
QuickSwap is a layer-2 decentralized exchange (DEX) using the automated market maker (AMM) model. It's native to the Polygon network and represents a fork of Uniswap. Launched in 2020, QuickSwap provides a quick and affordable alternative to popular DEXs. Users can swap ERC-20 tokens without order books, earning transaction fees by providing liquidity to the liquidity pools.
QuickSwap leverages Polygon's scalability and near-zero gas fees, bridging the gap between Ethereum and Polygon. The native crypto (QUICK) allows for governance participation and staking. Notable features include Dragon's Lair for staking QUICK tokens and earning dQUICK, and Dragon's Syrup Pools for additional passive income.
As of today, the DEX’s TVL is over $126 million. |
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Beefy
Type of dApp: Yield BMJ Score: 2.5
Beefy Finance is a decentralized, multi-chain yield aggregator that aims to maximize user rewards from liquidity pools, AMM projects, and other yield farming opportunities in the DeFi sector. Its main offering is the Vaults, where users can stake their crypto tokens and earn compound interest. Despite the name, funds are never locked and can be withdrawn at any time.
Beefy operates on the principles of permission-less and trustless DeFi apps, ensuring users retain full control over their assets. The platform's native governance token, $BIFI, enables holders to earn profits and participate in the governance process. The yield farming protocol is committed to providing high annual percentage yields (APYs) and employs innovative investment strategies to maximize returns. Beefy supports 20 chains. Polygon accounts for the second-largest TVL figure after Optimism, with almost $60 million of Polygon assets locked in its Vaults. |
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Gamma
Type of dApp: Yield BMJ Score: 2.5
Gamma is a DeFi protocol that automates concentrated liquidity management on platforms like Uniswap and Quickswap. Gamma Vault allows non-custodial management of liquidity pools using various strategies to maximize profits.
In 2022, Gamma underwent a significant overhaul with the launch of version two, prioritizing security and resilience. The protocol commissioned a thorough third-party audit that found 22 vulnerabilities. With the audit complete, Gamma successfully launched v2 and boasts almost $90 million in TVL per DefiLlama.
The protocol offers automated strategies for individual liquidity providers and profit-driven institutions. |
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Tetu
Type of dApp: Yield BMJ Score: 1.0
Tetu promotes itself as a Web3 asset management protocol on Polygon that utilizes automated yield farming strategies to offer investors secure and high-yield investment solutions. Through its innovative approach, Tetu offers automated yield aggregation and distribution using the xTETU token. The protocol's primary goal is to establish a self-sustaining yield management ecosystem that delivers stable and appealing yields to its users. One of Tetu’s strategies involves integration with Balancer through tetuBAL, a liquidity staking product that allows users to access the benefits of staking veBAL (Balancer's governance token). tetuBAL provides automatic liquidity balancing and offers advantages like governance rights, low transaction fees thanks to Polygon, and optimal dxTETU yields. |
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Tangible
Type of dApp: Tokenization BMJ Score: 1.0
Tangible is a DeFi platform that tokenizes real-world assets, providing users with access to fractionalized and tradable assets through its marketplace. With Real USD (a native yield stablecoin backed by real estate), users can purchase valuable physical goods from leading suppliers. Each purchase results in the minting of a Tangible non-fungible token (TNFT) representing the item, which is securely stored while the TNFT is transferred to the buyer's wallet. TNFTs can be redeemed, transferred, or sold on the Tangible marketplace, offering liquidity and tradability. By bridging the gap between DeFi and off-chain assets, Tangible solves the issues of illiquidity and limited access to real-world assets like real estate, gold, fine wine, or luxury watches. |
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Investor Takeaway
Polygon (MATIC) has emerged as a game-changing, layer-2 scaling solution for Ethereum. With its sidechain architecture and integration of various scaling solutions, Polygon has become a popular choice for developers and users alike.
MATIC has been maintaining within the top ten and top 15 largest cryptos by market cap. As of mid-June 2023, the coin trades at $0.60 on a market cap of $6 billion, which turns out to be the lowest level in almost a year. Those who believe in the promise of Polygon to outperform Ethereum in the long run could see this as an opportunity.
The network hosts a range of popular DeFi protocols, as well as Web3 and NFT projects. These protocols offer diverse opportunities for investors seeking exposure to DeFi. Of course, to see price appreciation in the MATIC token, it's necessary for the network to attract more developers and more users.
To dive even deeper into the important metrics, we recommend you read our Polygon Investors Scorecard, where we rate the blockchain on items like token mechanics, user adoption, and the management/development team. |
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Bitcoin Market Journal is a daily newsletter that makes you a better crypto investor. It's created by John Hargrave, Nick Marinoff, Steve Walters, Anatol Antonovici, Matthew Du, Daniel Joel, and Preetam Kaushik.
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