Polygon is an Ethereum sidechain that is quickly taking over the DeFi space. 

My recent introductory blog on Polymatic Networks provided an insight into the growing implimentation of these networks. Here is another article published recently on Finder. Also check out how to transfer and withdraw funds form a Poly Bridge. 

Mark Cuban, the US entrepreneur and billionaire, loves it because it's “destroying everybody else” in crypto. 

You can think of it as Ethereum's faster, cheaper, slightly more attractive sibling. So, what is it?

Polygon: The new economy 

Polygon lets you trade all your Ethereum tokens for a fraction of the gas fees, 100 times cheaper in many cases.

This means you can do things like earn money from lending or yield farming, without having to sacrifice hundreds of dollars of profits just to pay for gas fees. Because of this, a new economy has sprung up on Polygon:

• Existing Ethereum projects like AAVE, SushiSwap and Curve have already moved billions of dollars over to Polygon.

• Completely new ones like Polycat and QuickSwap are building Polygon-native DeFi platforms for lending, trading and earning yield.

It now accounts for 10% of the entire DeFi market (US$8.44 billion), and that number is growing rapidly.

The technology behind Polygon is complex, but here’s how you can use Polygon to get the most out of your Ethereum DeFi trading.

To go deeper, make sure to read our comprehensive guide to Polygon which includes a step-by-step guide for moving assets over from Ethereum to Polygon.

Before we go on, I want to welcome you to The Roundup by Finder – a fresh newsletter designed to help you get the most out of your crypto investments. I'm James Edwards, a DeFi enthusiast, cryptocurrency expert and journalist at Finder. I'll be finding opportunities to help you grow your cryptocurrency knowledge and portfolio (hopefully) each week. 

Now back to Polygon. Take a look at these numbers. They're BIG.

The leading DeFi platforms on Polygon, and the amount of assets (TVL) each protocol has deposited on the network. Source. DeFiLlama.

The table shows the amount of assets each protocol currently has deposited on Polygon – the deposits are known as the Total Value Locked (TVL). As you can see, major "blue chip" platforms such as AAVE, SushiSwap and Curve have already launched Polygon-compatible versions of their products. This is like major banks saying they're going to support a new currency – it's huge.

In the case of AAVE, the largest DeFi platform in the world, Polygon already accounts for 21% of its TVL. That means 21% of all user funds are now on Polygon. Hopefully the enormity of that is beginning to resonate with you.

But there is a catch.

Polygon is a sidechain using Layer-2 technologies to help Ethereum scale. Essentially this means its security and finality is indexed to Ethereum, while transactions are settled on Polygon as a separate blockchain. 

So to use Polygon, you first need to transfer your Ethereum tokens to Polygon for use. You also need to buy some MATIC – the native token of Polygon – to pay for gas fees, just as  ETH is used on Ethereum. Because of this, a secondary Ethereum token economy has erupted on Polygon. And that's what I want to introduce you to now.

Some key Polygon platforms 

Here are  some of the prominent protocols and associated tokens capturing market share on Polygon. Some are quite new, so while they present great opportunities for early adopters (that's us) some also carry much higher risk due to being largely untested.

• MATIC – MATIC is the native token of the Polygon network and is used to pay for gas fees – a few cents per transaction – much the same as ETH is used on Ethereum. As such, every Polygon user must have some MATIC in their wallet to use the network. How to buy MATIC. 
• AAVE – AAVE is a lending/borrowing platform, and by far the most prominent DeFi platform on both Polygon and Ethereum, with over US $2 billion of its US $9.78 billion TVL now migrated over to Polygon. Use AAVE on Polygon for cheaper and quicker access to DeFi lending. Using AAVE this way means you can borrow, lend or farm yield and earn crypto without having to give up a chunk of your profits just to pay for gas fees. How to buy AAVE.
• SushiSwap – SushiSwap was one of the first decentralised exchanges (DEX) to adopt Polygon, and has quickly become one of the leading DEXs on the network with roughly a third of its total TVL now on Polygon. This means it has one of the most liquid markets on Poly and makes it a great place for trading exotic altcoins or farming yield. How to buy SushiSwap. 
• QuickSwap (QUICK) – QuickSwap is essentially a Uniswap clone tailored for Polygon and similarly offers users the chance to earn revenue by being a liquidity provider. Just as Uniswap is on Ethereum, QuickSwap is now central to the Polygon ecosystem. By lending to QuickSwap pools while it's still fresh, you are eligible for increased rewards. 
• Polycat Finance – Polycat Finance is an ambitious-looking project that could be described as a version of Yearn Finance for Polygon. It offers automated yield farming as well as farms and vaults. That means you can deposit assets once, and let the protocol reinvest profits so your earnings are constantly at work compounding over time.
• Beefy Finance – Beefy is a multi-chain automated yield farming platform. Essentially you make one deposit, and it automatically takes those funds, pools it together with other users and seeks out the best yield farming strategies (i.e. best returns). The magic in this case is that it operates across multiple blockchains, including Polygon. How to buy Beefy Finance.

Next steps 

Now that you know what Polygon offers you, and which platforms are already available to use (with plenty more on their way), I suggest you read our comprehensive guide so that you can start enjoying Ethereum's rich DeFi ecosystem, for a fraction of the fees.

And remember, you will need a bit of MATIC in your wallet to pay for gas fees, so check out our How to buy MATIC page for a bit of help in that department as well. 

How to move funds on to Polygon (step-by-step)

Step 1. Connect MetaMask to Polygon. To transfer funds from the Ethereum blockchain to the Polygon blockchain you must first make MetaMask compatible with the Polygon blockchain. In your MetaMask wallet click the "Ethereum Mainnet" symbol at the top centre of the page. In the dropdown list, choose the Custom RPC option.

Enter the details as shown in the screenshot below and click "Save".

This is also a text copy of the details:

• Network Name: Matic Mainnet
• New RPC URL: https://rpc-mainnet.maticvigil.com/
• Chain ID: 137
• Currency Symbol (optional): MATIC
• Block Explorer URL (optional): https://explorer.matic.network/

Once confirmed, your MetaMask wallet will now be able to communicate with the Polygon blockchain. An option for "Matic Mainnet" should now appear within your Network list.

Step 2. Head to the Polygon v2 web wallet. All of the funds within MetaMask will initially be sitting within the Ethereum wallet. To transfer funds on to the Polygon blockchain you need to log on to the Polygon v2 web wallet.

Step 3. Connect MetaMask to Polygon web wallet. Before accessing the site you will be prompted to connect your Web 3.0 digital wallet. In this example we would click on MetaMask. A prompt will open from your MetaMask asking for confirmation of connection. Click "Sign".

Step 4. Polygon v2 web wallet. After connecting your MetaMask wallet to the Polygon v2 web wallet, the Polygon v2 web wallet will open in your web browser. Now you need to move funds from the Ethereum blockchain to the Polygon blockchain. In the window click "Move funds from Ethereum to Polygon".

Step 5. Transfer funds from Ethereum to Polygon using the Polygon Bridge. The Polygon Bridge enables users to deposit funds from the Ethereum blockchain to the Polygon blockchain. You need to have either ETH or ERC-20 tokens in your Ethereum mainnet MetaMask wallet. On the Polygon Bridge screen, select the cryptocurrency you would like to transfer and enter the amount.

Note: The "Transfer Mode" used for transferring funds to Polygon is the PoS, or proof-of-stake, bridge. The proof-of-stake bridge takes approximately 7-8 minutes to transfer funds to the Polygon blockchain.

Once you're happy with the amount, click "Transfer". The following popup will outline the estimated time for the transaction. Click "Continue".

Step 6. Confirm transaction. The last prompt will highlight the Ethereum gas fees required to move funds from your Ethereum wallet to Polygon. Click "Confirm". Once the transaction is confirmed, it will take roughly 7 minutes for them to be confirmed in your Polygon address. The funds will then appear within your Polygon v2 web wallet.

Once you have funds on the Polygon blockchain you can begin using them with either Polygon or Ethereum-based DeFi applications. This can significantly reduce your transaction fees.

Using funds from your Polygon wallet

Once you have successfully connected your MetaMask wallet with Polygon, and deposited funds on to the Polygon blockchain, those funds can be utilised on any application associated with the Polygon blockchain or on any Ethereum DeFi application. As funds are being distributed using the Polygon Layer-2 solutions, transaction fees are considerably less than if the same transaction was taking place on Ethereum.

Note: To perform transactions on the Polygon blockchain a user must hold MATIC tokens within their Polygon wallet. The MATIC tokens are required for gas fees on the network. For each Ethereum DeFi application that a user connects their Polygon wallet to, a user must also be on the Polygon-version of that application. For example, the lending and borrowing protocol AAVE has an AAVE-Polygon version.

Below are just a few examples of where funds from a Polygon wallet can be used:

• Swap and provide liquidity on QuickSwap.
• Borrow and lend on AAVE.
• Provide liquidity on Curve.
• Swap, provide liquidity, lend and borrow on SushiSwap.

How to move funds on to Polygon using an exchange

Some exchanges will let you withdraw funds directly off the exchange onto Polygon, which in some cases may save you on gas fees compared to using the method described above. If Ethereum network fees are high, then using an exchange may be the cheaper option if the exchange offers a fixed-rate withdrawal fee.

Let's take a look at an example using the Ascendex exchange which supports Polygon withdrawals.

At the time of writing these were the fees for transferring the following assets using Ascendex, versus using the Polygon Bridge.

How to move funds off Polygon

Step 1. Polygon v2 web wallet. To withdraw funds from the Polygon blockchain back to the Ethereum blockchain, head back over to the Polygon v2 web wallet.

Click "Withdraw" next to the cryptocurrency you wish to transfer.

Step 2. Polygon Bridge. 

By clicking "Withdraw" it should take you back to the Polygon Bridge. The Polygon Bridge should now indicate the option to enter an amount you would like to transfer back to Ethereum. Enter the amount and click "Transfer".

Note: When using the Polygon Bridge to withdraw funds, users have 2 options for "Transfer Mode". These include PoS (proof-of-stake) and Plasma. The proof-of-stake bridge takes approximately 1 hour for a transfer back to the Ethereum blockchain and is the quickest option. The Plasma bridge can take up to 7 days.

Step 3. Confirm the transaction. After clicking "Transfer", you will be prompted to approve the associated gas fees and eventually asked to sign off on this transaction in your MetaMask wallet.

Once the transaction is confirmed, funds will be transferred back across to your Ethereum wallet. These funds can then be used again directly on the Ethereum blockchain.