Decentralized finance, or DeFi, is a very appealing industry that continues to note ongoing growth and development. While once home to Ethereum, the network’s high fees, and slow transactions make developers rethink their options. Slowly but surely, Polygon is emerging as a strong contender, even though there is still much work to do.
Polygon DeFi Is on The Move
As a layer two solution for the Ethereum network, Polygon solves many issues plaguing Ethereum’s blockchain. It removes the high gas fees almost entirely and allows for faster network transfers. Considering how this solution can do what the native blockchain cannot [yet], there should be a much higher demand to bring decentralized finance to Polygon. Whether that will happen is a matter of debate, although the initial developments are promising.
The rough numbers do not put Polygon DeFi in a good spotlight just yet. Its combined Total Value locked (TVL) sits at $2.95 billion, although the adjusted value is closer to $2.6 billion. The adjusted rate takes inflation into account, which explains why that value is much lower. Compared to Ethereum’s $111 billion, Polygon is a tiny fish in a big pond. However, it may be a matter of time until developers acknowledge this layer two’s benefits.
What is remarkable is how the top five of DeFi apps by TVL only have two “native” Polygon projects in them. Both QuickSwap and Dfyn Network are built on this layer precisely, rather than developers porting it from another ecosystem. That is an outstanding choice, as putting the layer two solution ahead of Ethereum or even Binance Smart Chain sends a solid signal to the community. Several other Polygon-native solutions exist, such as DinOSwap, QiDao, Polycat Finance, and Iron Finance, to name a few.
These rankings also confirm the average DeFi user remains largely unaware of Polygon. The layer two solution for Ethereum has many benefits, yet the native DeFi protocols struggle a bit to attract TVL. Except for QuickSwap, none of the others has over $90 million in TVL today. So there is much room for improvement on that front. Attracting more liquidity remains a top priority, but it will take time to do so.
Popular Projects Make The Transition
One aspect helping Polygon’s DeFi ecosystem is how renowned projects are exploring opportunities on this layer two network. For example, Aave’s popular lending and borrowing protocol is the primary TVL contributor, with $1.44bn in adjusted TVL and $1.7 billion nominally. Sushiswap, one of the leading DEXes on Ethereum, also supports Polygon. Its TVL for this ecosystem is just $259.64m adjusted or $295.24m nominally. Pushing for broader usage of Polygon’s network may help move things along.
Ethereum isn’t the only blockchain that sees native DeFi apps explore opportunities through Polygon. Binance Smart Chain’s ApeSwap, WaultSwap, and JetSwap have made similar moves. While their experiment has not attracted tremendous TVL just yet, that situation may change in the future. The longer Ethereum takes to scale, the more critical layer two solutions will become.
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