The emergence of Decentralised Finance (DeFi) has contributed towards a radical shift in the traditional financial industry. This could mark the beginning of a transparent, permissionless, and highly innovative ecosystem.
DeFi still faces challenges, some of which include scalability and transaction costs on platforms like Ethereum. The introduction and development of Polygon acts as a solution, with the platform positioning itself as a transformative solution in the world of DeFi.
The History and Importance of Layer 2 Solutions
For a blockchain to be effective, it needs to possess three key attributes:
It should be scalable (can handle a large number of transactions), secure (resistant to hacking or fraud), and decentralised (not controlled by a single entity or a few entities). While there are techniques to boost the number of transactions, such as employing more robust nodes, these can potentially reduce the system’s decentralisation.
Layer 2 is a secondary framework built on the foundational blockchain, to enhance its scalability. If we liken Ethereum to Bitcoin, both can be viewed as “Layer 1” protocols. This means they serve as the primary platforms, validating and settling all network transactions.
Layer 2 solutions are designed to rely on Layer 1 solutions and increase and maximise transaction capacity and scale up the system while retaining the security attributes of the main network.
Polygon as a Layer-2 Solution
Polygon as a layer-2 scaling solution offers tools that simplify how blockchains function with the aim of reducing costs and boost transaction rates. Like other Proof-of-Stake platforms, Polygon features staking, governance, and network nodes. Its protocol not only links all Polygon-based blockchains but also ties them to the Ethereum network, leveraging Ethereum’s robust security.
Bitcoin Smarter offers guides that highlight the key Proof-of-Stake chains crypto-enthusiasts should know.
Polygon enhances Ethereum’s platform by increasing transaction speed and reducing expenses for developers, making the blockchain overall experience more efficient.
While many solutions offer layer-2 scaling, Polygon’s approach is unique. It’s not just a singular layer-2 platform but a multi-chain framework. This means, that instead of being a mere sidechain, it offers a suite of interoperable chains that can be customised according to the project’s needs, creating a ‘multi-chain Ethereum’ of sorts.
Polygon’s Scaling Solutions
Polygon has a variety of scaling solutions that allow users to choose one that will best serve their needs. Below is a list of all the scaling solutions offered.
- Proof-of-Stake Chain
Polygon relies on Proof-of-Stake (PoS) consensus instead of the traditional Proof-of-Work (PoW) process, which uses a lot of power while generating new blocks. PoS consensus uses a group of node validators to check and validate transaction blocks. The main distinction is that in PoW networks, validators are required to perform labour (computations), whereas in a PoS system, token holders check and verify transactions.
The native coin of the Polygon ecosystem, $MATIC, is then awarded to users.
- Polygon Edge
Edge offers the groundwork for custom chains using the PolyBFT consensus. It uses an in-built bridge to link with its primary rootchain, allowing chains powered by Edge to tap into its security and functionalities. Edge enhances the block capacity on the rootchain, ensuring greater scalability and connection for decentralised apps. Through on-chain governance, Edge allows communities to transparently make decisions and update the network.
Edge adopts a diverse strategy, utilising a mix of scaling solutions to ensure optimal scalability. This strategy encompasses layer-2 scaling methods, concurrent processing, and in due course, ZK technology.
By merging these techniques, Edge meets the growing need for computational power, data storage, and transaction speed as both the user base and applications on its network expand.
- Polygon Hermez
Hermez is a zk-rollup designed to scale payments and token transfers on Ethereum, focusing on frequently used tokens such as ETH, DAI, Tether, and wBTC. Instead of computation, Hermez primarily uses the Ethereum blockchain for storing data. While it performs computations off-chain, it uses zero-knowledge proofs to confirm the correctness of these off-chain calculations. With both the data and the proof accessible on-chain, Hermez’s security is closely aligned with Ethereum’s, making it equally resistant to censorship.
A unique feature of Hermez is its method of selecting the next rollup batch creator. Within the Hermez framework, those aspiring to be coordinators (equivalent to batch creators) participate in an auction, bidding the number of tokens they’d pledge for the right to form the subsequent batch. The participant offering the most tokens wins and gets the privilege to create the following batch. This process is termed “Proof-of-Donation” in the Hermez Network since a significant portion of the winning bid is contributed to Ethereum-based protocols and social services.
- Polygon Nightfall
Nightfall is a blockchain solution that uses advanced Optimistic-Zero Knowledge technology, offering businesses a secure and user-friendly blockchain network with the utmost privacy and security. It is credible, confidential, and efficient.
- Polygon Zero
Polygon’s zkEVM, short for zero-knowledge Ethereum Virtual Machine, taps into zero-knowledge (ZK) proof technology to dramatically boost transaction speeds while reducing costs, all without compromising Ethereum’s security. This technique involves bundling multiple transactions into one composite transaction, which is then processed on the Ethereum Network. The resulting ‘gas fee’ for this single transaction is shared among all its contributors, making transactions far more economical.
For those building payment platforms or DeFi apps, zkEVM presents a compelling case. Its robust security and resistance to censorship make it stand out from other Layer 2 solutions. In contrast to Optimistic roll-ups, which can make users wait up to a week for financial actions, zk-Rollups guarantee quicker settlements and enhanced capital utilisation. Additionally, zkEVM facilitates the smooth transition of decentralised apps (dApps) from Ethereum-compatible chains, granting developers the benefits of Ethereum’s vast network and EVM compatibility.
- Polygon Miden
Polygon Miden stands as a unique zero-knowledge rollup operating on the Miden VM. Rather than aligning with Ethereum’s EVM, it opts for a design that’s more attuned to ZK (zero-knowledge) features. This choice positions it to introduce functionalities that Ethereum lacks, targeting creators keen on developing high-capacity, confidential dApps. Essentially, Miden operates as a versatile roll-up, enabling the deployment of diverse smart contracts.
What sets Polygon Miden apart from numerous rollups is its distinct emphasis on being ZK-centric over mirroring Ethereum’s EVM. It further harnesses a groundbreaking state model to maximise the benefits of its ZK-focused design. This opens the door for developers to craft applications that may be challenging or infeasible on account-based models.
Polygon’s achievements within DeFi highlight how it is incredibly transformative and important, more especially due to the forward-thinking attitude and flexibility of the platform that brings about great solutions that contribute towards making blockchain platforms and decentralised finance as a whole more seamless and efficient. As the decentralised web grows, platforms offering scalable, seamless, and user-oriented solutions will dominate the industry – Polygon being one of the few at the forefront as it embodies the innovative spirit that defines the blockchain industry.
///ENDS
Word count: 1153