Yield Farmers are Migrating to Polygon

Key Takeaways

  • The variety of day by day customers on Polygon is rising quick, with the Layer 1 scaling resolution not too long ago surpassing Ethereum within the variety of day by day transactions.
  • Ethereum-native protocols akin to Aave, SushiSwap, and Curve led the way in which for Ethereum customers emigrate to the community.
  • Polygon is an Ethereum scaling resolution and is in direct competitors with Binance Good Chain.

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Polygon presents the same yield farming expertise to Ethereum mainnet at a fraction of the price. Key metrics present that DeFi energy customers are beginning to migrate to the community.

Low-Value DeFi on Polygon

Excessive fuel charges are pricing common traders out of DeFi on Ethereum. As the worth of ETH has risen, fuel charges have additionally surged, casting doubts over the potential for a second DeFi summer time.

Ethereum’s reputation has helped drive fuel costs to document highs even with organizations like Flashbots working to scale back blockchain congestion. Some customers have turned to Binance Good Chain, although that community has suffered from quite a lot of points akin to hacks and flash mortgage assaults.

Within the seek for low charges and quick transactions, many yield farmers have turned to Polygon, the Ethereum scaling resolution that’s typically described as a “commit chain.” Polygon makes use of a Proof-of-Stake consensus algorithm, and transactions on the community price fractions of a cent.

Daily users on Polygon. Source: Nansen.
Supply: Nansen

The expansion within the variety of day by day lively addresses has been accompanied by a formidable rise within the worth of Polygon’s native token, MATIC. Over the past 30 days, the token worth has elevated by greater than 300%, in line with CoinGecko. The variety of transactions on Polygon additionally surpassed Ethereum for the primary time on Could 2, with main change Quickswap accounting for many of the quantity.

Based on Nansen, lower than 0.1% of Ethereum addresses have interacted with Polygon, which has meant there are bountiful yield farming alternatives for many who have began utilizing the community. The prospect to earn passive yields has elevated as extra protocols have launched on Polygon.

Whereas apps like Quickswap are Polygon-native, curiosity within the Layer 1 scaling resolution grew when established DeFi protocols arrange variations of their apps on Polygon. Aave, Curve, and SushiSwap have all joined the ecosystem this yr, with optimistic outcomes.

Even after the launch of Aave v2 and a well-liked liquidity mining program on Ethereum, Aave’s Polygon market measurement has already reached $6 billion. To assist the market develop, Polygon has distributed MATIC rewards for lenders and debtors. The demand for low-cost DeFi, easy accessibility to capital, and the MATIC rewards distributed to lenders and debtors have all helped appeal to liquidity.

Current APY for Aave Polygon. Source: Aave/
Supply: Aave

Lenders can presently earn as much as 18% lending USDT on Aave. Curiously, customers also can borrow USDT at a fee of 8% per yr however earn 12.5% in MATIC rewards, leading to a internet acquire.

Yield Farming on Polygon

DeFi customers presently have a number of choices for incomes excessive yield on crypto belongings on Polygon. The primary chance is to supply liquidity on Quickswap, the most well-liked change on Polygon. With low charges and fuel costs, Quickswap’s quantity is excessive and ends in excessive commissions for liquidity suppliers (LPs). As well as, LPs can obtain QUICK rewards on sure swimming pools, additional boosting APYs. These rewards presently vary from 30% on stablecoin pairs to 200% when the buying and selling pair contains QUICK. SushiSwap and Curve are additionally providing MATIC rewards on high of charges for his or her LPs.

Customers also can select to entrust their LP tokens (tokens acquired when offering liquidity to a buying and selling pair) to yield aggregators like Yearn.Finance on Ethereum. These yield aggregators assist reinvest earnings in the identical swimming pools, boosting the returns of their customers. Some platforms akin to Adamant Finance have additionally launched their very own governance token as an extra incentive, driving APYs even greater. Consequently, offering LP tokens for Sushi’s USDT/USDC pool is presently incomes a 99% APY, together with ADDY tokens.

Some of the current Adamant vaults in operations. Source: Adamant Finance.
Supply: Adamant Finance

Basic yield farms are again as effectively, the most well-liked up to now being Polywhale. Customers can stake their cryptocurrencies in Polywhale’s swimming pools in change for its native token KRILL. When customers deposit their crypto belongings, a portion of their deposit is used to repurchase KRILL from the market. Customers can presently earn as much as 80% APY by staking MATIC, harvest the KRILL rewards, and deposit them in their very own pool for as much as 2,500% APY.

It’s essential to notice that such farms are extremely experimental, and the worth of tokens like KRILL could be extraordinarily risky. For a lot of customers, the combination of danger and large returns remembers the summer time of 2020 on Ethereum. If the thrill round DeFi yield farming returns this summer time, it might be on Polygon.

Disclaimer: The writer held BTC, ETH, and several other different cryptocurrencies on the time of writing.

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