Staking basics

Polygon Use Cases - A Complete Guide

Shivendra Singh

Apr 14, 2023 • 5 min read

How Does Polygon (MATIC) Work?

Polygon is a Layer 2 scaling solution for Ethereum which ensures a smooth performance of the Ethereum Blockchain. Polygon aims to take care of the major problems on the Ethereum Blockchain including High Gas fees, Slow Transactions, and Scalability Issues. Polygon uses the Plasma framework to implement the transactions on Ethereum Blockchain faster and with lower gas fees. The major advantage of the Plasma Network is that it creates a secondary network right beside the Ethereum mainnet which quickly completes the transactions and returns the outcome back to the mainnet making Polygon more affordable, faster, and scalable for the Ethereum Blockchain.

Here is a brief overview of how Polygon works:

When the user sends a transaction on Ethereum, the transaction is first received at a Polygon node.
Once receiving the transaction, the Polygon node then submits the transaction to the Plasma chain or ZK-Rollup. Apart from this, there’s also a sub-chain named optimistic rollups which checks for if there’s a fraud transaction being done.
The Plasma chain or ZK-Rollup then accumulates the transaction with all other transactions and submits it to Ethereum.
Ethereum then validates the transaction and adds the transactions to the blockchain.

Also Read: Matic Staking Rewards

What is Layer 2?

Layer 2 is a term used in blockchain technology for describing the scaling solutions that sit on top of the layer 1 blockchain. Layer 1 blockchains, such as Ethereum, are limited in their scalability which means that they can only work on a limited number of transactions per second. Layer 2 scaling solutions aim to solve this problem by offloading transactions from the layer 1 blockchain to a separate layer.

There are a number of different types of layer 2 blockchain scaling solutions, including:

Rollups: These are the type of layer 2 scaling solution which combines multiple transactions into a single, more efficient transaction. This can significantly improve the scalability of the layer 1 blockchain.
Sidechains: Sidechains are separate blockchains connected to the layer 1 blockchain. Transactions can then be processed on the sidechain, which can then be sent back to the layer 1 blockchain.
State channels: State channels allow two parties to process multiple transactions off-chain, without the need for each transaction to be broadcasted to the entire network. This reduces the number of transactions that need to be processed on the layer 1 blockchain significantly and makes it more scalable.

Layer 2 scaling solutions have the potential to significantly improve the scalability of blockchains making blockchain technology more accessible to a wider range of users.

Also Read: Ethereum Staking Rewards

Importance of Layer 2 Scaling Solutions

Some of the most important features of Layer 2 scaling solutions are:

Scalable: Layer 2 scaling solutions increase the scalability of blockchains significantly. Layer 2 scaling solutions can process more transactions per second, making them more suitable for applications that require high throughput.

Cost-effective: Layer 2 scaling solutions can also help in reducing the cost of transactions as they can offload some of the work from the layer 1 blockchain, which reduces the fees that users need to pay.

Privacy: Layer 2 scaling solutions can also help in improving the privacy of transactions. Layer 2 scaling solutions allow the users to conduct transactions off-chain, which reduces the amount of data that is recorded on the blockchain.

However, there are also some challenges associated with using Layer 2:

Complexity: Layer 2 scaling solutions can be complex to implement. This is because they require the development of new protocols and infrastructure.
Security: Layer 2 scaling solutions can also be less secure than the layer 1 blockchain. This is because they are not as widely used, which means that they may be more vulnerable to attack.
Interoperability: Layer 2 scaling solutions may not be compatible with all dApps. This is because dApps are typically built on the layer 1 blockchain, and they may not be able to interact with layer 2 scaling solutions.

Overall, Layer 2 scaling solutions offer a promising way to improve the scalability of blockchains. However, there are still some challenges that need to be addressed before they can be widely adopted.

Also Read: Ethereum Bridge

Polygon use cases in Decentralized Finance (DeFi)

Polygon due to largely useful applications in many different spaces has become immensely popular for a variety of purposes. Here are some of the places where Polygon is used at:

Defi (Decentralized Finance)

Staking: Users can stake their MATIC tokens for which users can get staking rewards in return for providing their tokens for various purposes.
Liquid Staking: Users can Liquid Stake their MATIC tokens for which users can get Liquid Staking Rewards apart from this, users also have access to their tokens in order to earn additional rewards in DeFi. For example, staking your MATIC with Stader Labs for which you get MaticX tokens which can be used to get access to DeFi can be a good option that one can explore.
DeFi Earning: MaticX can also be used to participate in DeFi in which you can earn staking rewards by providing liquidity to DeFi protocols.

Also Read: What is Defi

NFT

Minting: You can use Polygon to mint NFTs, which are unique digital assets that are stored on a blockchain. NFTs can represent anything like art, music or video.

Trading: You can also use Polygon to trade NFTs on decentralized exchanges.

Storage: Polygon can be used to store NFTs on decentralized storage platforms.

Also Read: How to Stake ETH

Gaming

Development: Polygon as a platform is largely used to develop decentralized games.

Deployment: We can also use Polygon to deploy decentralized games.

Hosting: Polygon can be used to host decentralized games.

Payments: Polygon can be used to make digital payments in decentralized games.

Governance and DAOs Use Cases

Crowdfunding: Polygon supports the Crowdfunding DAOs which helps in the transparency of the fundraising and what work was carried out with the funds is guaranteed not by the organization, but by the blockchain.
Voting: Polygon is also used to vote on proposals for DAOs allowing a more democratic and transparent decision-making process.
Claims: We can use Polygon for making claims for participation rewards. This can be very useful for DAOs that want to reward users for their contributions.

Overall, Polygon is a great layer-2 scaling solution for DeFi, NFT, DAO, and gaming. Polygon offers a number of benefits for these applications, including scalability, cost-effectiveness, and security. With Polygon continuing to grow in popularity, we can expect to see even more DeFi, NFT, gaming, and DAO applications being built on the platform.

Frequently Asked Questions (FAQ’s)

Q) How does Polygon improve scalability and interoperability for decentralized applications (dApps)?

Ans) Polygon is compatible with Ethereum, meaning that dApps built on Polygon could also be accessed on Ethereum making it easy for users to switch between Polygon and Ethereum which makes it interoperable between platforms. In terms of scalability, Polygon can process up to 65,000 transactions per second, which is much higher than Ethereum's 15 transactions per second. This makes Polygon a more scalable and interoperable option for dApps.

Q) How can I participate in DeFi on Polygon?

Ans) There are a few ways to participate in DeFi on Polygon. Here are a few of the most popular methods:

Staking
Liquid Staking

Q) What popular gaming platforms are available on Polygon?

Ans) Some of the popular gaming platforms available on Polygon are Aavegotchi, Zed Run, and Arc8.