Polygon zkEVM Ecosystem: Slow but Steady
In 2022, numerous ZK rollup networks found themselves in intense competition. However, currently many of these networks have debuted their mainnet and are in the process of actively developing their ecosystems. On March 23, 2023, an airdrop on the Arbitrum network proved successful, which led to users migrating to ZK rollup in hopes of benefitting from the subsequent airdrop. This shift was particularly evident towards zkSync Era, StarkNet, and other ZK rollup networks that have yet to release their own tokens.
Unlike other upstart ZK rollups that haven’t had tokens yet, there is one ZK rollup network that has received less attention but is growing naturally with solid technology and a developer-friendly environment, which is Polygon zkEVM. Polygon zkEVM is one of the ZK rollup networks developed by the Polygon Foundation, formerly known as Polygon Hermez. The key technical difference between Polygon zkEVM and other ZK rollup networks is its high EVM compatibility.
(Source: Vitalik Buterin)
Unlike other ZK rollup projects (e.g. StarkNet, zkSync Era) that build their own VMs, transpile Solidity into a zero-knowledge friendly language, and compile it into bytecode, Polygon zkEVM supports Ethereum’s opcodes. As a result, Polygon zkEVM may not be as scalable as other ZK rollup networks, but it has the advantage of providing a much easier environment for developers to build dApps utilizing existing Solidity code.
In the case of the Polygon zkEVM network, ETH tokens are used as the gas fee, MATIC is the token used for the incentive scheme for the Sequencer, which determines the order of transactions on the network to create batches, and the Aggregator, which generates ZKP for the batches. Since both of these tokens are already issued, many users did not expect Polygon zkEVM to airdrop, which is why it initially underperformed compared to other networks regarding network activities. However, if you look at recent trends on the Polygon zkEVM network, you’ll see that users and TVL are growing rapidly, and there are a few reasons for this.
(Source: Sandeep Nailwal)
The first and most conclusive reason is a tweet from Polygon co-founder Sandeep Nailwal. The above tweet was posted by Sandeep in response to a tweet mocking the low TVL of Polygon zkEVM, which included the line, “There is no rule that an existing token can’t do a massive airdrop”. After this tweet, many users started using Polygon zkEVM in anticipation of the airdrop.
(Source: Polygon Twitter)
The second was a mention of Polygon zkEVM in Vitalik Buterin’s seminar at EDCON2023. Vitalik had previously written a post on the Ethereum Magicians community about the milestones that a rollup network needs to achieve, breaking it down into stages 0, 1, and 2 for a rollup network to become a true rollup. During a seminar, Vitalik made a statement indicating that Polygon zkEVM had reached stage 1, unlike its competing networks. This achievement drew significant attention towards Polygon zkEVM. Note that to achieve stage 1, unlike stage 0, there must be a working proof system (e.g. fraud proof or validity proof), and safeguards must be in place for the upgrade mechanism of the rollup smart contract.
Polygon zkEVM, which is starting to get a lot of attention, recently showed a 10x increase in TVL from hovering around $2M to $25M in less than a month. While the ecosystem grows rapidly, the network is still in its infancy. In this article, I’ll give you an overview of the dApps that exist in the Polygon zkEVM ecosystem, which is still in its infancy but has plenty of momentum to grow.
2. Polygon zkEVM Ecosystem
2.1 DeFi (AMM DEX)
Quickswap is the leading AMM DEX in the Polygon ecosystem, supporting Polygon, Dogechain, and the Polygon zkEVM network. Quickswap provides AMM DEX services based on CPMM (x*y=k) and also provides a concentrated liquidity system, such as Uniswap V3. Furthermore, Quickswap has launched a new service on Polygon zkEVM, which is a perpetual futures trading service. Since Polygon zkEVM has high scalability, the Quickswap team appears to have deployed it on the Polygon zkEVM network rather than Polygon PoS. The basic system is similar to GMX, with the advantage that the price is fetched through an oracle, allowing users to trade without price impact. Liquidity in the market comes from QLP tokens, and liquidity providers can deposit QLP tokens to earn trading fees and incentives.
2.1.2 Mantis Swap
Mantis Swap is a stableswap DEX in the Polygon ecosystem that facilitates the trading of pegged assets such as stablecoins. The difference between Mantis Swap and other stableswap DEXs is that it aggregates multiple assets into a single liquidity pool and allows for providing a single asset for liquidity. For example, the Mantis Swap liquidity pool on Polygon zkEVM currently includes USDT, USDC, and DAI, with the advantage that liquidity providers can only supply one token instead of two or more.
2.1.3 Antfarm Finance
Antfarm Finance is a DEX on Ethereum, Arbitrum, and Polygon zkEVM that uses a new strategy called Band Rebalancing AMM. Taking the ETH/USDC liquidity pool as an example, liquidity providers can choose a fee of 1, 10, 25, or 50% to provide liquidity. But who would want to trade in a liquidity pool with a very high fee of 10%? This can happen in times of extreme volatility, and if the price of 1 ETH is 1,000 USDC, but the price of 1 ETH in another market is over 1,100 USDC, there will be trades to arbitrage. Therefore, users who provide liquidity to Antfarm Finance’s high-fee liquidity pool have the advantage of being able to bet on volatility.
Balancer is a representative AMM DEX protocol in the Ethereum ecosystem that provides a variety of liquidity pools including pools with different proportions of two assets and stable swap pools in addition to the basic CPMM (x*y=k). Balancer’s zkEVM deployment was proposed via BIP-224 and was recently officially announced.
In addition to the DEXs mentioned above, there are a number of other protocols, including
- DoveSwap is a zkEVM native DEX that supports concentrated liquidity features like Uniswap V3, where liquidity can only be provided in a specific price range.
- Kokonut Swap is a Klaytn-based AMM DEX that has also started supporting the Polygon zkEVM network. Kokonut Swap uses Curve’s stableswap AMM for similarly valued assets and dynamic-peg for differently valued assets, providing more concentrated liquidity than regular CPMMs.
- Sushiswap is the leading AMM DEX in the Ethereum ecosystem, and through a forum suggestion, it now also supports the Polygon zkEVM network.
2.2 DeFi (Lending)
0vix is the lending protocol of the Polygon ecosystem, supporting Polygon PoS and the Polygon zkEVM network. Users can deposit collateral to earn interest, or lend in an overcollateralized manner. 0vix supports major tokens such as WBTC and WETH, as well as liquid tokens such as wstETH and stMATIC, and various tokens such as vGHST, jEUR, and gDAI.
Aave is the leading lending protocol in the Ethereum ecosystem, supporting various EVM networks. Like other lending protocols, it allows users to lend in an over-collateralized manner. Aave V3 has already been deployed and tested on the Polygon zkEVM testnet since 2022 and is expected to be deployed in the near future, as it received an overwhelming vote in a temperature check vote in March for deployment to the Polygon zkEVM mainnet on the snapshot governance platform.
2.2.3 Qi Dao
Qi Dao is a stablecoin issuance protocol. Users can deposit collateral and issue MAI stablecoins in an overcollateralized manner. Qi Dao is characterized by the fact that users do not have to pay any interest on the issued stablecoins, and there is no due date to repay the borrowed stablecoins. Of course, there is a liquidation process when the value of the collateral decreases, which has a penalty for this.
- UniLend Finance is a multi-ch ain decentralized money market protocol that supports overcollateralized lending.
2.3 DeFi (Orderbook DEX)
Clober is an on-chain order book for EVM networks and currently supports Ethereum, Polygon, Arbitrum, and Polygon zkEVM. Implementing an on-chain order book is challenging due to the high volume of transactions, which Clober solves through its proprietary technology called Segmented Segment Tree and Octopus Heap. By utilizing Clober, users can execute transactions on-chain while enjoying a CEX-like order book experience.
Satori is a perpetual futures order book trading protocol that has raised over $10M in funding from Polychain Capital, Jump Crypto, Coinbase Ventures, and others. Satori allows users to easily trade perpetual futures on-chain with a CEX-like UI and UX.
- Spin Fi is an all-in-one DeFi platform originally built on Near Protocol, offering spot and futures order book trading, a Decentralized Option Vault (DOV), and more.
2.4 DeFi (Others)
Gamma is not an AMM DEX but a protocol that provides automated liquidity provisioning services to DEXs like Uniswap V3 that can provide concentrated liquidity by setting specific price bands. The disadvantages of concentrated liquidity are that if the market price goes outside the set price range, the liquidity is excluded from the liquidity supply, no interest is earned, and impermanent losses are large, but Gamma can solve the above disadvantages by automatically rebalancing the price range according to the market price. Gamma currently offers this service in collaboration with Quickswap on Polygon zkEVM
Gelato is a protocol that helps automate smart contracts, and many DeFi protocols utilize Gelato. Protocols can leverage Gelato to enable limit trading on AMM DEXs, manage liquidation risk on lending protocols, or introduce the ability to rebalance price ranges on protocols that support concentrated liquidity like Uniswap V3. Gelato will deploy the Relay Network on the Polygon zkEVM network to help various dApps in the ecosystem automate their smart contracts.
- Bounce Finance is an auction-as-a-service protocol that makes it easy to implement a wide variety of auction methods on-chain, including fixed-priced auctions, Dutch auctions, and sealed-bid auctions.
2.5 NFTs, Gaming
OnePlanet is the leading NFT marketplace in the Polygon ecosystem, and recently announced its deployment to the Polygon zkEVM network. What sets OnePlanet apart from other NFT marketplaces is the curation of its NFT collection. Not just any project can be listed on OnePlanet, but only NFT collections that have been verified by the team so that users can shop for quality NFTs safely and securely. Various projects in the Polygon ecosystem have collaborated with OnePlanet to host various events.
- Gameswift, formerly known as StarTerra on the Terra blockchain, is a comprehensive gaming platform that offers IGO, INO, and gaming services.
- Zonic is an NFT marketplace that specializes in layer 2 networks such as Optimism, Arbitrum, Nova, zkSync Era, and Polygon zkEVM.
2.6.1 Orbiter Finance
Orbiter Finance is a cross-rollup bridge protocol specializing in rollups and supports various L2 networks in addition to Ethereum. In Orbiter finance, there is an entity called Maker, which has liquidity on each network, and bridging works by users sending funds to the Maker on the source chain and receiving funds from the Maker on the target chain. The downside is that there is an upper limit to the amount of ETH that can be sent at once, but the advantage is that bridging process is very fast.
Hyperlane is a protocol that enables cross-chain communication in a modular way, making it easy for anyone to adopt Hyperlane regardless of L1, L2, or app chain. Currently, Hyperlane is only available for EVM chains, but it will be available for non-EVM networks in the future. The verification method uses external validators. Introducing Hyperlane will improve composability with other Hyperlane-enabled networks in Polygon zkEVM.
2.6.3 Rhino Fi
Rhino Fi is an all-in-one DeFi platform specializing in the Ethereum ecosystem and supports multiple rollup networks, including Optimism, Arbitrum One, Polygon zkEVM, and zkSync Era. In addition to supporting swaps, liquidity pools, and various vaults, users can also bridge to the Polygon zkEVM network.
2.6.4 Magpie Protocol
Magpie Protocol is a cross-chain DEX that allows users to trade assets directly from multiple networks. In order to trade assets from different networks, users would normally have to transfer assets from one chain to another via a bridge and then execute the transaction, but with Magpie, users can do it all at once. In the cross-chain swap process, no mechanism is used to lock/burn tokens, and token transactions are carried out using Wormhole’s Generic Messaging Protocol. The process of swapping tokens is as follows: 1) The user’s transaction is submitted on the source chain. 2) The user’s assets are converted into stablecoins. 3) Stablecoins are deposited through existing bridges such as Wormhole and Stargate. 4) The user’s swap and deposit information is messaged to the Target chain via Wormhole. 5) Once verified, the tokens are bought with the stablecoin on the Target chain and sent to the user.
- Layerswap is a cross-chain bridge protocol that supports 17 exchanges and 20 blockchains. Unlike other bridges, it also supports bridging with CEX.
- XY Finance is a cross-chain swap protocol where liquidity providers provide liquidity to the Y Pool on each network, and traders can utilize the liquidity on each network to swap into any asset they want through the X Swap feature.
- Bungee is a cross-chain swap protocol based on a cross-chain protocol called Socket that supports various EVM networks. The movement of funds takes place through a liquidity layer.
- Meson Fi is a cross-chain stablecoin swap protocol that allows users to swap stablecoins across multiple networks by utilizing liquidity supplied by liquidity providers to each network. It utilizes HTLC atomic swaps as a bridge method.
- Interport Finance is similarly a cross-chain DEX protocol, allowing users to execute cross-chain swaps simultaneously, utilizing liquidity supplied by liquidity providers.
- Symbiosis finance similarly supports multiple EVM networks with a cross-chain DEX protocol. For bridge security it relies on validators maintained through incentives called Symbiosis Relayer.
- Celer is a cross-chain bridge optimized for the EVM chain, where transactions are validated by an entity called the State Guardian Network, which is driven by economic incentives. Bridging is accomplished through liquidity from liquidity providers on each network.
Pyth is an oracle that powers price data for cryptocurrencies, stocks, FX, commodities, and more across 13+ blockchains. Pyth fetches data directly from first-party sources, including Cboe, Jane Street, Binance, and many other large organizations. Pyth’s price feeds are currently available for Polygon zkEVM’s 0vix protocol and will be available for a variety of Polygon zkEVM protocols in the future.
API3, like Pyth, is an oracle that fetches data directly from a first-party. API3’s product, Airnode, has the advantage of being able to get data directly from a third party, and is very easy and inexpensive to use and maintain. API3 is currently being used to power the price feed for Polygon zkEVM’s Dovish perpetual protocol.
Unmarshal provides a variety of data infrastructure services and APIs across multiple networks. Services include a block explorer with a convenient UI called Xscan and a no-code smart contract indexer called Parser. Unmarshal will be utilized as the indexing and querying layer for Polygon’s zkEVM network.
- Defillama is one of the most prominent DeFi analytics websites, aggregating on-chain data related to DeFi from a number of networks.
- DeBank is an asset dashboard service specialized for the EVM networsk that displays the assets of a specific wallet in a convenient UI. In addition, it offers a messenger service and other features.
- Dexscreener is a service that analyzes and provides data from DEXs that are harder to access than CEXs, allowing users to view price charts of tokens that are only listed on DEXs or access data on various liquidity pools.
- L2beat shows information about various Ethereum Layer 2 networks, where users can view quantitative data such as TVL, Tx count, etc. as well as qualitative analysis of risk.
- Dune is an on-chain data analytics platform that allows users to query and visualize data from various networks.
Recently, Polygon outlined its vision to build a network of ZK-powered L2 chains with a roadmap called Polygon 2.0. While more details will be revealed at a later date, we can expect the Polygon ecosystem to expand around the Polygon zkEVM and related technologies. For such future roadmaps, the initial Polygon zkEVM ecosystem will play a very important role. As there has been recent proposal to expand Rocket Pool’s rETH into Polygon zkEVM, it is expected that more Dapps and users will be onboarded to Polygon zkEVM in the future.
Four Pillars is a global crypto research firm based in Seoul, consisting of the most influential blockchain researchers in Korea. Through robust research and governance skills, it helps various market players easily onboard to the blockchain industry by offering high-quality research articles while supporting protocols in their expansion into Korean and global markets.
Writer: Steve Kim, Co-Founder and CEO at Four Pillars
Reviewer: 100y, Co-Founder and Publication Lead at Four Pillars
#Polygon #Modular Blockchain #zkEVM