Many users, investors, and businesses in the world of cryptocurrency and blockchain have encountered the problems of network congestion and higher transaction fees. Layer 2 scaling solutions have come up as a reliable solution to these problems, and the Polygon Network is an example. The following discussion will help you learn about the use cases of Polygon and how it matters in the future.
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Importance of Layer 2 Solutions
The understanding of different uses of Polygon Network becomes easier with an overview of the importance of layer 2 solutions. Layer 2 solutions basically refer to blockchain networks working in parallel to the main blockchain network. In the case of Polygon, the main blockchain is the Ethereum network. The layer 2 blockchain runs in parallel to the main blockchain network, although while paying attention to processing transactions outside the blockchain network. As a result, you can find the benefits of lower transaction fees and higher transaction speed due to lower network congestion.
Layer 2 solutions can successfully create a communication channel between the two networks for exchanging data and tokens. They can help in exchanging transaction data to the parallel blockchain network from the main blockchain. This helps in executing transactions at a fraction of the original cost with better speed, albeit without any threats to Ethereum mainnet. The recently increasing interest in Polygon blockchain use cases has a lot to do with how it works. Ethereum is the most popular platform for any developer who wants to create decentralized applications. It offers a massive and highly secure infrastructure along with the benefits of innovative tools.
However, the popularity of Ethereum as a suitable choice for developing dApps and, most recently, DeFi applications has turned into a problem. The demand for transactions on Ethereum has been responsible for clogging the network, thereby degrading the throughput. Now, the clogged network results in higher transaction fees, thereby making Ethereum blockchain accessible to the big investors only. Therefore, layer 2 solutions like Polygon are quite crucial for the growth of DeFi owing to benefits of scalability and interoperability.
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Working of Polygon
The answers to ‘how does Polygon work’ can set the ideal basis for you to figure out its use cases. Polygon Network works like much other Proof of Stake-based protocols with network nodes, staking, governance, and other operations. Here is a detailed outline of different essential components in the working of Polygon.
The first highlight of the Polygon Network is the use of Proof of Stake consensus. Proof of Stake consensus relies profoundly on a set of node validators for verification and validation of different transaction blocks. Rather than relying on the conventional Proof of Work consensus, Polygon use cases can ensure efficient use of processing power for creating new blocks.
In the Proof of Stake consensus, the token holders are responsible for validating and verifying transactions. The PoS or Proof of Stake algorithm ensures rewards for users with MATIC tokens. Users can choose the role of validator or delegator for earning the MATIC tokens, thereby implying an incentive-based model for securing the network.
You can become validators with a full node dedicated to validating transactions on blockchain. The validator would receive a share of the transaction fees for successful verification of transactions. Validators would also receive newly minted MATIC tokens for their efforts. On the contrary, malicious action by validators could result in penalties such as slashing of MATIC rewards.
Delegators in the Polygon blockchain use cases are basically a particular variant of public node. They can receive the MATIC of other people and use it for validating transactions. It is important to note that the delegator’s voting power is directly proportional to their delegated stake. Delegators don’t have to face complications like node validators, albeit with limited rewards.
The Proof of Stake bridge of Polygon is also another important highlight in ‘how does Polygon work’ and presents a flexible channel between two blockchain networks. The Proof of Stake Bridge is actually a set of smart contracts which help in transferring or bridging assets to the Polygon side chain from Ethereum blockchain.
Polygon Network relies prominently on the PoS Bridge as it is important for transferring assets from Ethereum blockchain the Polygon. The transferred assets are essential for interacting with the different decentralized applications and DeFi platforms associated with Polygon Network.
Even if you have to pay the transaction fee for using the Polygon Bridge, it can help you access cheaper transactions on the Polygon Network. In addition, Polygon Network also uses a Plasma Bridge or side chain, which helps in transferring MATIC tokens or ERC-20 and ERC-721 tokens.
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Polygon Use Cases – A Deep Dive
The working of Polygon Network showcases a brief overview of its capabilities in ensuring faster and more cost-effective transactions. Discussions around the uses of Polygon have been surfacing recently with an emphasis on its role as a scaling solution. However, Polygon can serve a broad range of use cases depending on its ability to ensure better scalability in blockchain networks.
Polygon can help you achieve almost the same utility as Ethereum blockchain, albeit without the slow transaction speed and high transaction fees. The Polygon Network has become something more than just a basic scaling solution, with a broader and more complex ecosystem. Users, as well as developers, could explore a comprehensive range of use cases, such as becoming node validators or delegators.
In addition, the polygon blockchain use cases also involve the deployment of Ethereum-supported blockchain networks and using Ethereum-based decentralized applications. Interestingly, Polygon also helps in minting non-fungible tokens and stake MATIC tokens. The credible use of Polygon examples in popular projects such as yield farming protocols, Curve Finance, or Aave also verifies its functionality. On top of it, decentralized exchanges like SushiSwap also leverage the Polygon Network.
Polygon can also serve as the base blockchain for different DeFi protocols rather than the Ethereum blockchain. For instance, OpenSea supports the selection of Polygon as the main network in place of Ethereum, and users can rely on it every time they trade in NFTs.
Here is an outline of the notable use cases of Polygon alongside the examples to prove its capabilities.
The list of Polygon use cases would obviously draw emphasis on digital payment use cases. The basic design of Polygon Network serves crucial advantages for helping decentralized applications in speeding up payments. Polygon can empower decentralized apps with almost real-time payment settlement capabilities.
The network supports improvements in payment speed by leveraging a software development kit or SDK and specialized application programming interface or API integration. The process can support decentralized applications, users, and merchants for accepting instant payments with any form of cryptocurrency. As of now, the Polygon Network aims to revolutionize digital payment use cases for decentralized apps in three different phases.
Polygon would enable payments with Ethereum and ERC-20 tokens. Subsequently, the uses of Polygon in payment systems for dApps would focus on cross-chain multi-asset token transfers. The Polygon Network would also serve useful for leveraging atomic swaps in collaboration with different liquidity providers. Most important of all, Polygon also aims at introducing a fiat-based payment system for dApps with the support of fiat liquidity providers.
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The uses of Polygon would also mark a significant impact on the DeFi sector. Presently, Polygon is working on a mechanism for allowing merchants to evaluate credit ratings of the users signed up for using the platform. The process involves assessment of the transaction history of users to figure out their credit ratings.
On top of it, you must note that Polygon has a total value locked or TVL estimate of almost $5 billion in the DeFi space. The active use of Polygon for accessing dApps and the DeFi ecosystem has spurred the growth of the network. It has become closer to other top competitors, Ethereum and Binance Smart Chain, on the grounds of its efficiency for decentralized finance.
Polygon has maintained steady growth, and the primary reason would point at the Polygon examples in the biggest DeFi platforms. The two biggest DeFi platforms, Compound and Aave, have adopted Polygon. As a matter of fact, Aave, the DeFi lending protocol, has over $1 billion locked on Polygon markets in terms of liquidity, encompassing more than 8000 users. The capabilities of Polygon for offering scalable and interoperable infrastructure help users interact seamlessly across different DeFi platforms.
The interesting entries among Polygon blockchain use cases would also focus on how it enables NFT trading. Polygon Network brings the assurance of low transaction costs in purchasing and selling NFTs. Most important of all, it helps in conducting NFT trades through the biggest and most popular NFT marketplace, i.e., OpenSea. Now, users can develop, purchase or sell non-fungible tokens on the Polygon Network. You can configure Metamask crypto wallet for working on the Polygon Network and pay the transaction fees with the native token of Polygon, MATIC.
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Polygon launched the Polygon Studios division in July 2021 with a vision for transition of gaming to web 3.0 from web 2.0. The new division focuses on supporting developers interested in creating games by using Polygon. As a matter of fact, Polygon Studios can guarantee support for developers in the form of marketing assistance, support from community members, and investments. Polygon is one of the top choices for game developers in the world of blockchain gaming.
The effectiveness of Polygon use cases in gaming emerges largely from the network’s scaling capabilities. It can help in improving speed and performance of blockchain-based games. As of now, blockchain games are far behind traditional PC and console games, especially in terms of network latency and slower transaction speeds. However, the combined power of the Ethereum network and Commit Chain scaling technology of Polygon can resolve these concerns.
Therefore, developers and gamers could use the Polygon network for creating and playing blockchain-based games with more ease. The contributions of Polygon examples in the domain of blockchain-based gaming have arrived at the perfect time. Non-fungible tokens and NFT marketplaces have been fuelling the growth of blockchain-based gaming and the crypto industry in general.
Polygon Network can also become a part of the future of blockchain-based gaming. It would allow faster and cost-effective exchange of gaming NFTs. As many gamers continue purchasing, selling, and trading different in-game NFTs and collectibles, Polygon can serve as an ideal platform for better efficiency.
You can trade in-game NFTs with lower transaction costs on the Polygon network. Interestingly, some of the renowned blockchain-based games and NFT dApps have leveraged Polygon to their benefit. Examples such as Cometh, Neon District, Zed Run, and Aavegotchi used Polygon for scaling up their user experiences.
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Other Important Use Cases
The details of different Polygon use cases show that it is more than a layer 2 scaling solution. It uses its capability for facilitating scaling and interoperability to its advantage in almost all use cases. On the other hand, Polygon Network can also address many other use cases. Polygon can serve as crucial improvements in the settlement times required for decentralized exchanges.
As a result, it can serve better opportunities for faster and more cost-effective trading. The notable examples of decentralized exchanges leveraging Polygon Network to offer faster and more cost-effective trading include ComethSwap, Quickswap, and Dfyn. These decentralized exchanges, or DEXs, have experienced profound growth in transaction volumes alongside user activity through functionalities of Polygon.
Furthermore, the effectiveness of Polygon use cases in the case of protocols such as mStable and Curve Finance is beneficial. These protocols have helped in ensuring lower costs and slippage in stablecoin swaps. Another important highlight in the design of Polygon refers to its Plasma Bridge or scaling solution. The plasma scaling solution can help in speeding up cross-chain atomic swaps for tokenized as well as non-tokenized assets.
In addition, majority of decentralized applications require unique methods for signing transactions without offering private keys. It is an essential practice for safeguards against user privacy issues. Polygon can serve the solution with the help of its scalability improvements. It can enable open identity frameworks for designing and using decentralized applications.
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The capabilities of Polygon Network are clearly evident in the understanding of ‘how does Polygon work’ and its different components. With a native token, Polygon is a unique layer 2 scaling solution which has evolved for different use cases. If you look closely, all the use cases of Polygon leverage different aspects of its functionalities.
For example, NFT and Gaming use cases are possible due to the flexibility for creating, buying, and selling NFTs. You can interact with NFTs through OpenSea on Polygon Network. Polygon is no longer only a scaling solution as it includes many decentralized applications and DeFi platforms running on it.
The advancements in the design of Polygon signify promising highlights for DeFi. How? Most of the use cases of Polygon focus on the DeFi sector. It has all the right ingredients for defining the future of DeFi and future of crypto with improved scalability. Explore to learn more about the importance of Polygon network to understand its use cases in detail.
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*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research!