My DeFi diary — day 8: crossing the Polygon bridge

This series is a look back at the last few months as I’ve made my way into the crypto space, and particularly into the DEFI space, as a complete newbie. I aim to catalogue the moves I’ve made, the tech I’ve experimented with, and the mistakes I’ve made along the way. I include some details around fees and logistics, hopefully to be useful to others wanting to follow in my footsteps.

1 May 2021 15:32 ETH @ $2,947.80 Gas Price: 29 Gwei

In my last two posts I talked about liquidity pools and liquidity mining , and how I had put most of my crypto into a MATIC-ETH pool on Uniswap, and then staked the LP tokens via Zapper into something called BAO. (If that all sounds like Greek, go back and read the other posts!)

However, I was left feeling like my funds were too concentrated in one place, and thus open to a whole range of risks — firstly the respective price changes of ETH and MATIC (both volatile cryptocurrencies), secondly the prospect of impermanent loss if the two tokens started moving in different directions, thirdly the risk of some kind of hack or problem on Uniswap. This was not good portfolio management on my part!

Part of what was making it difficult for me to diversify was that I just couldn’t stomach the high transaction fees each time I wanted to move my funds from one protocol to another — in previous posts you will have seen transaction fees sometimes as high as $90 for one of these moves.

With this in mind, I decided to move some of my funds onto the Polygon sidechain. If you’re interested in the technical details, you can read this article here. For now, let’s just say that this sidechain is linked to the Ethereum blockchain, but one can bridge one’s digital assets across to it, and then transact far more quickly and cheaply, on a different set of DeFi apps, but with the same (or similar) range of cryptocurrencies, and with a lot of the same functionality as on the Ethereum chain.

Let’s look at this practically. There are a growing number of options for how one can bridge assets across to Polygon, but the original one that I used was the Polygon bridge itself (see below).

Bear in mind that for these initial transactions I am still on the Ethereum blockchain — so in my Metamask you would see that Ethereum Mainnet is selected:

Just as I would for any other Decentralized app (Dapp) in Ethereum, my first transaction is to grant approval to the Polygon bridge to spend my MATIC. This approval cost me $3.52 in gas fees.

My next transaction was to actually transfer $510.82 worth of MATIC over the bridge. MATIC at that point was worth about $0.75 a coin. The transaction fees for this transaction were $10.82 (note this is still technically an Ethereum network transaction).

Once I had transferred money across, I immediately started transacting on the Polygon network — what a pleasure to see transactions go through so quickly, and virtually for free (a fraction of a cent, mostly). One of the things one has to do (if you’re using Metamask) is switch your network each time you want to transact on Polygon as opposed to Ethereum. There are some other technicalities that can catch you out, so best to watch some of the explainer videos here.

One of my first transactions was to deposit some DAI stablecoin on the AAVE platform (see below):

You can see from their total market size (over $7 trillion) that they’re one of the biggest and most established players in the DeFi space. They have a huge presence on the Ethereum mainnet, but when they set up an app on the polygon network in April it was a huge vote of confidence in the sidechain.

You might also notice if you followed my transaction link above, that we now use a different blockchain explorer, given that we are using a different blockchain. However, the features and the principles remain very much the same as when we were using Etherscan on Ethereum.

Just a couple of notes of caution, so that you can avoid the mistakes that I made:

1 — be aware that transactions on the polygon network are paid for in MATIC. MATIC is the native coin of the network, just like ETH is the native coin of the Ethereum network. So make sure that you always keep some MATIC in your wallet (i.e. don’t deposit all of it into AAVE like I did and then get stuck unable to make any transactions!).

2 — be wary of using the plasma bridge, and rather use the PoS bridge when transferring across from Ethereum. We won’t go into technicalities here, but let’s just say when I used the plasma bridge (unknowingly) to bring across some DAI, I wasn’t able to do anything with the Plasma-DAI that I ended up with, and I had to send it back across the bridge, which took 7 days to clear! (the PoS bridge clears in a matter of minutes)

In my next post I will go into more detail on how I now looked to start diversifying my portfolio, and exploring all of the different protocols and Dapps on the polygon network — something I’m still very busy with today! Stay tuned.

Got any questions or comments? Pls post below — keen for this to be a two way conversation! Please also applaud and/or follow if you’re enjoying these posts.