DEFI TUTORIAL

DeFi Tutorial: How to participate in low-risk stablecoin liquidity mining on Polygon (MATIC)?

2021/5/31

This article is authorized and reproduced from Zombit Notes. The original article can be found here.

Due to the minimal risk of price fluctuations and the ability to earn rewards by providing liquidity for stablecoins in DeFi, it has always been a conservative choice for many people in their cryptocurrency asset allocation.

However, with the increasing transaction fees on Ethereum, especially during congested network times, just withdrawing funds from a wallet could cost over $10 worth of ETH as a gas fee, not to mention executing contracts. For farmers with smaller assets, it may take a significant amount of time just to earn back the high fees, making it very unprofitable.

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Therefore, the issue of high transaction fees on Ethereum has always been a problem that developers urgently want to solve, and Layer 2 sidechains are one of the solutions. Recently, Polygon has become the focus of the market, and many projects have begun to gradually support the Polygon network, allowing users to engage in liquidity mining with low fees. This article will guide readers step by step on how to participate in liquidity mining through Polygon, using Curve and Sushiswap as examples.

There are two points to note:

When transferring from Ethereum to the Matic Network, it is done on the Ethereum network and still requires ETH. This means that during the initial transfer, high Ethereum gas fees will still be incurred, and this cost should be taken into account when calculating.
Transferring back from Matic to Ethereum takes some time. In the author's test, it took approximately three to four hours to complete, but there have been reports in the community of it taking several days. Therefore, it is recommended that these funds should not be moved frequently to avoid getting stuck.

※ This article will use the Metamask wallet, which is the most commonly used wallet by Ethereum users, as an example.

Table of Contents

Step 1: Add Matic Network to Metamask

Open the Metamask wallet, click on the network list in the red box, and select "Custom RPC."

Enter the Matic network information as shown in the image and click "Save":

Network Name: Matic Mainnet

New RPC URL: https://rpc-mainnet.maticvigil.com/

ChainID: 137

Symbol: MATIC

Block Explorer URL: https://explorer.matic.network/

Now, when you open the network list, you will see the Matic network available for selection!

After selecting, you will see the wallet page with MATIC as the gas fee, indicating completion!

Step 2: Transfer Ethereum Assets Using Matic Bridge

※ This step is still carried out on the Ethereum network.

Unlike BSC with Binance supporting BEP20 tokens or Solana with FTX supporting SPL tokens, Matic does not have token forms supported by major exchanges, so asset transfers between different chains rely on Bridges.

Next, we will use Matic Bridge to transfer assets from the Ethereum network in Metamask to the Matic network.

First, go to Matic Wallet

Upon entering, it will prompt to connect the wallet, choose "Metamask."

Choose "Next."

Choose "Sign."

After completion, you will see the Matic network wallet.

Next, prepare three types of coins in the Metamask wallet: ETH, MATIC, and a stablecoin for mining (using USDT as an example in this article). If you don't have MATIC, consider buying and withdrawing from FTX or Binance to your wallet.

Once ready, you can start following along with us to bridge!

In the top right corner of the wallet page, you will see the functions provided by Matic: Matic Bridge and Staking. Matic Bridge is used to convert assets between different networks (chains), while Staking allows you to stake MATIC for rewards. Here, we choose "Matic Bridge."

In the Matic Bridge interface, you can see the direction of exchange. This time, we are transferring coins from the Ethereum network to the Matic network, so it is From Ethereum to Matic Network. If you want to reverse the direction, select the Switch in the middle to change the direction.

Click on the red box to select the type of coin to transfer to the Matic Network.

Of the three types of coins we prepared earlier, the ones to be transferred to the Matic Network are MATIC and USDT. ETH is used to pay the gas fee for using Matic Bridge, so it does not need to be transferred to the Matic Network. In the Matic Network, MATIC will be used as the gas fee.

As an example, let's use MATIC for the transfer. Enter the desired amount to transfer and click "Transfer."

It takes approximately 7-8 minutes to transfer from Ethereum to Matic. Click "Continue."

Here, you will be informed about the approximate transfer fee, which is the total of two numbers (Approve + Deposit).

Click "Continue."

Here, the wallet needs authorization. Click "Confirm."

※ Note the Gas Fee issue here. Click "Edit" to adjust, and it is recommended to set it to "Fast." For the Transaction Fee part, click "Edit" to select

In the first transaction (Approve), wait a moment.

Once the Approve is completed, click "Continue" to proceed with the next transaction.

The wallet needs authorization. Click "Confirm."

※ Note the Gas Fee issue here. Click "Edit" to adjust, and it is recommended to set it to "Fast."

Enjoy a cup of coffee while waiting for the transaction to complete. (It may take longer during Ethereum congestion.)

Once confirmed, the wallet will be updated in about 7-8 minutes.

Completion!

Similarly, transfer USDT following the same process, and you will see it in your wallet once successful.

If you want to transfer assets from Matic back to Ethereum, follow the same steps, just change the direction to From Matic to Ethereum at the beginning.

Step 3: How to Use Curve/Sushiswap on Polygon

You can find which Dapps currently support Polygon on this website. It is recommended to choose a well-known Dapp with a proven track record on Ethereum. In this article, we chose Curve and Sushiswap for demonstration.

Curve (Click here to visit)

Make sure the wallet's network is set to Matic.

Upon entering Curve, it will prompt to connect the wallet. Choose "Next."

Choose "Connect."

You will now see the Curve interface. In the red box, there is currently only the Aave pool, composed of three stablecoins: DAI, USDC, and USDT. You can participate in this pool with any of these coins. The reward calculation is Base APY + Rewards APY, with the current APY (annual percentage yield) around 29%.

To deposit USDT into the pool, click on Aave in the red box.

You can then select "Deposit" at the top.

After entering the coin and amount to deposit, select "Deposit & stake in gauge."

If you only select Deposit, you will only receive the Base reward.

Click "Confirm."

After completion, go back to the Curve homepage and select "My Dashboard."

You can now see the status of the assets in the pool and the current rewards in "My Dashboard."

The rewards are calculated as follows:

Base APY: By providing stablecoin LP to the pool, the value (reward) increases over time. When withdrawn, the value will have increased, and you cannot simply claim the reward.
Rewards APY: Rewards for staking that can be withdrawn at any time.

The entire deposit process only costs 0.0008 Matic, with very low fees.

Now, how do you withdraw stablecoins? Click on "Withdraw" in the Aave pool page.

In the red box above, since this pool consists of three stablecoins, you can choose which coin to withdraw, either in proportion or entirely in one type.

Click "Withdraw & claim" to withdraw all, or if you only want to claim the staked rewards, select "Claim WMATIC." The wallet operation is the same as for Deposit, so it will not be repeated here. Once complete, the assets will return to the wallet.

Sushiswap (Click here to visit)

After entering the website, connect your wallet.

Choose Metamask.

Click "Next."

Click "Connect."

Once completed, you can confirm a successful connection if "Polygon" is displayed in the top right corner.

Choose "Yield" from the top left menu to see the available pools. This time, we choose the USDC-USDT stablecoin pool for demonstration.

Unlike Curve, Sushiswap requires you to prepare both coins first. As an example, if you prepared USDT, you need to first exchange half of it to USDC.

Click on the token exchange in the top left menu. Select the currency to exchange on the left and enter the quantity on the right. Click "Approve USDT."

Click "Confirm."

After approval, click "Token Exchange."

Click "Confirm Exchange."

Click "Confirm."

Click "Close," and soon you will receive the exchanged coins!

Next, you need to add liquidity to get LP.

Choose "Pool" from the top left menu and select "Liquidity," then click "Add Liquidity."

Choose the coins on the left and enter the quantity on the right. If you want to join the USDT-USDC pool, select these two coins. Pay attention to the slight price difference in stablecoins to ensure it meets the system's requirements.

Click "Approve USDC."