🎙️Polygon's Hamzah Khan Wants to Make DeFi More Accessible Than Running Water

This week on The Defiant Podcast we speak with Hamzah Khan, Head of Defi at Polygon. Polygon is one of the biggest players in DeFi with $1.5B in TVL and in the blockchain space in general. Hamzah begins by giving us a brief overview of the Polygon ecosystem.

Despite the bear market, Polygon has been forging high-profile NFT partnerships with companies like Instagram and Reddit. Its network was also used by JP Morgan’s Onyx unit to conduct the first interbank on-chain forex swap and was chosen by Robinhood to debut its Web3 wallet. We dive into the details of these partnerships with Hamzah.

Unlike its sidechain counterpart, Polygon zkEVM will be directly built on Ethereum to serve as a Layer 2. Hamzah goes on to explain the main differences between the two scaling solutions and breaks down the advantages and disadvantages of each.

And finally, Hamzah shares his insights into the DeFi ecosystem on Polygon —where most of the activity happens and the innovations he’s excited about.

🎙Listen to the interview in this week’s podcast episode here:

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What follows is a summary of the podcast episode.

To start, I'd like to make sure everyone has the same idea of how the Polygon ecosystem works since it has a few different parts. Polygon can be categorized into two sectors: public chains and private chains. On the public chain side, there's the proof of stake chain and the zkEVM. Then there are the private chains called ‘Supernets’.

What are these private chains like? How are they actually built?

What we have isn't private chains. I meant private servers, like dedicated servers. So a dedicated server is a shared server. I think that's a better comparison since a shared server is like your POS system or any other chain.

On the other hand, a dedicated server is like one chain where you can set up your own validators and block times. We use a framework called Polygon Edge to make it. This lets you make your own chain.

The docs are public. Everything is public. You can start making your own DeFi platform on that right away.

What's the point of having a project or an application run on these dedicated servers? Why have a blockchain in the first place if you're not going to build on a public blockchain?

The non-custodial aspect is very interesting. Big companies know this, which is why when Meta and Instagram did their Instagram NFTs on Polygon, they were very clear from the start that they wanted to do it on open infrastructure.

People have to be able to add a composability layer into royalties and new monetization techniques can be created when all of those things are on one layer.

It is incredibly difficult to run your own chain. There's no doubt about that. But bringing traction onto that chain is even more difficult and only possible when you have some level of composability, some level of transfer between things.

I would ideally want things to be on the public blockchain, but that way you cannot scale it up the whole population.

How are you thinking about bridge security?

Over the past five or six months, we've added more people to the security team. There are a lot of good security experts from top industry teams. And it's not just Polygon; we also do this through third parties.

Unify has been very helpful with some bugs and white hat bounties. We're putting more and more money into that. I think that Polygon is one of the bigger bounties and funding on Unify.

Why did Polygon choose ZK technology instead of Optimistic rollups? Both are very new, but Optimistic rollups have been around a little longer and have been battle-tested and are probably the most useful L2s right now.

The biggest problem with Optimistic rollups is that you will have to rely on a third-party bridge if you want to make it a widely used chain network.

We were big fans of ZK technology in general, not just for its scalability, but also for its zero-knowledge proofs as a technology. Zero-knowledge proofs are very important, not just for scalability and EVM, but privacy.

Reddit recently announced it will use Polygon to launch its avatar NFTs. There was also a big announcement a couple of weeks ago with Robinhood using Polygon for the launch of their crypto wallets. Can you go over the details?

Seventy to eighty percent of the people who use their custodial app every day have traded crypto at least once. So that's how many people use it. Earlier in the year, they wanted to launch a non-custodial wallet.

They believe in the technology of blockchains and that this can power a lot of new tokens and new assets. They launched a non-custodial wallet on the Polygon blockchain, exclusive to Polygon.

Right now, they've said that there will be about 10,000 beta users. But by the end of the year, everyone should be able to use it.

Reddit, FinTechs, and RobinHood are the biggest distributors of anything that we build on-chain. Anyone who is building on Polygon or DeFi, or who is thinking about building on DeFi, should look into this opportunity.

It's been clear that the best way to get crypto to a large number of people is to form partnerships with big companies that can bring on millions of users at once, rather than building more native apps that attract users.

My goal with Polygon DeFi, is to make DeFi finance more accessible than running water. That is the goal in 10 years. If you're able to achieve something like that then we are good. Otherwise, we are just building one new DEX, one new yield farm. That's not how you change and you empower the big masses of the world.

- Hamzah Khan

So far, a lot of these FinTech announcements about crypto have said, "You trade crypto within our system, and then you cash out to your bank." And that's neither crypto nor DeFi.

Robinhood will be using 0x protocol which is like Matcha, an aggregator, to drive trades to all the DEXs that are on Polygon. So that is the goal. This will be a separate app. This will be a separate wallet which is a non-custodial wallet. Think of it exactly like Metamask. Think of it like Robin Hood's Metamask. It's as simple as that. But all the trades will be via 0x on Polygon. Whoever sends the most trades through 0x and has the best bid and lowest spreads on 0x will get the most volumes.

So RobinHood is effectively going to compete with Metamask?

Yes.

Wow. And this is mobile?

They will shout at me, I think. But should I show this?

Sneak peek of the new Robinhood non-custodial wallet.

You see I’m swapping BUSD for USDC. If I do it, I think it's done. So I sold some BUSD.

No confirmations, no gas?

No. Robinhood funds the transaction because gas is very cheap on Polygon POS.

The big change then is they've abstracted away all the like cumbersome confirmations and gas approvals. I wonder how they're handling the seed phrase, because you'll have to make it accessible and recoverable at some point, right?

I have not looked too much into it. They're trying ways to completely abstract the seed phrase saving and all of that. You can sign in via Google and all those things. I think it'll be via password or your Google IDs, things like that.

I think it's really bullish for DeFi that some of the biggest brains out there in UX are trying to figure out this.

Yeah, it took me only like 15 seconds to get into the wallet and you can back it up, back up my seed phrase into the cloud, and encrypt it via face ID and stuff like that.

And then to fund it, did you have to make a bank transfer?

So right now I think they only show transfers from Robinhood, which is the big app. So you can move funds from there to here. I'm sure they'll be integrating some fiat on-ramp to go from credit card to bank to on-chain.

That would be a limitation if you have to be a Robinhood user to use a non-custodial app as only the US would have access.

Besides Robinhood what does the DeFi ecosystem on Polygon look like? Where is most of the activity coming from? What kind of innovations are you seeing?

Clayton Chain
Kucoin wallet
Superfluid
Teller Finance
Roof Finance

I'm super interested in how these under-collateralized loans develop in DeFi. I agree that this makes the space more accessible. If DeFi requires collateral, only wealthy people can utilize it.

However, external risk is introduced. You're adding reality into DeFi. Unsecured loans and derivatives are typically associated with 2008. This is how we messed up. So I see the point of skeptics. But I also think it's the best way for DeFi to grow.

- Camila Russo

To get to this goal that you mentioned of having open finance be more accessible than running water, what do you think is missing?

What would you like to see built on Polygon or elsewhere?

Credit for sure. Credit drives real-world finance. But I think credit will take time, especially since there are so many moving parts.

One way of bridging the gap is by bringing these off-chain assets on-chain, tokenizing them and giving yield on that, and giving loans on top of that.

There is one solar market that does nothing but solar, and they are based in San Francisco. They are giving loans to farm teams in Africa and India to help them build solar farms. They already have seven or eight big farms that they run with their own money and do all the underwriting and other work. So that kind of thing is cool because it gives you real-world yield that isn't tied to anything else.

It looks like we are finally seeing more innovation happening in DeFi. There was a time last year, and I don't know if you agree, when the space seemed a little bit stagnant.

I remember you were saying this on one of your podcasts, multiple times you said that last year.

What other news and announcements can we expect from Polygon in the next couple of months? What does the roadmap look like?

People will see that Polygon's technology is superior. Because of zkEVM, SuperNet, and all of these other things, Polygon will become one big modular Ethereum scaling solution that anyone can come in and build for.

In terms of new announcements and whatnot, there's a lot of institutional DeFi coming. A lot of things are ready on the PR, which will bring a lot of new users to the chain and make risk management more interesting. So I'm pretty excited about that.

Crypto in Latam is very important to me.

What would you like to see Polygon look like? Let's just say a year from now. Like how big is it? What kind of people use it?

Like, I don't put a number on the number of users because I don't know what this macro market is going to look like.

What I'm more interested in is being the first choice for builders. The North Star for everything that we do, whether it is tech, BD, PR, marketing, or whatever it is will always be that because these Dapps are the future and not the chains. Whether it is NFT gaming, PFPs, DeFi, FinTech institutions, tokenization, enterprise, whatever it is, that's how you onboard the next a hundred million users on-chain.