Polynomial Chain: An Optimized L2 for On-Chain Derivatives
Polynomial Chain is an L2 designed to hyperscale on-chain derivatives trading, tackling the scalability and liquidity challenges present in the current DeFi ecosystem. It offers ultra-fast settlements and unified liquidity, setting a new standard and emerging as the premier derivatives super chain for DeFi.
Polynomial started as a Perpetuals protocol on Optimism but quickly ran into limitations that make on-chain derivatives trading inefficient.
General-purpose Layer 2s often fall short for specialized protocols — not just in terms of cost or scalability, but due to a deeper issue: liquidity fragmentation.
Perpetuals are a proven product-market fit in crypto, with $100 billion in daily trading volume, yet only 2–3% of that happens on-chain. Despite advancements in rollups, account abstraction, and chain abstraction, CEXs continue to dominate this space. The reason? Liquidity is fragmented across multiple chains and rollups, forcing developers to spend more time managing liquidity than driving innovation.
Beyond fragmentation, infrastructure constraints also pose challenges — Polynomial had limited control over execution speed, order flow, and user experience. Worse, gas spikes and congestion could lead to unintended liquidations, even when the broader market was stable.
To solve this, Polynomial built its own Layer 2 (using the OP Stack) — an infrastructure optimized for on-chain derivatives. What started as an in-house solution for its perps DEX is now a fully-fledged chain where developers can focus on building, not fixing liquidity issues.
By owning its infrastructure, Polynomial improves scalability, user experience, and capital efficiency. With seamless in-chain bridging, account abstraction, and a unified liquidity layer, the Polynomial Chain lays the groundwork for a more efficient, scalable, and accessible on-chain derivatives ecosystem.
The goal here is simple: to provide a better user and protocol experience. With best-in-class UX and liquidity while staying on-chain.
Before we proceed further, here’s a quick look at the numbers
Liquidity Layer: The Backbone of the System
Polynomial Chain’s native liquidity layer is crucial for its operation. Here’s how it works:
- Unified Liquidity Pool — Liquidity is pooled together, allowing multiple financial products to draw from the same source. This eliminates fragmentation and enhances capital efficiency.
- Asset Support — The liquidity layer currently supports USDC, sUSDe, and sDAI, with plans to include more assets over time.
- Delta-Neutral LP Strategy — In order to maintain stability and reduce risk, Polynomial employs a delta-neutral approach, ensuring LPs benefit from consistent returns without excessive exposure.
By unifying liquidity, Polynomial ensures LPs can maximize capital efficiency while traders benefit from lower costs and faster execution. With 60% of trading fees distributed to LPs, liquidity providers are directly rewarded for sustaining the ecosystem. Designed initially for perps, this liquidity layer is built to scale — supporting prediction markets, options, and structured trading products in the future.
Key Features
At the heart of Polynomial Chain’s design is a strong commitment to user experience. Trading on-chain comes with its own set of challenges — complex wallet setups, slow bridging processes, and unpredictable fees — but Polynomial eliminates these pain points through features outlined below:
- Seamless in-chain bridging: Allows users to move assets without relying on third-party tools, making trading feel effortless.
- Account abstraction: Removes the need for constant transaction approvals through smart contract wallets, session keys (temporary keys that allow users to sign multiple transactions within a defined session without repeated approvals), and gasless reward claims, simplifying the trading experience.
- Shared Liquidity: As part of the Superchains, Polynomial taps into shared liquidity from Base, Mode, and other connected chains, positioning itself as the liquidity hub for derivatives trading and beyond.
Here’s how it works in practice: Bridging assets like USDC, sUSDe, sDAI, and USD0++ from Ethereum, Optimism, Base, and Arbitrum is seamless — no third-party tools required.
Depositing funds into your trading account (a smart contract wallet) takes just a few clicks, removing the friction seen on traditional on-chain platforms.
Stake to Earn
Staking in the Polynomial liquidity pool lets you earn a share of the platform’s trading fees while contributing to its growth. 60% of all fees from Polynomial Trade flow into the liquidity layer, and 100% of those fees are distributed to stakers.
Beyond fee-sharing, staking also earns you points, unlocking future benefits. It’s a straightforward way to participate in Polynomial’s growth while earning passive rewards.
Beyond staking, Polynomial offers additional programs designed to engage and reward its users:
- Referral Program — Incentivizes users to bring others onto the platform.
- VIP Program — Offers lower trading fees for high-volume traders.
- Points Program — Allocates points based on trading activity, encouraging long-term participation.
These programs aim to enhance user engagement and retention, contributing to the broader growth of the chain.
Polynomial’s newest initiative, Trade Fest Season 2, kicks off on February 1, offering traders another opportunity to engage and earn rewards (180.000 OP over 12 weeks as prizes for stakers and traders)
Need codes? Use ours
- IWLFCS
- EP7D53
FYI, Rabby has integrated the Polynomial Chain.
Final Takeaway
Polynomial is shaping up to be the go-to chain for on-chain derivatives trading by addressing key challenges:
- Innovative features — Unified liquidity, seamless bridging, account abstraction, and delayed orders to enhance LP protection.
- Market potential — Perps see massive trading volumes, yet remain underrepresented on-chain — Polynomial is positioned to change that.
- User-first approach — A frictionless experience with strong incentives, bringing CEX-like efficiency to on-chain trading.
If you find this helpful, please support us by subscribing/ following.
Everythingblockchain — Freethinkers, Writers ✍, Blockchain explorers 🔭
In pursuit of simplifying the different blocks of the chain metaverse
Socials
The information provided through this work is intended solely for educational purposes and must not be treated as investment advice. Any lapses in presenting any of the information correctly are ours alone. We disclaim any liability associated with the use of this content.
