Polygon – one of Ethereum’s most popular layer-2 scaling solutions – saw its mainnet implement one of the biggest upgrades recently. Namely, it is Ethereum Improvement Proposition 1559 that will start burning MATIC tokens as part of each transaction.
Polygon EIP-1559 . integrates
cryptopotato It was reported last week that EIP-1559 was about to go live soon. The team officially announced that the update is rolling out on January 18th at 3 am UTC, following the successful upgrade of its Mumbai testnet.
Among other things, perhaps the most significant change to Polygon’s network is the introduction of a deflationary token burning mechanism that will begin burning the network’s native MATIC tokens while improving fee visibility.
EIP-1559 does away with first price auction as the main mechanism for fee calculation. Instead, there is a discrete base fee for transactions to be included in the next block and a priority fee to speed up processing. The base fee, which fluctuates based on network congestion, is then burned. – reads the official announcement.
The upgrade itself was supported by major exchanges including Binance. This happened at block height 23,850,000.
Impact on MATIC’s Price
At the time of writing, MATIC price is down 7.8% in the last 24 hours. Nevertheless, it is worth taking a look at the long-term effects of introducing a burning mechanism.
Unlike Ethereum, however, MATIC has a fixed supply of 10 billion, so any reduction in the total number of tokens available on the market will certainly have a deflationary effect.
Taking Ethereum’s experience since the London hard fork, the team has already simulated the potential impact on MATIC’s total supply and the findings suggest an annual burn of 0.27% of MATIC’s total supply.
The analysis itself can be found here.
The official post also reads that:
Burning is a two-stage affair that starts on the Polygon network and ends on the Ethereum network.
There is also a public interface where users will be able to monitor the entire process, but at the time of this writing it has not been made live yet.
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