Polygon, the most popular Layer 2 scaling solution for Ethereum – has recently seen the implementation of one of the biggest updates on its mainnet. This is EIP-1559, which will cause MATIC tokens to be burned as part of each transaction.
According to a report last week, Polygon, the Ethereum Layer 2 network, will implement EIP-1559 shortly. At first, the project focused on adding functionality to the Mumbaitest network. On January 18 at 3 am UTC, the mainnet received this upgrade, which proceeded well.
The primary update to the Polygon network will be the addition of a deflationary mechanism for token burning. It will eliminate the native MATIC token from circulation while improving fee predictability.
EIP-1559 replaces the first-price auction as the primary method of determining fees. Instead, it sets a basic fee for transactions that will be included in the next block and a priority fee that will allow them to be expedited. After then, the base fee will be burnt, which varies according to the network’s overload.
The largest exchanges, including Binance, supported the update itself, and it took place at the height of block no. 23,850,000.
MATIC token price
At the time of writing, the MATIC price has lost 7.8% in the last 24 hours. Nevertheless, this is the result of general market sentiment. Therefore, it is worth looking at the long-term consequences of the introduction of the combustion mechanism.
Unlike Ethereum, MATIC has a steady supply of 10 billion tokens. Thus, any reduction in the total number of tokens available on the market will have a deflationary effect.
The team has already simulated the potential impact on MATIC’s total supply, taking into account Ethereum’s experience since the London hard fork. Its results suggest that 0.27% of the total supply of MATIC will be removed from circulation each year.
The analysis can be found under this lick. The official post also reads that:
Combustion is a two-step 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. At the time of writing, however, it has not yet been launched.