MATIC supply is likely to become deflationary once the burn begins as estimated by Team Polygon.
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The Ethereum upgrade that introduced partial burning of network fees last August went live on the Polygon layer two scaling network.
Ethereum’s EIP-1559 upgrade shipped with the difficult fork in London last summer and has been successful in terms of gas price prediction and network fee burning. The upgrade has now been launched on the Polygon layer two scaling network in an effort to improve “fee visibility”. It worked about an hour ago at block 23850000.
The Polygon team announced the upgrade date on January 17, following a successful rollout on the Mumbai testnet.
The EIP-1559 upgrade introduces the same fee recording mechanism to Polygon which resulted in the destruction of MATIC tokens. It also eliminates the price-first auction method for calculating network fees, resulting in better cost estimates but no reduction in gas prices.
“Burning is a two-step work that starts on the Polygon network and completes on the Ethereum network. ”
The team claims that, like Ethereum, the MATIC supply is likely to become deflationary with .27 percent of the total supply burned annually by estimates. There is a fixed supply of 10 billion MATIC tokens with 6.8 billion currently in circulation.
“Deflationary pressures will benefit both validators and authorizers as their rewards for processing transactions are calculated in MATIC,” it added before claiming that the upgrade will also reduce spam and network congestion.
Despite being a two-layer network, Polygon has suffered from its own gas crisis recently. Earlier this month, Polygon gas fees skyrocketed according to Dune Analytics, resulting in some validators failing to submit blocks. The surge in demand was due to a DeFi productivity farming game called Sunflower Land, which rewarded early adopters before the degens lost interest.
Related: This is how Polygon is defying the limitations of Ethereum
Since going live on Ethereum about six months ago, the upgrade has resulted in a burn of 1.54 million ETH so far according to the write tracker. At the current price of ETH, this number comes in at around $5 billion. The tracker also predicts that Ethereum issuance will deflate -2.5% annually once the “consolidation” occurs and proof of stake becomes the primary consensus mechanism for the network.
The MATIC price has dropped 9% on the day and is down to $2.22 at press time according to CoinGecko.