The Ethereum upgrade that introduced the partial burning of network fees last August is now making a comeback. The Ethereum Polygon sidechain network is in the news today after it incorporated the same update (EIP-1559) in its ecosystem.
Club ‘deflation’
Folks, # EIP1559 Only a few hours left to go live on #Polygon main network.
The much-anticipated upgrade brings $MATIC record and improve charge visibility.
Learn more: https://t.co/7fRxSZIrdv
– Polygon | $MATIC (@ 0xPolygon) January 17, 2022
Polygon launched EIP-1559 to start burning MATIC tokens in real time. The official blog post read,
“The much-anticipated Ethereum Improvement Proposal 1559 implementation is coming to the Polygon blockchain, bringing with it native MATIC token burning and better fee visibility. ”
The update was activated at block height 23850000. It replaces Polygon’s previous fee system based on ‘auction by first price.’ The upgrade is now live on the layer two extension network to improve “fee visibility”. This will include a separate base fee for transactions in the next block. As well as a priority fee to increase processing speed is included here.
According to the post, burning is a two-step work that starts on the Polygon network and completes on the Ethereum network.
“The Polygon team has created a public interface where users can monitor and be a part of the burning process. ”
Here’s a brief overview of the site after the aforementioned upgrade goes live.
Source: Polygon
Since the price of gas is determined by supply and demand, it will not reduce the fees paid for transactions. However, it will allow users to get a better cost estimate since the base fee is the minimum price to include in the next block. This will result in fewer users overpaying.
Additionally, similar to Ethereum, EIP-1559 could also have a deflationary effect on MATIC, its native token. Mainly due to its fixed token supply of 10 billion tokens. According to the analysis, the EIP-1559 is estimated to burn 0.27% of the total MATIC supply in a year.
This will indeed have far-reaching implications for all Polygon’s stakeholders. Including, DApp User, validator and authorizer.
All in all, the news comes after a month of successful rollout on the Mumbai testnet. Meanwhile, the aforementioned update comes at a crucial time. Polygon has been hit by the growing gas fee crisis. According to Dune Analytics, gas fees have skyrocketed, resulting in some validators failing to send blocks.
What about the price?
Well, the native token, MATIC did not respond positively. According to CoinMarketCap, the token has been bleeding. At press time, MATIC is trading at $2.20, with a 9% correction over 24 hours.