The Ethernet upgrade that introduced a partial network fee destruction mechanism last August is now back in the headlines. The Ethernet sidechain network Polygon is in the news today after integrating the same update (EIP-1559) in its ecosystem.
The "Deflation" Club
Guys, #EIP1559 is a few hours away from going live on the #Polygon main site.The much-anticipated upgrade brings $MATIC consumption and improved cost visibility.
Polygon launches EIP-1559 to initiate real-time destruction of MATIC tokens. The official blog post writes that
“The much-anticipated implementation of Ether improvement proposal 1559 is coming to the Polygon blockchain, bringing native MATIC token destruction and better fee visibility.”
This update is activated at block height 23,850,000. It replaces Polygon's previous "first-price auction" based fee system. The update has now been launched on the second layer of the extended network to improve "fee visibility". This will include discrete base fees for transactions in the next block. This also includes a priority fee for accelerated processing.
According to the post, destruction is a two-step affair, starting with the Polygon network and finishing on the Ethernet network.
“The Polygon team created a public interface where users can monitor and be part of the burning process.”
This is a glimpse of the page after the above upgrade went live.
Since the gas price is determined by supply and demand, it will not reduce the fees paid for the transaction. However, since the base fee is the minimum price included in the next block, it will allow users to better estimate the cost. This will result in fewer users paying more.
In addition to this, similar to Ether, EIP-1559 may also have a deflationary effect on its native token, MATIC. This is mainly due to its fixed token supply of 10 billion tokens. According to the analysis, EIP-1559 is estimated to consume 0.27% of the total MATIC supply within a year.
This does have a profound impact on all of Polygon's stakeholders. This includes DApp users, validators, and delegates.
Overall, this announcement comes a month after the successful implementation of the Mumbai test network. Meanwhile, the above update comes at a critical time. Polygon has suffered as a result of the growing gas fee crisis. According to Dune Analytics, gas fees have spiked, causing some validators to fail to submit blocks.
What about the price?
Well, the native token MATIC did not respond positively. According to CoinMarketCap, the token is bleeding money. At press time, MATIC was trading at $2.20, a correction of 9% in 24 hours.