Polygon – one of Ether's most popular Layer 2 scaling solutions – saw one of the biggest upgrades to its mainnet implemented recently. Namely, it's Ether Improvement Proposal 1559, which will begin destroying MATIC tokens as part of every transaction.
Polygon Integration EIP-1559
CryptoPotato reported last week that EIP-1559 was scheduled to go live soon. The team has officially announced that the update was rolled out on January 18 at 3am UTC after a successful upgrade of its Mumbai test network.
Among other things, perhaps the most important change that will occur in the Polygon network is the introduction of a deflationary token destruction mechanism that will begin to destroy the network's native MATIC tokens while increasing the visibility of fees.
EIP-1559 moves away from using first-price auctions as the primary fee calculation mechanism. Instead, there is a discrete base fee for transactions to be included in the next block, and a priority fee for accelerated processing. The base fee, which fluctuates based on network congestion, is then destroyed. – Read the official announcement.
The upgrade itself is supported by major exchanges, including Coinan. It occurred at a block height of 23,850,000.
Impact on MATIC prices
At the time of writing, MATIC's price has fallen 7.8% in the last 24 hours. Nonetheless, it is worth looking at the long-term impact of introducing a destruction mechanism.
However, unlike Ether, MATIC has a fixed supply of 10 billion, so any reduction in the total number of tokens available on the market will have a definite deflationary effect.
The team has simulated the potential impact on total MATIC supply, drawing on Ether's experience since the London hard fork, and concluded that the annualized depletion of total MATIC supply is 0.27%.
The analysis itself can be found here.
The official post also reads.
Destruction is a two-step affair that starts on the Polygon network and finishes on the Ethereum network.
There is also a public interface where users can monitor the entire process, but at the time of writing this article it is not yet live.