MATIC Burning Began With The Roll Out Of The Much Anticipated EIP-1559
Polygon, Ethereum layer-2 scaling solution, implemented one of largest upgrades on its mainnet that will begin burning MATIC tokens as part of every transaction.
The team officially announced that the EIP-1559 upgrade has been rolled out on January 18th at 3 AM UTC, following a successful upgrade of one of its testnet.
One of the most important change that will happen to Polygon’s network is the introduction of a deflationary token burning mechanism that will begin reducing the network’s native MATIC token supply, while also improving fee visibility.
“EIP-1559 gets rid of first-price auction as the main mechanism for fee calculation. Instead, there is a discrete base fee for transactions to be included in the next block and a priority fee to speed up processing. The base fee, which fluctuates depending on network congestion, is then burned.”
While on the short term MATIC price hasn’t really seen much positive action due to the upgrade. At the time of this writing, MATIC’s price is down 4.3% in the past 24-hour window.
However, it’s worth taking a look at the longer-term implications of the introduction of a burning mechanism.
Unlike Ethereum, MATIC has a fixed supply of 10 billion, so any reduction in the overall number of tokens available on the market will have a deflationary effect.
Polygon team has simulated the potential impact on MATIC’s total supply, taking Ethereum’s experience since the London hard fork and the conclusions suggest an annualized burn of 0.27% of MATIC’s total supply.
There’s also a public interface where users would be able to monitor the whole process, but that’s yet to go live at the time of this writing.
