MATIC Burn Begins as EIP-1559 Goes Live on Polygon Mainnet

The much anticipated EIP-1559 upgrade that introduces a partial network fee burning mechanism went live on the layer-two scaling network Polygon on January 18. 

The Ethereum Improvement Proposal 1559, more famously known as the London hardfork, went live on the Ethereum mainnet in August 2021 and has proved to be a success in terms of gas price predictability and network fee burning. On Polygon too, after a successful upgrade on the Mumbai testnet, EIP-1559 went live at block 23850000, according to a blog post by the Polygon network. 

Here’s What Changes

Broadly, the EIP-1559 upgrade aims to introduce the fee-burning mechanism to Polygon resulting in the destruction of MATIC tokens making the token supply deflationary once fee burning commences.

It also brings in better cost estimations by removing the first-price auction method for calculating network fees but does not reduce gas prices.

Similar to the ETH burning mechanism, the supply of MATIC is likely to become deflationary with 0.27% of the total supply being burnt every year according to estimations.

Unlike Ethereum, for MATIC since there is a fixed supply of 10 billion tokens with 6.8 billion currently in circulation, the token’s deflationary nature in the future could further aid supply shock narratives fueling a macro bullish narrative for the 13th ranked coin by market cap. 

Positively affecting token HODLers, validators, developers, and DApp users the upgrade aims to benefit the cohorts by making gas prices more predictable and the network more efficient. 

“Deflationary pressure will benefit both validators and delegators because the base fee increases automatically if the block is full, the changes will result in fewer spam transactions and lead to less network congestion,” the team added. 

Price Implications on MATIC 

Amid positive commentary around the Polygon network as the upgrade launched, MATIC’s price took an opposite trajectory. MATIC, at press time, traded at $2.19 noting a 7.77% fall in price over the last 24-hours. 

While Ethereum on the day of the EIP-1559 launch saw close to 13% appreciation in price, MATIC’s price reacted negatively to upgrade. Nonetheless, the introduction of token burning for MATIC is a long-term bullish trend that could fuel a better supply-demand narrative for the coin aiding price growth in the long term. 

For now, MATIC’s price seemed to be on a downtrend as trade volumes maintained low levels despite the positive social sentiment surrounding the update.