Upgrade went live on January 18, at 3 a.m. UTC.
Ethereum Improvement Proposal 1559, better known as the Ethereum London hard fork, arrived on the Polygon Blockchain this week. The upgrade brings the burning of the native MATIC token and improved fee visibility for users. It went live on January 18, at 3 a.m. UTC.
EIP-1559 went live on Ethereum mainnet in August last year and was one of the most significant changes in the network’s history. Now, after pushing out a successful upgrade on the Mumbai testnet, Polygon’s development team is rolling the upgrade out on the mainnet.
One prominent feature of the upgrade is that it gets rid of the first-price auction as the core mechanism for fee calculations on the network. There will be a discrete base fee for transactions and a priority fee to speed up processing. The network will burn the base fee, which will fluctuate depending on network congestion. Burning starts on the Polygon network and completes on the Ethereum network. Users can monitor and become part of the burning process when the upgrade is complete.
Despite Polygon being a Layer-2 scaling network, it has also suffered from surging gas fees lately. As reported, Polygon gas fees skyrocketed due to an overflow in demand for network transactions due to a decentralized finance yield farming game called Sunflower Farmers. It is also believed that the move will reduce spam and network congestion.
For MATIC holders, the token has a fixed supply of 10 billion, so any decrease in the number of available tokens will have a deflationary effect. I.e., the less there is available, the more valuable the tokens should become. The team took Ethereum’s experience as a starting point to simulate the potential impact on MATIC’s total supply. The analysis, which can be seen here, suggests that annualized burn would represent 0.27% of the total MATIC supply.
Users of decentralized apps, dapps on Polygon, which already have some of the lowest fees in the industry, will benefit from more predictable gas prices. The downsides are fewer MATIC tokens available because of the burn and a gas fee curve more similar to Ethereum. In a nutshell, as time goes on, transactions on MATIC will become more expensive.
Deflationary pressure will benefit both validators and delegators as rewards for processing transactions are paid in MATIC. Because the base fee increases automatically if the block is full, the changes will result in fewer spam transactions and less network congestion. Validators, who now receive the total amount of the fees, will be getting only the priority fee in the future, as the base fee is burnt.
Among the most used dapps in the Polygon ecosystem, we find the tower defense game Crazy Defense Heroes, the decentralized exchange QuickSwap and the earlier mentioned Sunflower Farmers. With Sushi and ApeSwap the ecosystem has some familiar DeFi brands, while it also houses the innovative GameFi, DeFi, play-to-earn solution Aavegotchi.
Click here for a more technical overview of how EIP-1559 is being implemented on Polygon.
The above does not constitute investment advice. The information given here is purely for informational purposes only. Please exercise due diligence and do your research. The writer holds ETH, BTC, AGIX, HEX, LINK, GRT, CRO, OMI, IMMUTABLE X, ENS, GALA, AVASTR, GMEE, CUBE, RADAR, FLOW, FTM, BNB, SPS, WRLD, ATOM, and ADA.