Polygon [MATIC]’s much-awaited EIP-1559 upgrade goes live on its Mumbai testnet. As per the blog post, the layer-2 scaling solution would be undertaking a burning mechanism similar to Ethereum Improvement Proposal. The testnet implementation would introduce annualized burning that will account for 0.27% of the total supply of MATIC tokens and also enable ‘better fee visibility’.
The upgrade which goes by the name of London fork, EIP-1559 went live on the Ethereum mainnet back on August 5 and was touted to be one of the biggest changes in its history. This prompted Polygon to start initiating the process and incorporate the much-requested upgrade into its network after extensive deliberations and input from the community.
Polygon’s new upgrade- Key takeaways
In accordance with the blog, the EIP-1559 update will have ‘far-reaching implications.’ Here’s how- First, it would remove the traditional price auction process which was initially the main mechanism for fee calculation. In lieu of that, now there would be a discrete base fee for transactions after every block and a priority fee to speed up processing during network congestion. With regards to the base fee, the post stated,
“The base fee, which fluctuates depending on network congestion, is then burned. The changes do not lower the fees paid for transactions, since gas prices are determined by supply and demand. They do allow users to better estimate costs since the base fee is the minimum price for inclusion in the next block. This will result in fewer users overpaying.”
The tokenomics– Secondly in terms of token holders, Polygon’s MATIC has a fixed supply of 10 billion. Thus, any reduction in the number of available tokens will cause a deflationary effect. However, this deflationary pressure will benefit both validators and delegators, as their rewards for processing transactions would be denominated in MATIC. To top that, users of decentralized apps [dApps] on Polygon would also benefit from a more predictable gas price.
Recently the network has acquired a zero-knowledge [ZK] protocol developer, Mir, for nearly $400 million after its deal with Hermez network back in August for $250 million. Speculators feel that the testnet release complemented by a series of acquisitions could push the MATIC price to a new high against the current downtrend in the crypto market.