Polygon activated the EIP-1559 upgrade proposal this week, introducing token burning to the network and paving the way for it to become a deflationary cryptocurrency.
The developers of Polygon Network, the second layer network focused on scalability of Ethereum, announced the successful implementation of Ethereum Improvement Proposal (EIP) 1559 on their blockchain this week. The activation of this improvement proposal introduces the burning of tokens to Polygon and begins the path for MATIC, the cryptocurrency native to the network, becomes a deflationary asset in the future. In your releasePolygon explained that EIP-1559 will also give better visibility into the rates paid within the network.
The burning of tokens is a mechanism used by cryptocurrency projects to remove units of their currencies from circulation forever, in order to make them scarcer and with a deflationary tendency. MATIC was designed to have a fixed supply of 10.000 billion units, but from now on it will be reduced as the tokens paid in the network's base rate are burned.
It may interest you: Polygon moves towards building a DAO to mainstream DeFi
Polygon, an ecosystem similar to Ethereum
Polygon wants to become an Ethereum-like ecosystem that developers can easily get familiar with. Currently, Ethereum is the second cryptocurrency on the market by capitalization and the blockchain leader for the development of decentralized protocols and projects, NFT, games and metaverses.
Polygon developers explained that, like Ethereum, the blockchain has changed its fee auction mechanism to establish a base fee on the network, which will change based on usage and demand, and which will be burned to reduce the supply of MATIC. Polygon users can decide to pay an additional fee to the network's validators and delegates to prioritize and expedite their transaction.
“Deflationary pressure will benefit both validators and delegators, because their rewards for processing transactions are denominated in MATIC.”
EIP-1559 was implemented early on the Mumbai test network before its arrival on the mainnet.
More than 12.000 MATIC burned
The Polygon development team created a public interface, called Polygon Burn, where the crypto community can verify and monitor the token burning process on the blockchain in real time. Currently, since the activation of EIP-1559 last Monday, Polygon has burned a total of 19.364,1 MATIC, as shown by the interface data. The value of these tokens reaches a total of $39.502,7, with MATIC trading at $ 2,04 dollars per unit on the market. At the time of this edition, some 12.293 MATIC are waiting for confirmation to be burned on the network forever.
Source: Polygon Burn
Burning MATIC tokens on Polygon is a two-step affair that begins on the scalability network and completes on the Ethereum network, the developers explained. According to their analysis, the annualized burning of tokens on Polygon would represent 0,27% of the total supply of MATIC.
More predictable rates
While Polygon offers one of the best commission rates in the industry, at just a few cents per transaction, its developers explain that the implementation of EIP-1559 will help make rates even more predictable for users. Another benefit that comes with the implementation of this improvement proposal is the security and stability of the network. If the base rate automatically increases based on blockchain demand and congestion, there will be fewer spam transactions and thus less congestion within Polygon.
ETH and MATIC on the market
The burning of tokens has brought great benefits to the price of ETH in the market. By mid-September 2021, a month after the implementation of EIP-1559 on Ethereum, the unit value of ETH approached $4.000, increasing 40% at that time. However, at the time of writing, ETH is trading above $ 3.100 dollars per unit, due to the general decline that regulatory uncertainty and some conflicts have caused in the crypto market.
For its part, MATIC has lost 29% of its value since its all-time high of $2,92 last December. MATIC is currently the 14.100th largest cryptocurrency project in the industry, with a market capitalization of $XNUMX billion.
Continue reading: Associated Press to launch Polygon-based NFT marketplace to trade historical photographs
