As of Tuesday, 18 January, after testing it on the Mumbai testnet, EIP-1559 is also active on the Polygon mainnet, and has therefore begun to burn MATIC tokens.
EIP-1559 also on Polygon
A few months ago, the now-famous London update (EIP-1559) was activated on the Ethereum network, which was what started the burn of a portion of the fees paid to miners to register transactions on the blockchain.
Polygon is a second layer created specifically to make transactions on Ethereum faster and, above all, cheaper, so it’s not surprising that they decided to integrate EIP-1559 also on their mainnet.
To date, almost 20,000 MATIC tokens have already been burned.
EIP-1559 eliminates the auction used as the main mechanism for calculating fees, and introduces a base fee, as well as a priority fee to speed up processing. The base fee, which varies depending on network congestion, is burned.
This change does not reduce fees, as the cost of gas will continue to be determined by supply and demand, but it does allow users to better estimate transaction costs, as the base rate is the minimum price to pay for inclusion of the transaction in the first subsequent block.
Polygon and the burn of MATIC tokens
The goal, in addition to reducing the supply of MATICs in circulation, is also to reduce the number of times excess fees are paid.
The MATIC token burn is divided into two phases. The first begins on the Polygon network, and then the second is completed on the Ethereum network. This change could have far-reaching implications for all stakeholders within the Polygon network.
As for MATIC token holders, we estimate an annual burn of about 0.27% of circulating supply, compared to a fixed total supply of 10 billion tokens. Therefore, a deflationary effect is expected.
The benefits of MATIC burn
Users and developers of dApps on Polygon will benefit from more predictable gas prices.
For validators, the increase in base rate will result in fewer spam transactions, leading to less network congestion.
It remains to be seen if, as happened on Ethereum, these burns will cause the cost of gas to increase on average, or if it will remain very low.