Polygon (MATIC) to implement EIP-1559 on its network, could push token price higher

Karthik Subramanian

Polygon, the Layer 2 scaling solution on Ethereum that has been making waves in recent times, has announced that it would be looking to implement the EIP-1559 proposal on its network following discussions and approval from the community.


Similar to Ethereum Proposal

This proposal was initially implemented in Ethereum in August and though it was suggested as a change to improve the visibility of fees for the users of the network, what caught the eye of the traders and the investors was the fact that it involved the burning of the existing ETH tokens at a specific rate every year which would mean that the supply would keep decreasing with time and with the demand remaining constant or increasing, this would mean that the price would likely go up in the long term. This was viewed as a ploy by the Ethereum team to artificially drive up the price of the token which would benefit the team and also the large investors as well.

A similar initiative is currently being implemented by the Polygon team on the testnet and it says that this mechanism would have a discrete base fee for transactions to be included for processing in the next block and a priority fee to push up the speed of the transaction. The base fee, which would depend on the congestion and traffic on the network at that time, would then be burned. The team has made it very clear that it would not serve to alter the gas fees in any manner and that this is just another way of making the gas fees as transparent and reliable as possible.

Deflationary Effect on MATIC

For the developers and users, this change would mean that the gas fees become more predictable which will help them to design their systems in a more reliable manner. In the long run, the team estimates that 0.27% of the tokens would be burned on an annual basis which will have a deflationary effect on the price of the MATIC token. This could help to push up the price of the token in the long run and this could encourage long-term investors to look into buying the token now to make use of this deflationary effect in due course of time.

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