Polygon brings long-awaited fee-burning mechanic to the scene
Polygon network and MATIC token are expected to receive their own implementation of the long-awaited Ethereum EIP-1559 update, which is going to introduce a fee-burning mechanism and remove auction-based transaction processing.
Base costs and combustion mechanism
The introduction of Ethereum’s fee-burning mechanism completely changed Ethereum’s tokenomics and drastically affected the performance of the coin market. After discussion within the community, the Polygon network decided to test the much requested update in the Mumbai testnet.
The EIP-1559 update removes the traditional auction-type transaction mechanism and adds the base fee for all transactions and the priority fee, which will be used to speed up transactions during congestion periods. The base fee will be burned just as on the Ethereum network.
Dapps functionality
Polygon dApps will only benefit from the upgrade, according to developer blogs. Removing an auction-based pricing structure will allow users to use dApps with more predictable fees.
Will it affect MATIC’s price?
MATIC’s token supply is currently fixed at 10 billion, which means that the supply reduction will most certainly have a deflationary effect in terms of the supply. But the fee-burning mechanism does not necessarily mean a continuous value increase.
The price action for each asset is related to its ease of use, fundamental value and speculative interest. If all the mentioned criteria are met, the deflationary effect could in fact deliver a positive result in the market.
Validators and delegators will also be affected by the upcoming update. All rewards on the network are being handed out in MATIC token, which will become deflationary. After the update’s implementation, developers expect the network to become less congested due to the automatic base fee increase.
Once each block is full, the next transaction will require a higher fee which will remove spam transactions from the network and reduce the overall load.
