Polygon’s much-anticipated EIP-1559 upgrade live on Mumbai testnet
India-based Polygon network has been trending for a while now. Recently the Ethereum-powered network acquired a zero-knowledge (ZK) protocol developer, Mir, for around USD 400 million. Now, it is rolling out a testnet implementation that could possibly hike MATIC by 3X in the current cycle.
Polygon, a layer-2 scaling solution taking inspiration from Ethereum released a blog to address the latest development. As per the official blog, Polygon’s core development team:
“…is rolling out a testnet implementation of Ethereum Improvement Proposal (EIP) 1559 to introduce burning of its native MATIC token and better fee visibility.”
Needless to say, ETH, the largest altcoin was the first ecosystem to undergo this hard fork – also known as the ‘London fork’. It was indeed one of the biggest changes in its history. Following the same route, the blog noted: ”
“Polygon is taking steps to bring this much-requested upgrade to our network. It goes live on the Mumbai testnet on Dec. 14, at 8 a.m. UTC.”
The introduction of the aforementioned changes will have far-reaching implications for all of Polygon’s stakeholders. Here’s how.
Let’s see in the context of Ethereum. EIP-1559 changes how the fee market works on the Ethereum network. It introduces a new baseFee that is burned rather than paid out to miners. Users can now specify a maximum fee and priority fee for transactions, rather than a gas price.
The discrete base fee for transactions to be included in the next block fluctuates depending on network congestion.
(For context: Transaction fee is calculated using the following equation: transaction fee = baseFee + min(maxFee — baseFee, priorityFee)
Although, the changes do not lower the fees paid for transactions as prices are determined by supply and demand. Instead, it allows users to better estimate costs. This will result in fewer users overpaying. Ethereum certainly has enjoyed a few perks following the hard fork.
Polygon’s MATIC has a fixed supply of 10 billion. Therefore, any reduction in the number of available tokens will have a deflationary effect.
“We took Ethereum’s experience since the upgrade as the baseline to simulate the potential impact on MATIC’s total supply. The analysis suggests that annualized burn would represent 0.27% of the total MATIC supply,” the team added.
Meanwhile, deflationary pressure will benefit both validators and delegators, because their rewards for processing transactions are denominated in MATIC.
MATIC to the moon?
Well, sure. The highly popular cryptocurrency trading YouTube series “Coin Bureau” opined that Polygon (MATIC) could grow “another 2-3x” in this cycle”. The aforementioned update would indeed play as a catalyst.
“If you’re wondering how far MATIC could go before this bull market ends, a conservative estimate is another 2-3x.”
Well, overall, the flagship coin could utilize some catalyst to help it enter the top 10 list in the crypto market. The 16th largest token was trading at the $1.86 mark with a 5% correction at press time.