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Polygon is Becoming Deflationary!

Around 0.27% of MATIC, the native token of Polygon, will be burnt annually.

The Ethereum Improvement Proposal (EIP) 1559 brought the ETH burning mechanism to the chain wherein base transaction fees is burned.

EIP 1559 went live on August 5.

Now Ethereum Layer-2 scaling solution, Polygon is also bringing EIP 1559 to its chain. It went live on the Mumbai Testnet on December 14, at 8 a.m. UTC.

It means that a specific amount of Polygon’s native token will be burnt with every block validated, same as the ETH burning of EIP 1559.

These changes have profound implications on different players of the ecosystem.

Since MATIC’s supply is capped at 10 billion, its reduction in circulation will have a deflationary effect, driving up its value. At the time of writing, MATIC’s price was 1.8 USDT with a green candle.

It is projected that annually 0.27% of the total MATIC supply will be burnt.

Moreover, users will also benefit from the predictable gas fees. 

Further, Decentralized Application (DApp) developers will “receive a boost by having all of their Ethereum tooling work seamlessly and face minimal adverse effects.”

Delegators and Validators too will benefit from the deflationary token supply.

As the base fee increases when the block is full, spam transactions will reduce owing to the increased cost of transactions. So, an added benefit is less network congestion.

But the Validators will receive only the priority fee.

Polygon is one of the leading Ethereum Layer-2 solutions. It will try to ape the Ethereum network as much as it can so that the experience is the same as Layer-1.

New economic and technological models are arising through cryptocurrencies and their tokenomics. Many of them are already deflationary as their value appreciates with time. Now with the decreasing circulation and supply, the deflationary pressure is more. Moreover, it remains to be seen, how decreasing the supply of native tokens would bring in more users to the network.

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