Max E.Tue, Jan 18, 2022 6:39 PM
Polygon Activates Transaction Fees Burning Mechanism
On January 18, at block 23,850,000, the mechanism for burning a part of the transaction fees in the Polygon network was activated.
The burning mechanism is similar to the token burning system in the Ethereum network, which was introduced into the blockchain of this cryptocurrency in early August last year.
The token-burning operation takes place in two stages: it starts on the Polygon network and ends on the Ethereum blockchain. Through a public interface specially created by the project team, users can monitor the combustion process.
It happens as follows: the tokens are transferred to a special address in the Polygon network. A smart contract on the Ethereum blockchain is deployed at the same address. After the procedure is completed on Polygon, ERC-20 standard tokens are burned in the Ethereum blockchain.
The token burning operation. Source – Polygon.
The update removes the current transaction fee calculation mechanism that used the first-price auction. Instead, the commission will be divided into two parts:
- The base fee, which allows you to include a transaction in a block;
- Priority fee that speeds up transaction processing.
The base fee will be burned, and the priority fee will be given to miners as a reward for their work.
The changes will not reduce transaction fees, as gas prices are determined by supply and demand, but will allow network users to assess their costs since the base fee is the minimum cost to include in the next block, which will minimize overpayments.
Holders of MATIC will benefit from the rise in the price of the asset because the token has a limited supply of $10 billion. Accordingly, any burning of tokens will create a deflationary effect, and in the long term increase the market value. The analysis carried out by the developers of Polygon showed that the annual burning rate of MATIC tokens will be 0.27% of the market supply.
Users of decentralized applications (dApps) on Polygon will benefit from the upgrade thanks to predictable gas prices.
The deflationary offer that is created will benefit all validators as their transaction processing reward is calculated in MATIC. Since the base fee automatically increases as the block fills up, the upgrade will result in fewer spam transactions, which will help reduce network load.
On January 18, the price of MATIC is $2.10. Formerly known as the Matic Network, Polygon is an interoperability and scaling platform for building Ethereum compatible blockchains.