Polygon (MATIC) Token Prices May Jump as it Announces EIP-1559 Implementation

Polygon, the Layer-2 scaling solution on Ethereum, has announced that it would be implementing the EIP-1559 recommendation which would help to make the gas pricing more stable and transparent.

The company has said that the implementation is currently running on its testnet and would be released on the main net once all the testing has been completed. This recommendation was initially implemented by Ethreum in August and since then, the price of the token has either been higher or has been pretty stable. The reason for this is the fact that this recommendation envisages the burning of the tokens regularly. The gas fees would now have a component of base fees, which would depend on the network traffic and priority fees if the user wants the transaction to go through quickly. This will not reduce the gas fees in any way and it will only help the users to better understand the gas fees before making any transaction.

The base fees would be burned in the form of tokens and over time, the total number of tokens would likely start coming down slowly and steadily. If the demand continues to be the same or increases, then this kind of pressure would have a deflationary effect on the prices of the MATIC token in the long term. The Polygon team has said that, based on a study that involves a similar program on Ethereum, it is estimated that 0.27% of the total tokens would be burned on an annual basis. So, this is likely to artificially push up the prices of the token in the long run.

Some may see this as a ploy to push up the token prices, the same way it was seen when Ethereum did the same, and truth be told, they seem to have nailed it as the value of the ETH token has been quite high since then. For the users, because the gas fees on the network are already very low, this may not make too much of a change for them as far as transaction fees go but it will be useful for the traders and long term investors in the token as it is likely that the token price would go up.