As of February 7th, since the London upgrade in August, Ethereum has burned 1,778,834 ETH, equivalent to $5.5 billion at current prices. Polygon also announced the deployment of EIP-1559 in a mainnet upgrade on January 18th.

The main purpose of EIP-1559 is to do away with the first price auction mechanism in favor of a base plus priority fee. Setup fees vary based on network conditions, making gas fees more visible. In addition, the basic fee is burned.

The base fee is tied to the burning contract on Polygon and the priority fee is paid directly to the validator. Burning starts at Polygon and ends at Ethereum. Polygon provides a public interface that allows users to track and start burning when the cumulative MATIC for burning exceeds 25,000. Polygon has now burned 545,903 MATIC.

Why does Polygon start the mechanism burn?

Polygon is an Ethereum sidechain and aims to solve the problems of scaling like high fees, low TPS and poor user experience.

However, Polygon suffered a gas fee crisis in early January that prevented some validators from submitting blocks. An NFT game called Sunflower has increased gas fees, with 40% of the chain’s gas fees coming from this game. The average gas price on January 5 was Gwei 763.

The advantage Polygon claimed at go-live dwindles compared to the average gas fee of just about Gwei 10 earlier in the year.

On Jan. 18, Ethereum co-founder Vitalik Buterin tweeted about the article “Empirical Analysis of EIP-1559: Transaction Fees, Timeout and Consensus Security” co-edited by Peking University and Duke University. The post confirms that EIP-1559 did indeed improve user experience – a left shift can be seen in the graph, indicating a reduction in wait times.

Average wait time of a block | Source: Experimental Analysis EIP-1559

Based on the results of the London upgrade to Ethereum, Polygon hopes to bring improvements to everyone in the ecosystem with EIP-1559.

WOMENGracefulness Above polygon How will the impact be?

Polygon believes that the modernization of London will have far-reaching implications:

– For token holders: Since MATIC has a fixed supply, the combustion mechanism contributes to deflation. According to the simulation, the amount of MATIC burned annually will be 0.27% of the total supply.

– For users: Enjoy lower gas fees than Ethereum while allowing better prediction of future fees.

– For Validators: Future profits will only be preferential fees, but profits will benefit from MATIC deflation. It will improve both spam transactions and network congestion.

Here’s how the London upgrade works on Polygon:

Price gas medium

Transaction fees are determined by supply and demand, so the introduction of EIP-1559 will not significantly improve gas prices. After the upgrade, the price didn’t even go down, it went up slightly. The average price remained above 200 Gwei per day after the update, although there were some declines in late January.

Average gas price | Source: Footprint Analytics

Network usage

While gas prices haven’t come down, the London upgrade will make the setup fee predictable for users. Gas fees increase as block usage increases and vice versa.

Looking back at Ethereum since the London upgrade, network usage has dropped significantly, from around 97% to 51%, and usage has been very stable, fluctuating no more than 1%.

heightUsing the Ethereum Network | Source: Footprint Analytics

Similarly, Polygon’s network utilization ranged from 60% to 90% prior to January 18 and fell below 50.7% shortly after the upgrade. The stability of usage rate fluctuations has kept network and transaction fees relatively stable.

Polygon Network Usage | Source: Footprint Analytics

Price sign

ETH price surged after London upgrade while MATIC fell.

This is mainly because the MATIC price is more influenced by the overall blockchain market. This altcoin has a high correlation with BTC as the crypto king’s price fell below $40,000 due to various factors.

MATIC price correlation and bitcoin | Source: Footprint Analytics

Recently, ESMA (European Securities and Markets Authority) called for a ban on PoW mining and the Bank of Russia published a report proposing a ban on cryptocurrencies. Therefore, countries have introduced policies that are not conducive to the development of cryptocurrencies. At the same time, the Federal Reserve is expected to hike rates in March and funds are expected to start moving, which is also somewhat negative for blockchain. There are many reasons that have contributed to the recent tumultuous downtrend of this emerging market.

Conclude

Polygon received a lot of attention as a sidechain of Ethereum and became the third largest blockchain by number of protocols after Ethereum and BSC. However, since August, its market share has been gradually shrinking and the overall value rating is locked from 3rd place to 8th place.

Without Ethereum’s game-changing advantage, Polygon was forced to make this upgrade to differentiate itself from the many emerging chains.

While the MATIC price is yet to be revived, the new combustion mechanism could reignite optimism for Polygon.

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