Is Polygon deflationary

Is Polygon deflationary?

The polygon Ethereum sidechain has had its own token called $Matic since the start. Although Matic was not a deflationary token from the beginning. After the implementation of Ethereums upgrade, EIP-1559 Polygon also implemented its version of EIP-1559 which would burn a fraction of the transaction fee. Making the blockchain thus deflationary.

The so-called Ethereum London hardfork that implemented EIP-1559 for Ethereum was also added to Polygon on January the 18th 2022. These code upgrades made for a more stable fee structure on the Ethereum blockchain but also decreased the supply of ETH by burning a part of the transaction fee. The Polygon sidechain however does not have an inflation model and has a permanent hard cap. This means that with the implementation of EIP-1559 on Polygon the sidechain its token became deflationary. 

More Predictable Fees

Now after the upgrade to the sidechain we are left with 2 fees that together make up the whole transaction fee you pay to use the Polygon sidechain. At first, this fee used to be only the priority fee which is determined by the demand for block space. AKA how many people want to transact at that moment. The now introduced second fee is the base fee. The base fee is calculated by the supply and demand of block space. This model uses an approach that makes a transaction fee more predictable but not essentially cheaper. 

However, compared to the old model EIP-1559 does help make the transaction fee slightly more stable.

Burn it all

With this Polygon upgrade, the token supply will eventually get smaller and smaller. Which as long as Polygon is used a lot will mean that the token price should appreciate as well. Making it a fundamental upgrade for the whole Polygon/$Matic ecosystem. 

To see how much $Matic has already been burned, you can check out their “Watch the burn” tracker. Here you can see how much $Matic has already been burned and how the current burn is going. 

As of now, more than 600K of $Matic tokens was already burned. This leaves the Matic token at a 0.27% deflationary rate. This would change the real token supply from 10 Billion to 9.994- Billion. 

Although the burn rate is not that large yet. With the growth of the Polygon ecosystem and transaction volume. So will grow its burn amount of Matic tokens.

In theory, this should resolve into a positive for stakers, holders and users of the Polygon ecosystem alike and makes Matic look like a good Hold during the next decade. 

Future Polygon Upgrades

Polygon has since its start seen massive growth and has added more than 1 sidechain solution to its network of services. With multiple accusations that have happened in recent years. Polygon has put a focus on making itself one of the first carbon-neutral blockchains out there. But we expect that they will keep on innovating and expanding their huge network of services. Which as a result will all benefit the whole Polygon ecosystem and the Matic token.

More on how Polygon will move on into the future can be found on their website and blog.

Final word

Although we love Polygon and the Matic token, nothing on our website should be seen as financial advice as we are not financial advisors. But if you do have any crypto educational questions left that you want to be answered. Feel free to reach out to us on our socials or read another blog on our website.

If by now you have not started to use Polygon? Then learn how to add it to Metamask today, so you can transact at almost no cost.