According to footprint analysis data, like from February 7, Ethereal has burned 1,778,834 ETH since the London update in August, equivalent to $5.5 billion in curental prices. Polygon also announced the implementation of EIP-1559 in a mainnet update on January 18.
The main purpose of EIP-1559 is to get rid of the first price auction mechanism in favor of a base fee plus a priority fee. The base rate fluctuates based on network conditions, making gas charges more visible, while the base rate will burn.
The base fee will be locked into the recording contract at Polygon and the priority fee will be paid directly to the validators. The burn will start on Polygon and end on Ethereum. Polygon provides a public interface that allows users to monitor the burn and initiate a burn once the cumulative MATIC to burn exceeds 25,000. Polygon has currently burned 545,903 MATICs.
Why did Polygon release a recording mechanism?
Polygon is an Ethereum sidechain and aims to solve its scaling issues such as high fees, low TPS, and poor user experience.
However, Polygon experienced a gas fee crisis in early January, resulting in some validators failing to submit blocks. An NFT game called Sunflower increased gas fees, with 40% of the chain’s gas fees coming from this game. The average price of gasoline was 763 Gwei on January 5.
The head start Polygon claimed when it launched is dwindling compared to the average gas fee of just around 10 Gwei earlier in the year.
On Jan. 18, Ethereum co-founder Vitalik Buterin tweeted about the article: Empirical Analysis of EIP-1559: Transaction Fees, Wait Times, and Consensus Security, published jointly by Peking University and Duke University. It confirmed that EIP-1559 has indeed improved the user experience, which can be seen as a shift to the left on the graph, indicating that wait times have decreased.
Image Source: Empirical Analysis of EIP-1559: Transaction Fees, Wait Time, and Consensus Security
Based on the results of the Ethereum London upgrade, Polygon hopes to bring improvements to everyone in the ecosystem with EIP-1559.
Polygon Update Effects
Polygon believes that the London update will have far-reaching implications.
For token holders: Since MATIC is a fixed supply, the combustion mechanism will contribute to deflation. According to simulations, the annual MATIC burned will be 0.27% of the total supply.for users– Enjoy lower gas rates than Ethereum while allowing for better rate prediction in the future.For Validators: Future return will be priority rates only, but return will benefit from MATIC deflation. It will improve both spam transactions and network congestion in the future.
This is how the Polygon London update actually works.
average price of gasoline
Transaction fees are determined by supply and demand, the release of EIP-1559 will not result in a significant improvement in the price of gas. True, after the update, the price did not drop significantly, but slightly increased. The average price has remained above 200 Gwei per day after the update, with some decline at the end of January.
Footprint analysis: average gas price Network utilization
While there is no gas price reduction, the London update will make the base rate predictable. Gas rates increase in price as block usage increases and decrease in price as usage decreases.
Looking back at Ethereum since the London update, there has been a huge drop in network utilization. From around 97% to 51%, and the utilization rate is very stable, fluctuating no more than 1%.
Footprint analysis: use of the Ethereum network
Similarly, Polygon’s network utilization was between 60% and 90% prior to January 18, dropping below 50.7% immediately after the update. The stability of fluctuating utilization rates has kept the overall network stable and transaction fees relatively stable.
Footprint analysis: use of the polygon network token price
The price of ETH increased after the London update, while MATIC decreased instead of increasing. This is mainly because the price of MATIC is more influenced by the general blockchain market. The price is highly correlated to BTC, which fell below $40,000 due to various factors.
Footprint analysis: token price (MATIC vs BTC)
Recently, the ESMA (European Securities and Markets Authority) called for a ban on PoW mining and the Bank of Russia published a report recommending a ban on cryptocurrencies. Countries have launched policies that do not favor the development of cryptocurrencies. At the same time, the Federal Reserve is expected to raise interest rates in March and funds are expected to start moving, which is also a negative for blockchain. Many reasons have contributed to the recent turbulent downward movement of cryptocurrencies.
Polygon received a lot of attention for being an Ethereum sidechain and became the third largest blockchain by number of protocols after Ethereum and BSC. However, its market share has gradually compressed since August and TVL’s ranking fell from 3 to 8.
Without the first mover advantage of Ethereum, this upgrade and optimization is a must for Polygon to stand out among so many emerging chains.
Although MATIC has not yet been revived, the new recording mechanism may revive Polygon.
Date and author: February 17, 2022, [email protected]
Data source: footprint analysis
What is footprint analysis?
Footprint Analytics is an all-in-one analytics platform for blockchain data visualization and insight discovery. Cleans and integrates on-chain data so users of any experience level can quickly start researching tokens, projects, and protocols. With over a thousand dashboard templates plus a drag and drop interface, anyone can create their own custom charts in minutes. Discover blockchain data and invest smarter with Footprint.
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This post Will MATIC’s recording mechanism help Polygon stay on top?
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