The crypto world is ever bustling with announcements, upgrades, developments, fundings, and whatnot. What is overwhelming is that the bustle and curiosity are despite the dearth in the market’s price action. More exciting is that amidst all the buzz, Polygon being a layer-2 protocol has managed to steer the limelight towards itself.
Polygon’s recent upgrade to EIP-1559 has left a lasting impression amongst traders and savvies from the crypto town. Such curiosity and speculations, alongside the comparison with Ethereum’s EIP-1599, have been surfacing during the exchange of talks. On the other hand, in a recent update Polygon has committed 9 million MATIC tokens to Bitfinex’s MATIC staking initiative.
Is Polygon’s Burn Any Different From That Of Ethereum?
Polygon, Ethereum’s layer-2 scaling solution after a successful upgrade on the Mumbai testnet. The core development team rolled the EIP-1559 on the mainnet at block 23,850,000, on the 18th of January 2022, at 3 am UTC. The upgrade is in an effort to improve “fee visibility”. Which has taken the business by swirl.
The burning is a 2-step procedure that starts on the Polygon network and completes on the Ethereum network. Since MATIC is an ERC20 token on Ethereum (L1), the burning mechanism is implemented such that the tokens are burnt on the root chain and not just on the Polygon PoS chain (L2). Which sets it apart from conventional burn mechanisms.
According to the analysis made by the makers, the annualized burn would represent 0.27% of the total MATIC supply. Since Polygon has a fixed supply of 10 B tokens, the burn makes the asset deflationary. Although the mechanism is on the lines of Ethereum, we can expect MATIC prices to react in a mature way, owing to the fundamental perks of the network.
Successively, what did limit Ethereum’s price projection is the shortcomings of the protocol. And the staking made by investors in deposit contracts which is over 9 million ETH. The staked tokens limit the circulation of digital assets, which in turn caps the price.
On the other hand, Polygon has committed 9 million MATIC tokens to Bitfinex’s MATIC staking initiative. The firm has confirmed that users would receive up to 41% in annualized staking rewards for a higher yield by participating in the program.
Summing up, we can expect Polygon to react in a bullish manner following sequential burns. Unlike Ethereum, Polygon is not limited by shortcomings such as higher gas fees, transaction times, and scalability. While the staking in deposit contracts has been a bummer for ETH’s price projections. Polygon’s staking would be yielding annualized returns.