Ethereum EIP-1559 upgrade launches on Polygon to burn MATIC

The Ethereum upgrade that introduced a partial network fee burning mechanism in August last year has launched on the layer-two scaling network Polygon. 

Ethereum’s EIP-1559 upgrade shipped with its London hard fork last summer and has been a success in terms of gas price predictability and network fee burning. The upgrade has now launched on the layer-two scaling network Polygon in an effort to improve “fee visibility”. It went live about an hour ago at block 23850000.

The Polygon team announced the upgrade date on Jan. 17, following its successful deployment on the Mumbai testnet.

The EIP-1559 upgrade introduces the same fee-burning mechanism to Polygon resulting in the destruction of MATIC tokens. It also removes the first-price auction method for calculating network fees which leads to better cost estimations but goes not reduce gas prices.

“The burning is a two-step affair that starts on the Polygon network and completes on the Ethereum network.”

The team stated that, just like Ethereum, the supply of MATIC is likely to become deflationary with 0.27% of the total supply being burnt every year according to estimations. There is a fixed supply of 10 billion MATIC tokens with 6.8 billion currently in circulation.

“Deflationary pressure will benefit both validators and delegators because their rewards for processing transactions are denominated in MATIC,” it added before stating that the upgrade would also reduce spam and network congestion.

Despite being a layer-two network, Polygon has suffered from its own gas crisis recently. Earlier this month, Polygon gas fees skyrocketed according to Dune Analytics resulting in some validators failing to submit blocks. The surge in demand was due to a DeFi yield farming game called Sunflower Land which rewarded early adopters before the degens lost interest.

Related: Here’s how Polygon is challenging the limitations of Ethereum

Since going live on Ethereum around six months ago, the upgrade has resulted in the burning of 1.54 million ETH to date according to the burn tracker. At current ETH prices, this works out at around $5 billion. The tracker also predicts that Ethereum issuance will become deflationary by -2.5% per year once “the merge” happens and proof-of-stake becomes the primary consensus mechanism for the network.

MATIC prices have dumped 9% on the day in a fall to $2.22 at the time of writing according to CoinGecko.


Tagged : / / / / / /

Ethereum layer two TVL reaches all-time high

The total value locked (TVL) on Ethereum layer two (L2) networks has surged to a new peak as gas fees continue to steadily rise driving further adoption. 

Layer 2 analytics platform L2beat currently reports that the total amount of value locked across various L2 protocols and networks has reached an all-time high of $5.64 billion.

L2 scaling solutions provide much higher transaction throughput and lower transaction fees, and they have surged in terms of adoption in November which has seen the highest average gas fees in Ethereum network history.

Arbitrum has the lion’s share of the L2 market with $2.67 billion locked up, or around 45% of the total.

The dYdX decentralized derivatives exchange is in second place with $975 million in TVL, and the Loopring L2 DEX is in third place with $580 million, however its own LRC token makes up most of its value locked.

Layer 2 TVL has more than doubled since the beginning of October, surging 110% from $2.68 billion to current levels.

Related: Binance opens layer-two ETH deposits with Arbitrum One integration

Average Ethereum transaction fees are currently around $40 according to Bitinfocharts. They spiked to their second highest ever level of around $65 on Nov. 9 and have increased by 700% over the past four months.

Gas prices vary depending on the operation, a simple ERC-20 token transfer can cost around $45 at the moment and a more complex smart contract interaction or Uniswap swap can cost a painful $140 according to Etherscan.

Registering a name on the Ethereum Name Service can cost hundreds of dollars in gas despite the actual domain name costing just a few bucks per year.

Since October, multichain compatible DeFi platforms have seen record inflows as investors and developers attempted to avoid the Ethereum network due to soaring gas fees.


Tagged : / / / /

Ethereum sees first consecutive week of deflationary issuance

The Ethereum network has seen its first consecutive week of negative supply issuance as bubbling markets drive persistently high transaction fees.

With the highly anticipated London upgrade introducing a burn mechanism into Ethereum’s fee market in early August, a small quantity of Ether has since been destroyed with every transaction executed on the network.

With gas prices sustaining at high levels, Ethereum has seen seven consecutive days of deflationary issuance for the network, meaning that more ETH has been removed from supply than created through mining.In order for Ethereum to consistently produce deflationary blocks, gas prices must consistently remain roughly above 150 gwei.

EthHub co-founder Anthony Sassano commented that deflationary Ethereum was not expected until “the merge” — when the Ethereum blockchain is set to merge with Eth2’s Beacon Chain, which is currently expected to occur during the first half of 2022.

According to the Ultrasound.Money fee burning tracker, around 15,000 ETH ($65 million at current prices) is being burnt daily. When factoring in the rate of new ETH being created, WatchtheBurn reports a weekly net issuance of minus 8,034 ETH (roughly $34 million) at the time of writing.

Since the London upgrade, more than 724,400 ETH worth $3.1 billion has been permanently destroyed.

According to Etherscan the average cost of an ERC-20 token transfer is now a painful $46. Doing something a little more complex such as providing liquidity to a DeFi protocol or making a token swap on Uniswap can cost as much as $140 at the moment.

Sassano emphasized that the upgrade has not increased gas prices but has made them more predictable. “Contrary to popular belief, EIP-1559 has not increased gas prices and has in fact helped considerably with spikes in demand (such as during hyped-up NFT mints) which has led to a smoother network overall,” he said.

According to the Bankless Ethereum Q3 network report, transaction value settled for July to September this year was a whopping $536.5 billion, an increase of almost 400% since the same period last year.

Related: Ethereum supply flips briefly into deflation as gas fees spike

Despite Ethereum’s first deflationary week, many Ether advocates are seeking to encourage users to migrate to transacting using its emerging layer-two ecosystem.

According to L2beat, there is a record $4.68 billion in total value locked across the various L2 networks. This TVL has surged almost 500% over the past two months as Ethereum users increasingly seek out ways to avoid those excruciating transaction fees.