Will Ethereum Fork affect stablecoins and NFTs?
Ethereum takes about two weeks to merge or integrate. In addition to this process, which marked the end of mining and led to the involvement of network regulators, many questions were raised. One is to understand what happens to stablecoins and non-tradeable tokens (NFTs) in the event of a hard fork.
First, we need to define what a hard fork is. The term refers to dividing the grid into two so that they have different versions parallel to the existing grid.
As for Ethereum, it is an initiative of a group of miners led by Chandler Guo. A miner who already participated in the fork that led to the creation of Ethereum Classic is seeking peer support from him to back a version of Ethereum that uses Proof-of-Work (PoW) instead of Proof-of-Stake (PoW). Fare receipt or TSO).
Although not yet confirmed, the hard fork may have different effects on Ethereum users. It goes without saying that such events will affect holders of tokens such as stablecoins and NFTs, as the tokens will be replicated on another network, but this does not necessarily mean that they have any value.
Stablecoins have an important role in the Ethereum Fork:
Stable cryptocurrencies, or stablecoins, are at the heart of changes to the Ethereum network, as these assets will replicate in the event of a hard fork. So they will be on both networks (two copies of Ethereum) at the same time.
The problem is the assets behind these stablecoin issues. A cryptocurrency that is pegged to the value of a real-world asset, such as the US dollar, and is the foundation of any cryptocurrency released.
This means that if there are 10 million units of Tether (USDT), the issuer must have the equivalent of the underlying asset to support the issue and its value. The same applies to stablecoins issued by decentralized protocols such as DAI (DAI) and Maker Protocol.
The problem with certain unsupported tokens from some networks arises because support is needed to issue stablecoins. This is because the existing tokens are duplicates, but have no assets. As a result, the Ethereum 2.0 stablecoins or a fork of one of them will become worthless.
At this time, both Tether and Circle have confirmed that they will support Merge on Ethereum. To compound this situation, they announced that the USDT and USDC tokens will continue to exist on the PoS version of Ethereum.
According to data from Defillama, USDT and USD Coin (USDC), the top two market stabilizers (both in the middle) added $119 billion in market capitalization. The original Ethereum cryptocurrency, Ether (ETH), on the other hand, has a market value of $191.7 billion. These numbers are an example of indirect proof that these cryptocurrencies are held in one of the two versions of ethereum.
There are many other stablecoins in the Ethereum ecosystem. Its publishers are expected to confirm which version of Ethereum they will support, though most will go to the "official" network run by Vitalik Buterin and the Ethereum Foundation.
In which Network will the NFTs be?
Like stablecoins, NFTs are tokens created on the Ethereum network. This means that a potential split is subject to roughly the same conditions as before.
First, if there is a fork, there will also be two NFTs. One will be on Ethereum 2.0 and the other will be on Ethereum with PoW.
Be careful at this point. NFTs are symbols printed on a network associated with metadata, including their names and specific files (which can be images, video, audio, text, etc.). Just as tokens can be propagated, links to metadata will also be able to "live" on both networks.
But only one of them is original. For example, this is similar to the imitation t-shirt situation. In addition to product quality and similarity to the original product, only brand-approved products are classified as original.
Who should decide that? The server or website where the metadata is stored will do this. As described in this article, the providers of these services are often centralized. When celebrities release their own NFT kits, it is usually developed by a company, while private users use platforms like Opensea for development.
NFT expert Adam McBride warns of the risks if you want to "copy" on-chain NFTs with PoW. For example, if a user sells a copy of an NFT on that chain, someone could repeat the process and sell the same NFT on the chain through PoS without permission, he said.
This is called a replay attack and is based on the ability to replicate transactions across two networks. To prevent this, all NFTs owned by users must be removed from any marketplace.
What can you expect with the Merge?
While other networks like Bitcoin (and Ethereum itself) branched out and set a precedent in the past, the Ethereum merger is unprecedented. Not only has the network consensus algorithm changed, it is one of thousands of code, projects, and developers.
Therefore, it is necessary to follow these developments until mid-September, when the merger takes place and the network with PoS is already working securely and permanently. At the same time, those who interact with potential PoW forks are advised to be careful to avoid issues with crypto assets.