Everything You Need To Know About Ethereum’s Hard Fork & EthereumPoW!
How The “Merge” Process Will Split The Ethereum Chain!
A community split and division is not a reason to celebrate.
With Ethereum’s “Merge” hard fork the chain will split.
The “Merge” process will mark the end of the Proof-of-Work era (mining) for Ethereum, as with this upgrade, Ethereum embraces Proof-of-Stake (staking).
Miners that secured the network for eight years decided to keep the PoW version of Ethereum running and move forward with EthereumPoW.
The Ethereum miners will lose from Ethereum’s switch to PoS since they are excluded from the Ethereum network with the “merge” upgrade. Consensus will drastically change, and proof-of-work will seize to exist on Ethereum.
Critics of proof-of-stake consensus rush to undermine Ethereum’s consensus change, claiming it will lead to more centralization.
EthereumPoW found support from miners and exchanges, with Chandler Guo leading the split.
Justin Sun, Source: Twitter
Within these turbulent conditions for Ethereum, we expect the hard fork to apply in September.
What Is A Hard Fork?
(Image background from Pixabay)
A hard fork is a network upgrade lacking backward compatibility. Old versions do not recognize the new software, and the new version invalidates new blocks mined with old consensus rules.
The Ethereum Hard Fork in September will be contentious since part of the community (miners) disagree with the proposed changes.
The decision process of blockchain networks contains a crucial element called consensus. It is one direction and one set of rules all nodes follow. Usually, changes demand support from the overwhelming majority of a community.
A hard fork can present opportunities with economic incentives for part of the developers, miners, and investors in a community to proceed in a different direction.
However, a hard fork doesn’t infer a split in the network.
An example of how hard forks operate is Bitcoin Cash, where the community in the previous two upgrades reached a unanimous agreement. However, Bitcoin Cash in two different periods saw its network splitting (BSV and BCHABC) during planned hard forks.
A community can solve most issues caused by a proposed upgrade with discussion, yet, financial incentives alone will induce a split.
During the hard fork, the new set of rules applies to a selected block. After that block, the old version will not recognize the validity of the new one and vice versa.
The chain splits in two, and sometimes both versions find support from a community of miners, developers, investors, and users.
One side will always possess more resources and influence, so this is the chain that gets to keep the brand name, logo, and everything else this entails.
One part of the chain will be those nodes that didn’t upgrade the software but kept mining or watching following a previous set of consensus rules.
There is no winning or losing side. There are two different directions.
In PoW, mining nodes can upgrade, synchronize with the rest upgraded nodes, and begin mining (or validating) the upgraded version of the chain, or keep mining with the old rules validating transactions and building blocks for another chain.
A Contentious Hard Fork
Ethereum, with September’s upgrade, changes the core of its consensus, switching from PoW To PoS. With this upgrade, miners are excluded from Ethereum as mining is now obsolete.
Thus, this upgrade leaves Ethereum miners with these options:
Shut down their GPUs (and de-invest from the mining field)
Start mining other cryptocurrencies
Fork Ethereum and keep Proof-of-Work consensus (keep mining).
EthereumPoW will share the same history with Ethereum. It will also be closer to the original Ethereum’s principles since PoS was decided in the process and alters the course of Ethereum’s consensus.
However, the incentives, in this case, are questionable. Maybe preserving the Ethereum PoW values is not the intention of the team behind EthereumPoW but follows a speculative prospect.
Right after the upgrade, miners will be excluded from the financial process of the network and will not receive any more rewards.
Ethereum miners can’t upgrade since they lose their financial incentive. They can only move to mine other coins with the hashrate GPUs produced or keep mining the old version of Ethereum and support the network with developments and infrastructure.
The upgrade was expected for years, though, so miners already had enough time to plan for these changes.
The Ethereum Fork: An Opportunity For Forked Coins!
Investors are interested in the possibility of receiving “forked” coins as these tokens and price speculation until the merge.
Investors will receive two forked coins since the network splits.
Usually, during controversial hard forks, price volatility and trading volumes rise at least until the day of the event.
The Ethereum chain will split into two camps:
Ethereum: The upgrade finds overwhelming support within the Ethereum community, the Ethereum Foundation, and most backers, investors, and developers. This version will get to keep the brand name, logo, and everything. Some exchanges during the fork will rename it to EthereumPoS or ETHS (as Poloniex did), yet this is a clever marketing move by that particular exchange.
EthereumPOW: It seems the main person behind EthereumPoW is Chandler Guo
The EthereumPoW Brand is Born
The Ethereum PoW side found support from multiple entities in the field, and as the “Merge” upgrade approaches, it keeps adding more.
It seems this support for EthereumPoW is rapidly growing since the official website presents many leading names of the industry in support of EthereumPoW (including Binance, Huobi, Kucoin, FTX, f2pool, antpool, Bitfly, and more).
A team of Ethereum miners and devs will proceed with the EthereumPoW version. The miners will still mine Ethereum, although the interest of investors and users in this chain will decide its future.
Ethereum holders will receive two coins during the hard fork. Ethereum, and EthereumPOW.
We should also notice that “Merge’ is not a scalability upgrade but a consensus overhaul.
The possibility of Ethereum PoW splitting the chain is now a certainty, and the current holders of Ethereum will own two new Ethereum tokens after the split.
How To Claim Both Forked Coins
Exchanges will soon begin announcing they will support EthereumPoW by administering tokens to the owners of ETH.
However, the best approach is to hold the private keys to the Ethereum wallets.
Using a non-custodial wallet will serve best for this. Metamask is a browser and mobile wallet that gives absolute control to the user.
The investors that trust their keys with centralized exchanges should either wait for new information regarding support for EthereumPoW, or withdraw to a non-custodial wallet.
Each exchange makes its own rules. Depending on the interest EthereumPoW receives an exchange may decide to support it or not. Unless there is an official announcement (similar to Poloniex), investors should consider the exchange they use will not support the Pow version of Ethereum.
For beginners with non-custodial wallets, Metamask is one of the best options. A Metamask tutorial for beginners:
EthereumPoW Gains Support From Poloniex
Justin sun and Poloniex announced support for Ethereum PoW, with Poloniex giving the ticker ETHW to Ethereum PoW.
The exchange already includes trading of both assets ETHW (PoW) and ETHS (PoS) paired with ETH and USD!
Poloniex is the first exchange that announced support for EthereumPow, although it is also in discussions with some of the top companies in the industry.
Centralization Is The Main Concern of PoS Critics
Concerning the centralization issues PoS presents for Ethereum, the main concern of critics is Lido Finance and its current staked position.
Lido Finance currently holds 33% of all the staked ETH, staking more than four million ETH.
The PoS model is often criticized for providing no serious backing to a network and leaning towards centralization. Most PoS networks face difficulties to sustain a permissionless environment and are considered less decentralized and censorship-resistant than PoW networks.
Yet Proof-of-Stake carries an advantage over PoW regarding environmental concerns about the energy demands of the Bitcoin (BTC) network. Proof-of-Stake demands almost no electricity usage.
Everything Will Fork!
Issues arise regarding ERC20 tokens and NFTs and their evaluation.
Since the chain splits, so will all the ERC20 tokens and the NFTs utilizing Ethereum protocols.
Everything will split, not only the ETH.
Every old Ethereum address will correspond to two new ones on the upgraded Ethereum (PoS version) and the PoW network.
NFT and token holders will find the same NFT and tokens when accessing the EthereumPoW version.
This doesn’t mean tokens in EthereumPoW will maintain any value. It depends on the progress of EthereumPoW and the decisions of teams and communities. Perhaps a project will decide EthereumPoW suits its needs and abandon the PoS version of Ethereum.
Perhaps the Bored Apes Yacht Club decides not to support the EthereumPoW version, but new developments recreate conditions for the EthereumPoW version to generate value. In this case, the current holders will decide if they will cherish their EthereumPoW ERC20 tokens and NFTs or disregard them completely.
The stance of centralized assets operating on Ethereum, such as USDC and USDT is also influential, as they maintain a powerful impact on the decision process.
Vitalik commented while speaking on BUILD Asia:
“At the moment of the merge, you will have two [separate] networks […] and then you have exchanges, you have Oracle providers, you have stablecoin providers that are kind of deciding in a way, which one they respect.”
“…at that point, you’ll have 100 billion of USDT on one chain and 100 billion of USDT on the other chain, cryptographically — and so, they [Tether] need to stop respecting one of them,
-Vitalik Buterin
For USDT and USDC, it is an easy task to freeze funds (on any address) since their smart contract contains this option for the admin.
So it wouldn’t be surprising if they decide to freeze part of all the tokens on the EthereumPoW chain.
The rest tokens without this option may have an issue, although the market will decide if there will be a market for EthereumPoW tokens.
DEXs and Dapps operating on Ethereum can also be forked on EthereumPoW.
In Conclusion
It will be interesting to see how far EthereumPoW can proceed and if there will be a long-term model that will generate sustainability for the network.
The EthereumPoW network will announce network connection specifications for wallets after the hard fork.
Ethereum is a highly liquid asset, although it is also susceptible to extreme market volatility.
It is highly speculative to hunt hard forks for the expected reward of forked coins. The price action can negate such expectations, so, with this article, we do not provide financial advice.
Cover Picture background on Pixabay (modified, with layers from pixabay)
Posting on:
● read.cash ● noise.cash ● Medium ● Hive ● Steemit ●Vocal
● Minds ● Publish0x ● Twitter
Copyright Disclaimer:
Material published in this content, is used for entertainment and educational purposes and falls within the guidelines of fair use. No copyright infringement intended. If you are, or represent, the copyright owner of images used in this article, and have an issue with the use of said material, please notify me.
Originally published at Medium
Don't forget to Subscribe and Like if you enjoyed this article!
Super nice article. The ETHPOW thing seemed to come out of nowhere. I think it's just a distraction scam like Y2K.