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Guide: ETH Proof of Work (PoW) Fork

Note that this guide contains an (informed) opinion. 

 

The highly anticipated Ethereum Merge is scheduled for September 15. It will transition the Ethereum network from Proof of Work (PoW) to Proof of Stake (PoS), making the network more sustainable, environmentally friendly, and scalable. Read more about The Merge here

While most of Ethereum’s community is supportive of The Merge, the upgrade will significantly impact Ethereum miners.

When the network moves to Proof of Stake, ETH will no longer be available to mine, reducing the profitability of energy-intensive mining hardware. 

As a result, many ETH miners have advocated the creation of an Ethereum fork that would maintain the current Proof of Work consensus mechanism and, therefore, ETH mining. 

With the fork, a carbon copy of the full Ethereum ecosystem would be created, except that the current Proof of Work consensus mechanism would remain unchanged. If you had 10 ETH before the fork, you’d now also have 10 ETH PoW. 

 

Why the ETH PoW fork won’t work… 

On the ETH PoW fork, there’s no Proof of Stake consensus mechanism, so staked ETH (stETH) would be worth 0, as it will never actually be redeemable for ETH there. In fact, most tokens would be worth 0 in ETH PoW.

Most issuers of fiat-backed stablecoins have already stated their support for Ethereum’s PoS chain. Fiat-backed stablecoins cannot simply double their supply overnight and maintain their $1 value. So, on ETH PoW, USDCPoW and USDTPoW, stablecoins would be worth 0. 

DeFi stablecoins would have no backing, and DeFi collateral would be worthless overnight.

What’s more, no one is going to be building on ETH PoW, Decentralised Applications (dApps) will have no users, and developers will be elsewhere (i.e. the real Ethereum).

ETH PoW is like being given all the parts to build an Xbox360 for free. But why would you want to build an Xbox360 if you have an XboxOne (ETH)? It’s not worth the effort. 

 

But… 

The ETHPoW fork is the next sh*tcoin. However, sh*tcoin doesn’t mean you can’t make money. Quite the contrary- it’s like an airdrop! 

Think of Bitcoin Cash, it’s a Bitcoin fork. When it happened, if you held 10 BTC in your cold storage wallet, you suddenly had 10 BCH as well. BCH is certainly a sh*tcoin but doesn’t hurt to get some for free and sell them, does it?

Users who hold ETH in a cold storage wallet or an exchange that supports the fork (e.g. MetaMask or Binance) will have equal amounts of ETH on the Proof of Stake chain and the Proof of Work chain after the fork.

 

Click here to learn more about the Ethereum Merge. 

 

Disclaimer: NOT FINANCIAL NOR INVESTMENT ADVICE. Only you are responsible for any capital-related decisions you make and only you are accountable for the results.

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Nicola Rainsford

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