Ethereum (ETH): A Peek at Possible ‘Fork’ Led by Cryptocurrency Miners

Stablecoin issuers have already announced that they will not support fork in Ethereum. (Image: Pixabay/Dean Crosby)

Next week, Ethereum (ETH) will conclude “The Merge” – update that will change the consensus mechanism used from proof-of-work (PoW) to proof-of-stake (PoS) – to help the network be more energy efficient.

The update is the result of years of development and has the support of the Ethereum. Despite the enthusiasm regarding the retirement of the PoW engine on the network, not everyone is happy with the arrival of The Merge.

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A group of miners from Ethereum is planning to fork the blockchainwhere the update is never implemented and therefore can continue ETH mining operations.

It is important to note that the forked blockchain – which would maintain the proof-of-work mechanism – would work independently of the blockchain of the company. Ethereumwhich will continue as proof-of-stake after The Merge.

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While an official announcement about the fork hasn’t been made yet, it’s worth taking a look at the core details that could happen on the forked network.

Ethereum: Pros and Cons of ‘Fork’
to keep blockchain proof-of-work, according to analysts

Ethereum fork plans

Discussion about the miner-led fork began in July, when Chandler Guo – an influential Chinese crypto miner – proposed forking the blockchain for the Ethereumwhich would create “ETH PoW”, the forked version of the network.

“I have already forked the Ethereum before and fork again,” he wrote on Twitter.

Guo stated that the fork would allow miners to continue operations even after the network transition, rather than being forced to migrate to other proof-of-work blockchains.

Guo and his supporters – who have remained mostly anonymous – are reportedly working to fork the network of Ethereum. According to a blog post by the ETH PoW team, the fork could happen in September, around the same time as The Merge, which should be completed by September 20.

Recently, the ETH PoW team commented on how they had started to prepare for the fork. The team reportedly tweaked the Geth client software to remove the “difficulty bomb”.

This mechanism was configured by central developers at Ethereum to make mining blocks more difficult, preventing miners from interrupting The Merge.

Additionally, the ETH PoW team launched a testnet, called Iceberg, to test the fork code. The team also created a blockchain identification (ID) and remote procedure call (RPC) servers for frontend applications to run and connect to the forked blockchain.

The team claims to have added protection against replayreducing the risk of transactions applying equally on both blockchains – Ethereum original and ETH PoW – something that was considered a major security risk.

What will happen to the tokens?

If the fork happens, anyone who has tokens on the blockchain of the Ethereum will have a version of the tokens on both blockchains.

This does not mean that the tokens would have identical value – they might even be worthless on one of the blockchains. And that also includes non-fungible tokens (NFTs).

The forked network – ETH PoW – will contain all standalone contracts copied from the main network at the time of the fork, which, in practice, can allow developers to recreate applications based on the fork. Ethereum.

However, the fork will not bring in any developers who built the applications, nor will they be there to maintain them. This has raised concerns that any forks in the Ethereum will have little chance of success.

“If the Ethereum bifurcate, the ‘state’ of Ethereum will not be transferred together [à rede bifurcada]. It is likely that each stablecoin and application DeFi the fork fails immediately,” Compound co-founder Robert Leshner said on Twitter.

In addition, many projects have already announced that they will not support the forked network of Ethereum.

Stablecoin Issuers – tetherCircle and Frax Finance – said they will not support ETH PoW. These companies have stated that their stablecoins will neither be issued nor redeemable on the proof-of-work blockchain.

The leading NFT trading platform – OpenSea – also said that it does not plan to accommodate the ETH PoW fork. The company confirmed that NFTs present on the forked network will not be served by the platform.

A similar comment was made by Yuga Labs, the creator of Bored Ape Yacht Club. The creator of the NFTs collection said that he would not recognize copied versions of his NFTs in the ETH PoW fork.

“Aligned with the broad community of Ethereumin the event of a possible PoW fork, Yuga intends to only recognize NFTs on the ETH PoS blockchain,” commented Yuga Labs.

Ethereum: After implementing Bellatrix,
what’s next in ‘The Merge’?

What do negotiators say?

If the forked version of Ethereum If this becomes a reality, ETH PoW’s native token – ETHW – will need to be listed on cryptocurrency exchanges. Last month, poloniex and MEXC became the first spot exchanges to list the ETH PoW token, in the form of IOU tokens.

IOU-type tokens (from the expression “I owe you”, or “I owe you”, in free translation) allow users to buy, sell and reserve the native token of a blockchain that has not yet been released.

The ETH PoW IOU token is currently trading at around $35 USD, a value that could be completely different from the asset’s spot value when it is launched.

Over-the-counter trading company Paradigm estimated that the fork token from Ethereum will trade at $18 or 1.2% of the ETH market price upon launch. At that price, ETH PoW would have a market capitalization of $2.1 billion.

Other traders have started borrowing ETH, hoping they can repay the amount after the fork and sell any value of ETH PoW tokens – if any.

The scenario has resulted, however, in crypto lending protocols such as Hahato have discussions to pause ETH lending until after the fork – to try to dissuade this strategy.

According to a community discussion, excessive borrowing can lead to an overuse of ETH deposits, which can impact the health of the protocol.

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