The Merge marks a turning point for the Ethereum network, however what are the results of switch to a new consensus mechanism?
On the first day once the Merge, the decentralized finance (DeFi) community is subsiding into the on the face of it uneventful transition of the Ethereum network from proof-of-work (PoW) to proof-of-stake (PoS). However, it's yet to be seen the advantages that hard forks can bring to PoW supporters.
So far, the most vital competitor networks in favor of the mining community, EthereumPoW and Ethereum Classic, have shown different outcomes post-Merge.
A stumbling start
The fledgling EthereumPoW started its debut with Twitter users reporting issues with accessing the network. the issues were confirmed to be the result of a hack to the network however was reportedly resolved.
Major cryptocurrency exchange OKX has already started providing on-chain data for the new network. although this transaction activity of the crypto dealing appears stable, the prisoner spin-off’s value worth has been in constant decay since its launch, going from a value of $137 at its peak to $5.87 at publishing time.
Moving forward, there's no clear infrastructure or roadmap arrange for the ETH PoW network. The project’s “meme” written report, displayed on its web site, is ten pages long, with 5 of them exclusively dedicated to the title of the project and the remaining 5 “intentionally left blank.” The prank document is also accompanied by a GitHub repository with simply 16 contributions since August this year, and no further information is provided on the section of EthereumPoW official documents.
ETC’s revival
The cryptocurrency Ethereum Classic (ETC) might see a turnaround in its struggle to lift off, as the community might shift to the six-year-old project.
Originally created in 2016, the existence of Ethereum Classic is the result of one of the largest philosophical divisions within the Ethereum community. The fork originated as an answer to the hack of The DAO, a project executing on the Ethereum network.
The DAO was an early iteration of a decentralized autonomous organization (DAO) on the Ethereum network. to address the hack and compensate investors, the community united to primarily roll back the network’s history to before the hack happened with a tough fork. whereas the new fork inherited the name “Ethereum,” those who disagreed with the move continued to support the recent fork, that became called Ethereum Classic.
Today, Ethereum Classic works as an open-source blockchain that runs good contracts with its own cryptocurrency.
The preference for ETC over other fork choices goes beyond its value, already submitted to varied ups and downs, but rather a matter of usefulness. Sebastian Nill, ETC miner and chief operations officer of mining consulting company AETERNAM, told Cointelegraph that, since it runs employing a PoW consensus protocol, it's a lot of engaging for the mining community, adding:
“The possibility of a hardfork has always been there. People are always going to prefer to be able to mine Ether rather than having to buy it.”
As the network is a fork of Ethereum, meaning everything the most network had is replicated on its hard fork, that doesn’t imply that the possibility of building product and services on high of the ETC’s chain would be the main interest for the community.
The cryptoasset might conjointly absorb most of the energy consumption left by Ethereum to use on their own proof-of-work, permitting the network to substantiate transactions and maintain its security with an important amount of energy resources.
“Ethereum Classic goes to be even as effective as Ethereum was for miners. In the end, the community is going to pick ETC, not because of its rentability except for effectiveness for processing,” Nill says.
The user perspective
The users that decide to hold Ethereum prisoner or any resulting token post-Merge may realize it tough to trade their new assets. The support for operations with the fork-resulting plus from major exchanges like Binance is a current relief for holders who still face the asset’s decay in value.
Moreover, another concern that could be in sight is that the one coming from the regulation front. during a recent comment given to Wall Street Journal reporters on Thursday, the united states Securities and Exchange Commission chairman Gary Gensler reportedly said that cryptocurrencies and intermediaries that allowed staking could be defined as a security.
The regulative attention toward Ethereum ensuing from a PoW to PoS transition may well be a game changer that effectively fits the U.S. law. this is often because of the possibility of staked assets to get dividends and be seen as securities according to the Howey check.
On the other hand, whereas Ethereum’s future PoS model is a lot of energy economical and environmentally friendly, the upgrade hasn’t cured the present headaches for DeFi protocols and its users, like network congestion and high group action fees, called gas fees. for example, the primary nonfungible token (NFT) to be minted post-Merge price over $60,000 in gas fees.
The building of sturdy foundations over providing lower gas fees and major group action speed may be a temporary exchange that won’t affect the market, as Matt Weller, global head of research of city Index.
“From a user perspective, you want something that is cheap, fast and reliable. Through the Merge and more scaling in future plans for the Ethereum Foundation, this could be a foreseeable opportunity. They have worked from a very safe place, assuring security at all cost over other tradeoffs.”