The Decentralized Finance (DeFi) community has begun to settle into the seemingly smooth transition of the Ethereum network’s proof-of work (PoW), to proof-of–stake (PoS) status. It is yet to see the benefits that hard forks can bring to PoW supporters.
The most important competing networks for the mining community, EthereumPoW, and Ethereum Classic, have had different results post-Merge.
Stumbling to a halt
Twitter users reported issues accessing EthereumPoW when the fledgling EthereumPoW first launched. These issues were confirmed to have been caused by a hack to the network, but the issue was apparently resolved.
OKX, a major cryptocurrency exchange, has begun providing on-chain data to the new network. Although the cryptocurrency asset’s transaction activity seems to be stable, its price value has been steadily declining since its launch. According to CoinMarketCap, it went from a peak price of $137 to $5.87 at publication time.
There is currently no plan or clear infrastructure for the ETHPoW network. The “meme” whitepaper for the project is 10 pages in length. Five of these are dedicated to the title of project, while the other five are “intentionally left blank.” A GitHub repository contains 16 contributions from August this year. No further information is available on the EthereumPoW section.
Ethereum Classic (ETC), the cryptocurrency Ethereum Classic, could see a turnaround in the struggle to lift off. The community could shift to the 6-year-old project.
The creation of Ethereum Classic was originally made in 2016. It is the result one of the most important philosophical divisions within the Ethereum community. The hack of The DAO was the inspiration for the fork, which is a project that executes on the Ethereum network.
The DAO was an early version of an Ethereum-based decentralized autonomous organization (DAO). The community decided to roll back the history of the network to the time before the hack occurred with a hard fork. This was to address the hack and to compensate investors. The new fork took the name “Ethereum” from the old one, but those who were not happy with the change continued to support Ethereum Classic.
Ethereum Classic is an open-source blockchain today that runs smart contracts using its own cryptocurrency.
ETC is preferred over other fork options because of its market price. This has been subject to many ups and downs. It’s more practical. Sebastian Nill, an ETC miner who is also chief operations officer at AETERNAM mining consulting company, said that ETC runs on a PoW consensus protocol and therefore more appealing to the mining community.
“The possibility that a hardfork is possible has always existed. People will always prefer to be in a position to mine Ether, rather than have to purchase it.
The network is a fork Ethereum network, which means that everything in the main network can be replicated on its hardfork. However, this does not mean that building products or services on top the ETC chain would be the primary interest of the community.
The cryptoasset could also absorb the majority of Ethereum’s energy consumption to use on their own proof of work, allowing the network confirm transactions and preserve its security using a significant amount of energy resources.
“Ethereum Classic will be as efficient as Ethereum for miners. Nill states that ETC will be chosen by the community for its data processing effectiveness and rentability, but also because it is more affordable.
The user’s perspective
Users who decide to hold Ethereum PoW, or any other token post-Merge, could have difficulty trading their assets. Holders who are still facing the asset’s decline in value will be able to access Binance for support with operations with the fork-resulting assets.
Another concern is that regulation could be a factor. According to a Wall Street Journal report, Gary Gensler, chairman of the United States Securities and Exchange Commission said that cryptocurrencies and intermediaries that allow staking could be considered security.
A PoW-to-PoS transition to Ethereum could bring about a significant regulatory shift that will be beneficial for the U.S. legal system. This is because staked assets could generate dividends and be considered securities under the Howey test.
However, Ethereum’s PoS model will be more efficient and eco-friendly, but it won’t solve the problems DeFi protocols and users are currently facing, such as network congestion and high transaction costs, also known as gas fees. The first non-fungible token (NFT), that was minted after Merge, cost more than $60,000 in gas costs.
Matt Weller, global head for research at City Index, stated to Cointelegraph that the temporary compromise of building strong foundations over lower gas prices and significant transaction speed won’t impact the market.
“From a user’s perspective, you want something cheap, reliable, and fast. This could be possible with the Merge and additional scaling in the future plans of the Ethereum Foundation. They worked in a safe environment, ensuring security at all costs over any other tradeoffs.
The decision of Ethereum to place a bet on a protocol change has been justified as a necessary and non-negotiable action.
Skylar Weaver is the devcon and lead devconnect of the Ethereum Foundation. She told Cointelegraph that Merge is a testimony to the network’s “no shortcuts” approach to its development.
“No, it’s not a trade-off. PoS is a necessary step in order to provide user-focused perks like faster transaction speeds and lower gas prices. Some chains make tradeoffs to achieve lower gas prices and faster transaction speeds. They use shortcuts.
Additionally, rollups via layer-2 networks will continue to provide access to Ethereum’s benefits and benefits for mainstream users.
“Ethereum is scaling via L2s right now. Rollups are a good example. Rollups allow people to make transactions faster and at a fraction of the cost of gas while still retaining the security features of Ethereum. Weaver stated that this is how we scale without making shortcuts.