ETH holders should prepare for free crypto as developers push ahead with a proof-of-work fork ahead of the Merge.
While the majority of Ethereum developers are putting the final touches on a software upgrade to Ethereum known as The Merge, designed to reduce the carbon footprint of Ethereum, a small group of developers are working hard to preserve their livelihoods.
Who is working on PoW fork and why
The small group, led by Chinese miner Chandler Guo, wants to create a fork of the existing Ethereum chain that will still use the energy-intensive proof-of-work consensus mechanism. A fork occurs when a faction of a cryptocurrency community disagrees with how the associated blockchain should move forward and creates a new chain with new rules.
Guo was a vocal proponent of Ethereum Classic, a fork born out of a hack of The DAO in 2016. The community chose to split, with Guo favoring the old blockchain instead of the one now known as Ethereum.
After attending Mining Disrupt 2022 in Miami, Guo held a party where he learned that many Chinese miners faced bankruptcy following China’s crackdown on all things crypto. Initially, he decided he wouldn’t help them but soon posted a WeChat “moment,” asking for opinions on a proposed fork.
He soon received calls from the miners who lamented that they would have to file for bankruptcy if Ethereum continued its migration to proof-of-stake. They also supplied Guo with the contact details of some Ethereum developers working on layer-2 solutions after Ethereum migrated to proof-of-stake. Guo then contacted a Chinese crypto community and found 60 volunteers that would support a hard fork.
Proof-of-work systems like Ethereum and bitcoin require large amounts of energy to validate a block of transactions and add it to the blockchain. Ethereum miners, for example, use powerful computers called ASICs to validate transactions, earning ETH rewards in the form of a block subsidy and transaction fees. Being a miner often involves significant capital outlay to purchase ASICs, premises, electricity, and staff. Miners rely on the rewards paid out for adding a block to the blockchain to generate revenue and profit.
When the Ethereum Merge happens, miners will no longer be needed, leaving many miners stranded with expensive ASICs and no revenue. That’s where a proof-of-work fork becomes attractive.
How to prepare for ETH PoW airdrop
Guo said he expects the new blockchain to issue new tokens to ETH holders via an airdrop. Bobby Ong, the co-founder of Coingecko, offered some tips on receiving the new ETH token. The ETH wallet or the crypto exchange holding the ETH wallet must support the new fork. He also mentioned that users with ETH on exchanges would likely get the token without doing anything.
To receive the new ETH PoW token, holders of ETH on layer-2 applications like Arbitrum or Optimism must move it to the Ethereum mainnet. All wrapped ETH on the mainnet must be unwrapped, and all ETH used in liquidity pools must be drawn. It also makes sense to borrow ETH from either compound or AAVE, as ETH PoW will be dropped to anyone holding ETH when a snapshot is taken.
ETH mining revenue drops
Some miners like Hive Technologies may revert to mining Ethereum Classic. But there is already evidence of other miners moving away from ETH. Mining revenue for ETH reached a one-month low of $754,483.90 on Sep. 5, 2022, after the previous low of $785,384.98 on Aug. 27, 2022.
The controversial founder of the Tron blockchain Justin Sun said that his cryptocurrency exchange Poloniex would support all Ethereum proof-of-work tokens.
Blockchain price oracle provider Chainlink said it would not support proof-of-work forks after the Merge.
Some analysts have advised caution, saying that a fork is often plagued by a lack of users and developer engagement.
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