Original Author: Kyle

Original Author: Kyle

The merger of Ethereum is imminent, and the fork of Ethereum led by KOL Guo Hongcai (nicknamed Bao Erye) has attracted a wave of attention. He hopes to safeguard the interests of PoW miners, and does not support Ethereum under the merged PoS mechanism, instead forking an EthereumPow (ETHW) chain.

ETHW tries to introduce liquidity pool freezing technology to freeze the main liquidity pool contracts on the PoW chain immediately after the fork, so as to prevent scientists from using unrecognized USDT and other assets to exchange for ETHW tokens, and to keep them on the chain as much as possible. The ecology is not too chaotic.

The determination of ETHW to fork seems very firm. If the fork really happens, the focus will be on where the ecology of the Ethereum chain will go.

As of August 21, Tether (USDT) and Circle (USDC), the two major stablecoin issuers, ChainLink, the mainstream oracle machine, Aave, the on-chain lending protocol, Yuga Labs, the issuer of BAYC, and many mainstream projects in the Ethereum ecosystem have expressed their opinions. The merged PoS chain will be supported. Except for PoW miners and Tron founder Justin Sun, there are few voices supporting the PoW chain.

Many people in the industry believe that after breaking away from the support of mainstream ecological projects, the forked PoW will face the collapse of the chain ecology. This bifurcation battle may decide the outcome in a short time.

Alex, the leader of the ETHW community, revealed that he has assembled 300-500 programmers to provide technical support. It is expected that the first batch of DEX, lending, and stable currency projects will be born on the Pow chain at the end of September. This shows that ETHW seems to be ready to reconstruct the ecology from scratch. But the question is, how can ETHW, which has expensive gas fees, poor performance and lacks an ecosystem, compete with the PoS version of Ethereum and many emerging public chains?

Ethereum bifurcation event continues to ferment

On August 19, the latest Ethereum core developer meeting re-determined the total terminal difficulty (TTD) of the mainnet that triggers the Ethereum merger. Like the previous plan, the Ethereum merger is expected to be officially launched around September 15.

As one of the important steps in the upgrade process of Ethereum 2.0, the merger of the Ethereum mainnet and the proof-of-stake system of the beacon chain marks the elimination of the proof-of-work mechanism (PoW) of Ethereum. After the merger is completed, Ethereum will transition to the proof-of-stake system. mechanism (PoS). The miners who originally acted as the verification nodes of the Ethereum network will withdraw from the stage of history, and the Ethereum under the PoS mechanism will adopt the method of pledge verification. After the merger, the energy consumption of Ethereum will be reduced by about 99.95%.

The high-profile merger event has added more uncertainty due to the emergence of "forks". Guo Hongcai, a KOL who was active in the Chinese currency circle, believes that the change of Ethereum’s consensus mechanism is an abandonment of the original miners, and it will also lead to the centralization of Ethereum. Therefore, he hopes to unite Ethereum developers, communities and miners to initiate a hard fork when Ethereum merges, that is, the PoS chain is not supported, but partly modified based on the current main network version, and an EthereumPow (ETHW) chain is forked .

The drama of this fork has been fermenting in the industry for several days. ETHW released its initial version on August 15, the main features include disabling the difficulty bomb, banning EIP1559, and adjusting the initial mining difficulty of ETHW. The "banning of EIP1559" aims to "return" the benefits of Gas fees to PoW miners - after the upgrade of Ethereum London in August last year, EIP1559 took effect, and most of the Gas fees on the Ethereum network were automatically destroyed and no longer allocated to miners.

As the preparations for the fork progressed, the momentum of ETHW led by Guo Hongcai became more and more powerful. The founder of Tron, Justin Sun, made it clear that he supported the fork of Ethereum. "We currently hold more than one million ETH. If the fork of Ethereum succeeds, We will donate part of ETHW to the community and developers to support the construction of the Ethereum ecosystem.”

Although ETC Cooperative, a non-profit entity supporting the Ethereum Classic ecosystem, wrote an open letter to Guo Hongcai based on the experience of "experienced people", clarifying the many difficulties in implementing forks today, ETHW's determination to implement forks seems particularly firm. The latter responded to ETC Cooperative, saying that ETC has never grown since its birth. In the past four or five years, it has been stagnant, stagnant, and failed to establish any ecology. "It is conceivable that ETC will continue to be a giant baby in the future."

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ETHW Responds to ETC Cooperative Shows Its Determination to Fork

At the same time, ETHW clarified its attitude towards the fork with an ambitious statement, "We are willing to cheer for the community and make this attempt."

Mainstream Ethereum applications support ETH-PoS

There has been a chain fork event in the development history of Ethereum. In 2016, The DAO, Ethereum's largest fundraising project, was stolen. In order to remedy the funds, the Ethereum core development team proposed EIP-779, so that everyone can withdraw their ETH from the DAO contract through block rollback. However, some community members advocating fundamentalism believe that this violates the immutable spirit of the blockchain, so Ethereum forked into two chains, the original chain is the current Ethereum Classic (ETC), and the new fork is the current ETH, the consensus mechanism of both is PoW.

In the following years, the ETH ecology developed rapidly, and the emergence of applications such as DeFi, NFT, and DAO greatly enriched the ecology on the chain. According to the data of Okey Cloud Chain, at the peak period, the total lock-up value on the ETH chain exceeded 160 billion US dollars.

Compared with 2016, today's ETH is not the same, and implementing a fork is not just a simple question of which chain to support. You must know that the reason why the market value of ETH continues to grow is mainly due to the growth of the ecology on the chain. And once ETH undergoes another fork, which chain the ecology of the chain finally chooses will determine which chain can become the real Ethereum in the future.

It is foreseeable that once the fork occurs, users who hold Ethereum ecological assets (including ETH and various DeFi project assets, NFT, liquidity, pledge certificates, etc.) will get two equal assets at the same time, one On the ETH-PoS chain, the other is on the ETH-PoW chain.

However, although the number of assets of users doubles, the value will not double. For example, a user holds 10,000 USDT on the current ETH chain. After the fork, the user holds 10,000 USDT on the two chains respectively, but the USD reserves corresponding to these assets are still only 10,000 USD. Therefore, the user In essence, you still have USDT worth 10,000 US dollars, and the USDT on which chain can be converted into US dollars 1:1 depends on which chain the USDT issuer Tether supports.

In the same way, no matter whether users hold stablecoins such as USDT and USDC, DeFi protocol assets such as UNI and COMP, or NFTs such as CryptoPunks and BAYC, the final value depends on the issuer of the stablecoin and the DeFi protocol. And which chain the NFT issuer chooses. If a certain agreement supports two chains at the same time, then under the condition that the market value of the agreement remains unchanged, the assets on the two chains may fall at the same time, and eventually the added value will be equal to one asset.

As the two most mainstream stablecoin issuers in the market, Tether (USDT) and Circle (USDC) both stated that they will "only support the Ethereum PoS chain." Tether stated that it will support POS Ethereum according to the official schedule. A smooth transition is critical to the long-term health of the DeFi ecosystem, including platforms using USDT.

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Tether, the USDT issuer, indicated that it only supports the PoS version of Ethereum

As the largest on-chain stablecoin transaction protocol in the market, Curve Finance also issued a statement stating that it will choose the chain selected by the stablecoin. It said that it is impossible for Curve DAO to forcefully choose one of the forks, but only the chain selected by the stablecoin is paired with Curve DAO. is feasible.

The one-stop DeFi wallet DeBank believes that hard forks will bring huge disasters to the entire Web3 ecosystem. Therefore, during the transition period of Ethereum's PoS merger, DeBank and all its products will not support any forked chains.

Yuga Labs, the publisher of BAYC, also stated that in order to be consistent with the wider Ethereum community, Yuga only recognizes NFTs on the PoS chain in the event of a PoW fork.

It is worth noting that because many DeFi protocols on the Ethereum chain are coupled with each other and support each other, it is difficult to operate independently. Therefore, it will form the effect of "pulling one hair and moving the whole body".

An example is the scale effect of oracles. Almost all current on-chain lending agreements involve liquidation mechanisms, and accurate liquidation must rely on accurate quotations from oracle machines. Therefore, whether lending protocols such as MakerDAO, Aave, and Compound can continue to operate depends on whether the oracles they use support PoW chains.

Previously, Chainlink, the most mainstream oracle machine in the market, officially announced that it would not support any PoW fork version of Ethereum. Subsequently, Aave also issued an article saying that due to the lack of oracle machines and related liquidity issues, Aave cannot run normally on any PoW chain. It has initiated a community proposal and promised to choose the PoS version of Ethereum as the main chain.

On August 19, Bitfly, the parent company of Ethermine, currently the largest Ethereum mining pool, announced that after careful evaluation, Bitfly decided not to provide a dedicated mining pool for any planned PoW fork coins. Once the PoW mining phase is over, the Ethermine pool will switch to withdrawal-only mode. Subsequently, the Ethermine layer server will be shut down, and users will no longer be able to connect the mining machine to the Ethermine Ethereum pool.

Compared with more mainstream stablecoin issuers and DeFi protocols supporting PoS Ethereum, there are fewer voices supporting ETHW in the market. Except for Sun Yuchen's wave field project and PoW miners, few applications indicate that they will choose ETHW.

Most of the trading platforms are "neutral". For example, Binance and OKX have revealed that whether new forked tokens will be listed in the future will be evaluated in accordance with the currency listing standards.

Fork battle or quick decision

The fork battle is essentially a consensus battle. From the perspective of the current Ethereum ecological applications, the support rate of the PoS version of Ethereum has an absolute upper hand. In particular, supporters such as USDT, USDC, and Chainlink have played an extremely important role in the Ethereum ecosystem. It may influence the final outcome of the battle.

After the fork of Ethereum, there will be two identical versions of assets corresponding to various agreements and asset issuers, so the manager of the "vault" must actively choose which version to recognize as true, and the asset value of the unsupported version Will return to zero directly from the first moment of the fork.

Taking USDT and USDC as examples, as important assets supporting the operation of the DeFi ecosystem, these two mainstream stablecoins play an important role in applications such as DEX and lending agreements. Since their issuers have indicated that they support PoS Ethereum, the USDT and USDC on the PoW chain will be reset to zero after the fork, and the entire ecosystem on the chain will also fall into huge chaos.

For example, in the USDT-related liquidity pool of Uniswap on the PoW chain, since the value of USDT returns to zero, everyone will quickly sell USDT, which may cause other assets such as ETHW to rise in a short time. At this time, the Chainlink oracle machine no longer supports the chain, and the lending agreement cannot get accurate price feeds, which can easily lead to large-scale liquidation accidents.

This is just an example of the ecological chaos of the forked chain. If most mainstream DeFi protocols support the PoS chain, then the application ecology on the PoW chain may collapse immediately and become a "ruin". Robert Leshner, founder of Compound, reminded that if Ethereum forks, the state of the entire Ethereum will not be transferred to the forked chain, and all stablecoins and DeFi applications on the forked chain are likely to be invalid immediately. "You don't get double the wealth."

Therefore, many industry insiders analyzed that once the fork is completed, the winner will be decided immediately, and the PoS chain will almost achieve an overwhelming victory.

A few days ago, the ETHW core team stated that it was introducing a liquidity pool freezing technology to protect user funds. This is a simple and crude way, that is, to freeze the asset liquidity in the mainstream contracts on the PoW chain immediately after the fork, so as to prevent users, scientists, and hackers from using zeroed USDT and other assets to exchange for ETHW for profit , and make the entire network as less cluttered as possible.

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The ETHW development team plans to freeze the PoW chain liquidity pool

As of August 21, ETHW has announced three batches of liquidity pool contract addresses that will be frozen, including the fund pools of Uniswap, Aave, Compound and other agreements. The team also called on users to retrieve the ETH stored in the liquidity pool before the fork to prevent it from being exchanged by scientists.

Indeed, when the ecology of the entire PoW chain is fragmented, the forked ETHW token may be one of the few valuable assets on the chain, and it is also the foundation for the future operation of the PoW chain. Once a large number of ETHW tokens fall into the hands of scientists, They will quickly sell them and replace them with other valuable assets, which is undoubtedly a further blow to the ecology and confidence of the ETHW forked chain.

However, in the opinion of many industry insiders, ETHW's "freezing" strategy cannot solve the fundamental problem of ecological fragmentation. Once separated from the ecological support of the mainstream chain, the value of ETHW will become insignificant.

Although the current prospects of ETHW are generally pessimistic, the core team is still preparing for the fork and revealed some future plans. Alex, the leader of the ETHW community, said in an interview that there are currently 300 to 500 programmers in the community who can provide technical support. It is expected that the first batch of DEX, lending, and stable currency projects will be launched by the end of September, and the number will be about 20. At the same time, the community will hold a project roadshow. Before the end of the year, the ecological application on the new chain will take a prototype.

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