The Eve of the Merger of Ethereum: The Capital Competition Behind the Computing Power

Original post by Jessy, Chain Catcher

Original post by Jessy, Chain Catcher

"Do you want to fork?"

"What are you doing?"

The conversation took place between Bao Erye and He Xia (pseudonym), a volunteer in the AWSB community. On July 22, it was just a small gathering among three friends. In the Bay Area of ​​the United States, a group of Chinese engaged in the blockchain industry or relying on currency speculation to achieve financial freedom gathered. They often meet with each other for dinner and wine tasting. On this day, someone found a good women's cigarette, so he invited friends to try it out.

The merger of Ethereum is the biggest hot spot in the silent bear market, and it is also a topic that cannot be avoided by gatherings in the circle. Bao Erye and He Xia hit it off, and they jointly forked an Ethereum fork chain called ETH PoW. Bao Erye, who brought his own traffic, stood in front of the stage to drain traffic, while volunteers from the AWSB community completed a series of technical development work in the rear. Facing the media, talking about the original intention of doing this, Bao Erye said with a smile, "I hope my epitaph will say the man who forked Ethereum twice."

At the small gathering that day, another person named Yang Kai (pseudonym), before that, he had made different choices. Unlike Bao Erye and others who chose to fork Ethereum, he turned his head to support the ecological construction of ETC, and a community called "ETCDAO" was established.

The interests of all parties behind the merger and upgrade of ETH are surging, and this small gathering also revealed that, just like the previous major currency bifurcation events, the Chinese are still the protagonists of the story.

lessons learned

History is always strikingly similar, and those who once participated in the Bitcoin fork once again carried the banner of the Ethereum fork.

Bao Erye once forked out Bitcoin God in 2017, and has accumulated a lot of infamy for "cutting leeks" for multiple ICO projects. He is the most vocal among all the teams participating in the fork of Ethereum. Liao Xiang, who forked Bitby Gold in 2017, this time he invested in three teams to participate in the Ethereum fork competition. Compared with the previous two, the head of the Ethereumfair community with a technical background is more low-key, and the team has experience in successfully developing public chains.

More teams have not yet surfaced. According to the insiders interviewed by Chain Catcher, as far as they know, there are about a dozen teams that are forking Ethereum, and when Ethereum is actually merged and upgraded, it may More teams will emerge.

It is not difficult to fork. These forked teams only need to copy the open source protocol of Ethereum and make some modifications, which is also in line with the spirit of the blockchain.

But in terms of details, there are various points that need to be handled with care. From a code point of view, the fork needs to remove all POS conversion logic from the Ethereum testnet code, remove the difficulty bomb, and update the chain ID to provide protection; the mining software may also need to be updated, which requires cooperation with the wallet provider. To agree to support ETH POW; need to cooperate with the exchange and agree to support ETH POW.

In addition to solving these problems, there is a big difference between the fork of Ethereum and the fork of Bitcoin in 2017. There are a large number of token assets on Ethereum. After the fork is successful, it means that these tokens Assets will also be copied to the forked chain. Whether the token assets on the forked chain are valuable is determined by the market, but there will definitely be chaotic scenes.

There are always too many distrustful voices in the market in the face of a team that has only started to prepare for a fork. ETC Cooperative, a public charity fund focused on supporting the development of the ETC ecosystem, shouted to Bao Erye's team: "This is a huge and arduous coordination task, and the merger is only a few weeks away. Today's prosperity is in the PoW new There is a high probability that the chain will not reproduce.” In their view, it is too late for these teams to start doing things now.

After the forked chain is made, the challenge really begins. Does the forked chain have the support of computing power? The project party is willing to build an ecology on the chain? Only when the ecology is truly established can the chain be considered to have real use value.

In 2017, there were differences among the Bitcoin community due to the expansion issue, and finally a new chain BCH was hard forked. With the outbreak of the bull market in 2017, more Bitcoin forked coins appeared, such as Bitcoin Gold BTG, which opposed segwit2x, Bitcoin Diamond BCD, which increased the block production speed by five times, etc., there were as many forked coins on the market as There are more than 70 kinds, but most of them are worthless and have no computing power support, and will soon die out.

ETC is a typical case. In 2016, because of a loophole in a project on Ethereum, hackers stole ETH worth 60 million U.S. dollars at the time, and the Ethereum development team modified the code of the Ethereum software to transfer all the funds of the project to a A specific refund contract address, thus regaining all the ETH stolen by the hacker.

Some miners disagreed with such a modification, so Ethereum hard forked into two chains, the old chain was renamed ETC, and the new chain is the ETH that everyone sees now, and the two chains represent different communities and consensuses.

At that time, most miners and project parties chose to follow the new ETH supported by Vitalik. The ETC community has always adopted a "governance by doing nothing" approach, and its development has stagnated. In fact, although ETC is the mainstream currency, in the past six years, new public chains have emerged continuously, and because it lives in the shadow of the big brother of Ethereum, ETC does not have much competitiveness, because the ecology on the chain has not been developed. If it can be done, it will become more of an object of speculation.

Can't get up early

From Ethereum to POS, where should the computing power originally supporting Ethereum flow? Some miners will choose to mine other PoW tokens. Part of the computing power will be distributed to ETC. The computing power is coming, and if the ecology on the chain is established, perhaps the development of ETC will usher in a turning point. Yang Kai supports the development of ETC, and the bet is that ETC will undertake part of the computing power after Ethereum is transferred to POS.

People's optimism about ETC is also reflected in the price of ETC. In March 2022, news about Ethereum miners considering transitioning to ETC began to spread, causing the price of ETC to rise by 103% within 11 days. Despite speculation surrounding a new ETHW fork following the merger, ETC is up again, up more than 198% since July 12.

Yang Kai built a support group for ETC. Every newcomer needs to express his opinion on what he can do for the ecological construction of ETC, and then the volunteers of ETCDao will sort it out.

Yang Kai shouted in the group, "Everyone hurry up and build, don't mind the traffic, when the tide of the forked chain fades, all the PoW traffic will converge on ETC, and then the early builders can easily eat the global PoW traffic dividend."

Someone responded, "Just wait for the skyrocketing."

In addition to supporting ETC, doing forks is also a business that will not lose money. "Everyone thinks they can still make money like they did in 2017. It's too early to make money without profit. Isn't it all about making money?" Liao Xiang bluntly pointed out the original intention of everyone's fork.

He Xia told Chain Catcher that the initial investment for the fork is only the cost of purchasing a few servers. There are about 8 core developers. These developers are distributed all over the world and they all pay for free. After the fork is successful, the ETHW team will hand over the project to the community for joint governance.

According to a fork chain rule of the Bao Erye team circulated on the Internet, its fork chain "except for the abolition of EIP-1559, other functions are consistent with Ethereum."

Liao Xiang saw that the chain catcher was directly attacking Bao Erye's team, "The first thing they announced was to retrieve the coins destroyed by EIP-1559. Then about 2.5 million coins will be recovered. How will these coins be distributed? He said it all No pre-excavation and no additional issuance, isn’t this the same as pre-excavation and additional issuance?”

Liao Xiang commented on the forked team that competed with him, “These teams have two ways to make profits, one is long-term play, and the other is short-term play. The short-term play is to make a coin and find some deals. Cooperate with the company, pull the plate and smash the plate to ship, and leave after cutting the leeks.”

And he himself said that what he wanted to do was to hedge against the uncertainty and risk of the Ethereum upgrade, so he chose to invest and fund three different teams to do the Ethereum fork. "I don't know which one can escape."

However, in the opinion of the person in charge of another forked team, "Liao Xiang's team has invested in it, which means that this interest already exists, and some teams under him have changed the mining rules. How will you distribute the investment you have dug?"

For the forked teams, the benefits definitely exist. The Ethereumfair community of the forked team also does not shy away from the fact that the forked chain of its own team will bring benefits to its own team. First of all, the success of the forked chain will bring benefits to the team. Come to fame. Secondly, the team is also discussing. On the existing Ethereum, there are 13 million ETH in the account holding the first currency. This address is the pledge contract address of the beacon chain of the Ethereum to PoS, and the contract is controlled by the Ethereum Foundation. The team feels that such a design is not good, so when the fork occurs, the ledger of 13 million ETH can not be synchronized. According to the current plan, the team plans to vote 70% of the 13 million candy coins after the fork to the token owners of another public chain ClassZZ developed by the team, as well as the holders of BTC, DOGE, and ETC tokens , and the other 30% is obtained by miners, technical communities, exchanges, etc. who support the forked chain.

It’s not just the teams that participate in the fork that can benefit. Liao Xiang recalled that when the enthusiasm for mergers and upgrades of Ethereum was not heated up, he always met with cold eyes when he went to mines, exchanges, and project parties to discuss cooperation. But until the past half a month, there are always endless meetings and endless partners.

As the largest "casino" exchange in the currency circle, it will not let go of this wave of traffic. At present, three exchanges, Poloniex, MEXC and Gate, have launched the futures of the fork currency ETHW. The price of this futures product was nearly 80 usdt at its highest price . A participant of the forked team told the chain catcher that this price has exceeded his expectations, and he thinks that $1 should be a relatively normal price when the forked token goes online.

The enthusiasm for speculation is surging in the hearts of retail investors. Where there is enthusiasm, there is room for speculation. For users who hold ETH, the success of the fork means that they will receive the corresponding "candy" income.

A fork team supported by Liao Xiang has started to pull a fork arbitrage group. Those who join the group need to pay 200 yuan, and the group owner told reporters that this group will invite experts to tell everyone how to arbitrage after the fork is successful , for retail investors, holding the candy of Ethereum waiting for the fork is a steady profit business.

The fund company FBBank currently holds about 300 ETH. The person in charge of the fund told the chain catcher that they are just keeping the ETH. If they get the forked currency, they will throw it away immediately. The fund side is not optimistic about these forked coins. In the eyes of the person in charge of the fund, he does not trust the forked chains and finds them difficult to implement.

As for the conversion of Ethereum to POS, he has the same devotion as a believer, "After converting to POS, the gas fee of Ethereum will be lower and more efficient." An opportunity for goods, ETH after transferring to POS will enter deflation. After switching to Ethereum after POS, other POS public chains must no longer be the opponents of ETH. He is bullish on the price of ETH for a long time. He thinks that it is time to ship when ETH rises to 10,000 US dollars.

Is the battle between POS and POW related to faith?

Whether it is the team that is going to make a hard fork of Ethereum or the members of ETCDao, they all said that they insist on PoW in order to adhere to the ideal of decentralization, or to keep a "Plan B" in Ethereum.

The main difference between PoS and PoW is how the voting power in the blockchain consensus is determined. In PoW, voting rights are proportional to the computing power of nodes; while in PoS, the voting rights of the system are proportional to the proportion of equity held. In layman's terms, after switching to PoS, the more ETH you hold, the greater your voting power, which is one of the reasons why PoW fans attack PoS. But looking deeper behind it, the backside of computing power is closely related to the competition for capital.

"After the POS is changed, will the SEC in the United States supervise this POS? After you change the POS, it is equivalent to having a controlled entity. However, POW cannot be supervised if you want to. Various anonymous nodes are distributed all over the world. .” Yang Kai said.

It is undeniable that supervision is the sword of Damocles hanging over ETH. In this regard, Vitalik, the founder of Ethereum, participated in the discussion on Twitter, and how the Ethereum community will react to this topic if the validator nodes of certain protocols (such as Lido, Coinbase, etc.) are supervised to conduct protocol-level review of Ethereum. It said it would view such censorship as an attack on Ethereum and chose to destroy these nodes through a broader consensus (social consensus). Such a response seems to threaten the asset security of Ethereum holders.

Emerging public chains generally adopt the POS consensus mechanism, which is undoubtedly an irreversible trend. Public chains that cannot follow the development trend seem to be abandoned by the world. A miner who still holds an ETH graphics card mining machine commented on ETC in this way: "The code version of ETC is too old, and it is an older version than TRON." Although his ETH mining machine can only be transferred to To mine ETC. "But he is not optimistic about the development of ETC, he has been hesitant and wait-and-see. Outdated public chains will always slowly retreat.

For the miners, after the transfer of Ethereum to POS, they can only "follow the trend." Whether to support the POW consensus has nothing to do with beliefs, and is almost entirely out of interest considerations.

This time, it is different from the fork of Bitcoin in 2017. At that time, Bitmain, the largest holder of Bitcoin’s computing power, dominated the fork of Bitcoin, and it seemed that it was to safeguard the interests of miners.

Howie, an old miner who joined the industry in 2013, invested a lot of computing power to support the fork of BCH in Bitmain when Bitcoin was forked in 2017. Not only that, they also connected resources to build an ecology. During the investment, they Made money. But one year later, there was a split in the BCH community. At that time, he judged that BCH could not continue, so he stopped investing in computing power. At the end of 2018, the market value of BCH has shrunk by 90%.

Forks are easy, and beliefs are easy to build. But the collapse of faith is always in an instant. With the experience of supporting BCH, he now has a more prudent and rational attitude towards whether to support the forked chain of Ethereum. He has his own observations and judgments about the ETHW chain of the Bao Erye team. The code published in its first version When it came out, I felt that the quality was average and I could not understand logic, nor did I have a technical spiritual leader. There are even some bugs that cause security issues (the team has been notified so far).

"There is no shortage of chains today. What everyone is competing for is attention and the support of all parties. It is much more difficult than in the past to do a good job of a chain, continuous iteration of code, and a good consensus and ecology."

Now there are probably only a few hundred Ethereum mining machines left in his hands. After the upgrade of Ethereum, the chip machines in these machines can only mine ETC and Ethereum hash coins, and the graphics card will handle them flexibly. From 2016 to 2017, the company managed 8% of the peak computing power of Ethereum. After working in the industry for many years, they have carefully considered the situation to deploy the number of mining machines. For example, at the peak of the bull market last year, their company released a lot of mining machines. He has been paying close attention to the various trends of Ethereum. On December 15, 2021, the testnet was launched. He observed the structure of the block and found that many POW things in the future will either be replaced or empty. At this time, he realized that The trend is irreversible, and the machines that should be sold should be sold.

But more small miners are not too forward-looking. Xie Zehai (pseudonym) is a dealer of ETH graphics card mining machines and a miner. He still has one or two thousand Ethereum mining machines in his hands. Before that, he sold some of the low-power mining machines in his hands, leaving these high-power mining machines. When ETH is completely transferred to POS, he will transfer these mining machines to mine ETC. When the ETH market was good in the bull market last year, each mining machine could earn about 200 yuan a day, but now, one machine earns only about 50 yuan a day. He calculated that when it is transferred to the ETC mining network, a mining machine can earn about 200 yuan a day. It is also a daily income of 50 yuan. The expected income is definitely not as high as when mining ETH, but he also accepted this result, "There is still some mining anyway."

As a miner, he is not optimistic about various forked chains. He analyzed that if there is a forked chain whose currency price is skyrocketed, miners may flood in to mine such forked chains within a month or two. Fork coins.

But in the long run, miners still hope that their coins can be mined and stored, and then sold at a suitable price. He called this "there is food in hand, and the mind is not panic." Although the profit of mining ETC is not as high as that of ETH. But he felt that, after all, this currency has been around for six years, and there is a dealer behind it. When the dealer pulls up the disk, it is time for the miners to ship.

Most of the miners are ready to upgrade. Xie Zehai remembers that since 2018, ETH has been planning to upgrade POS. The mentality is mining.

Xie Zehai has been in this industry for a long time and has also made money. He analyzed that if the person who bought the mining machine last year when the price of the mining machine was high, and the price of ETH fell later, it would only take three years to pay back the cost. For these For small miners, the upgrade of ETH has the greatest impact on them, and the payback cycle is predictably lengthened again.