Abstract
The Ethereum merge marks a pivotal moment in blockchain history, transitioning from Proof of Work (PoW) to Proof of Stake (PoS). This article explores the potential chain split resulting in ETHPoW (a minority PoW chain) and ETH2 (the dominant PoS chain). While ETHPoW faces significant technical and economic challenges, it may present short-to-medium-term opportunities for traders and speculators.
Key Takeaways
- ETHPoW emerges as a minority chain post-merge, with uncertain long-term viability.
- The ice age mechanism will render PoW mining increasingly difficult, potentially limiting ETHPoW’s lifespan.
- Stablecoin issuers (e.g., Circle, Tether) will likely back ETH2, destabilizing DeFi on ETHPoW.
- Traders could exploit onchain liquidity gaps to acquire ETHPoW at a discount post-merge.
The Ethereum Merge: An Overview
Timeline and Mechanics
Ethereum’s merge, tentatively slated for September 2022, will deactivate PoW mining, shifting consensus to the existing Beacon Chain. Users must run:
- A staking client (consensus layer).
- An execution client (e.g., Geth) for smart contracts.
Withdrawals of staked ETH will remain locked for 6–12 months post-merge.
Miner Resistance
PoW miners, facing obsolescence, have rallied behind figures like Chandler Guo to sustain ETHPoW. Despite community support for PoS, miner incentives could prolong ETHPoW’s existence.
Challenges for ETHPoW
1. The Ice Age Mechanism
- Purpose: A preprogrammed exponential increase in mining difficulty to force PoW’s cessation.
- History: Reset six times via hardforks (e.g., EIP 649, EIP 1234).
- Impact: ETHPoW may survive ~175 days post-merge before block intervals become untenable.
| EIP Number | Hardfork Date | Purpose |
|---|---|---|
| EIP 649 | October 2017 | Delayed ice age |
| EIP 5133 | June 2022 | Final delay pre-merge |
2. Technical Legitimacy
ETHPoW must hardfork to remove the ice age, sacrificing claims to being the "original" chain. This requires:
- Developer expertise to create new clients.
- Community consensus on hardfork parameters.
3. Economic Viability
- Locked Stakes: 13.2M staked ETH are inaccessible on ETHPoW, reducing circulating supply but damaging credibility.
- Stablecoin Exodus: USDc/USDT issuers will favor ETH2, crippling DeFi on ETHPoW.
Trading Opportunities Post-Merge
Strategy: Buy ETHPoW Early
- Pre-Merge: Hold USDc in a self-custodied wallet.
- Post-Merge: Swap USDc for ETHPoW on decentralized exchanges (e.g., UniSwap).
- Sell ETHPoW: Once centralized exchanges (e.g., Binance) enable deposits.
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Risks
- Liquidity Crunch: Pools may drain rapidly.
- Infrastructure Hurdles: Nodes/DEX interfaces may initially support only ETH2.
- Replay Attacks: Ensure transactions aren’t mirrored on ETH2.
FAQs
1. Will ETHPoW survive long-term?
Unlikely. The ice age and lack of stablecoin support severely limit its utility.
2. How can I profit from the split?
Acquire ETHPoW via DEXes post-merge and sell on centralized platforms once listed.
3. What happens to staked ETH on ETHPoW?
Locked indefinitely unless a hardfork redistributes them—a contentious decision.
4. Why will stablecoins abandon ETHPoW?
Issuers like Circle adhere to regulatory and user demands, favoring ETH2’s legitimacy.
5. Is mining ETHPoW profitable?
Volatility and declining hash rates may deter miners post-merge.
Conclusion
The ETHPoW vs ETH2 split revives the drama of blockchain forks, offering a speculative playground for traders. While ETHPoW’s technical and economic hurdles are steep, its temporary existence could yield lucrative opportunities. For those prepared to navigate onchain complexities, the merge is more than a technical milestone—it’s a trading event.