The central theses
- A coalition of developers and miners plans to fork the Ethereum blockchain after the merger.
- This creates a new proof-of-work chain that matches users’ ETH balances with an equal amount of a new coin called ETHW.
- ETHW is likely to retain some value and can be sold on centralized exchanges that support its trading.
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After Ethereum is forked, addresses holding ETH receive an equal amount of ETHW on the forked blockchain.
Preparing for the merger
Ethereum is moving to proof-of-stake, but miners are planning a proof-of-work fork.
A group of anonymous developers backed by many major Ethereum miners are expected to hard-fork the Ethereum blockchain after the merge next week, with a version of the network based on the current Proof-of-Work (PoW) Consensus mechanism runs while the main blockchain transitions to Proof-of-Stake (PoS).
The fork, commonly referred to as ETHPoW, will have the same transaction history as Ethereum’s main network, but will start creating its own blocks after the merge update goes live. Since the PoW fork starts from the pre-merge status of the Ethereum network, all token balances and smart contracts will also be transferred. This means that anyone holding ETH on the chain will end up with an equal balance of ETHW on the forked ETHPow chain. ETHW will only be native in the PoW fork and will be a completely different asset than the original ETH on Ethereum.
For many Ethereum believers, the planned PoW Fork is of little interest as an investment. Virtually all DeFi, NFT, and network infrastructure protocols have publicly announced that they will support the PoS chain, putting the PoW fork in a difficult spot. After its launch, decentralized exchanges on the fork will likely stop working, and centralized stablecoins like USDC and USDT will be worthless, potentially causing mass liquidations and breaking many DeFi protocols.
Even though the PoW fork has to start from scratch, there is one token that will likely have some value – ETHW. Like the 2016 DAO hack fork that created Ethereum Classic, the PoW fork might have some loyal supporters who will continue to develop it and create demand for its token. Conversely, those who don’t think the fork will go anywhere may want to sell their ETHW tokens post-merger to reap additional profits. But what is the best way to ensure that you receive your ETHW? Which exchanges are planning to support the Ethereum PoW Fork? Read on to make sure you make the most of the merge and PoW fork.
Centralized Exchanges
The easiest way to play the merge is to deposit ETH on a centralized exchange that has announced it will support the PoW fork. The list below is not exhaustive but covers the major exchanges that have made statements:
- Poloniex has already listed an ETHW placeholder token and will list and support trading for the ETHW fork at launch, including crediting user accounts with ETHW at a 1:1 ratio with the amount of ETH they own.
- Binance, MEXC Global and Gate.io will all support an ETH PoW fork and also plan to credit user accounts with ETHW at a 1:1 ratio with ETH.
- OKX will list and support trading for an ETHW fork.
- BitMEX has launched ETHPOWZ22 – a USDT-margined ETHPoW linear futures contract.
- Coinbase, FTX and Kraken have announced that they will review and trade an ETH PoW fork like any other asset.
Currently, it seems that Poloniex, Binance, MEXC Global, and Gate.io are the safest to give users their equivalent ETHW after the merger. Of these, Binance will likely have the largest market as it is currently the largest centralized exchange by trading volume.
However, those who cannot or do not want to deposit their ETH on one of these exchanges prior to the merger have another option. Holding ETH in a non-custodial Ethereum wallet guarantees that your address will receive ETHW on the new PoW fork.
take custody
A non-custodial wallet should be the fastest way to access your ETHW after the merger. While users on centralized exchanges may have to wait hours or even days for their ETHW to reach their accounts, taking control of your ETH funds is the safest way to ensure you have access to your PoW fork coins.
However, the downside is that accessing the new PoW chain requires some technical knowledge and could put users at risk. Those who choose this approach will need to add the PoW network to their EVM wallet after launch. In MetaMask you can do this by clicking on the network at the top of the browser extension and selecting “Add Network”. You will then need to enter the ETH PoW chain name, RPC URL and chain ID (these details will be announced after the PoW chain is launched). The process is relatively simple, similar to adding RPCs for other Ethereum compatible chains like Polygon or Avalanche.
Another consideration for those planning to self-custody their ETH before the merger is consolidation. If your ETH is wrapped in a smart contract, sits on a Layer 2 chain, or is staked via a protocol like Lido, it will not be matched to ETHW on the PoW chain. To maximize the amount of ETHW you receive, it’s a good idea to convert your wealth into regular ETH and hold it in your wallet ahead of the merger.
Although using a non-custodial wallet will ensure you get PoW fork coins, the limiting factor will be finding a marketplace to sell them after the merger. Since all tokens on the forked chain except ETHW will almost certainly be worthless, using decentralized exchanges is out of the question. Those looking to withdraw will still have to wait for a centralized exchange to open ETHW deposits.
To ensure you are prepared, you should set up accounts in advance with the various exchanges that support ETHW. This allows those who wish to transfer their ETHW at the earliest opportunity and potentially sell at a higher price.
Finally, it is important to understand the risks associated with the merger and any new PoW forks. A frequently mentioned danger is that transactions could be “forwarded” if an Ethereum fork is launched with the same chain ID as the main PoS chain. Here, transactions signed on a forked chain could be validated on the main chain of Ethereum PoS, enabling new scams that potentially drain users’ wallets.
Although such scams are possible, it is doubtful that the PoW fork will be launched with the same chain ID. However, unscrupulous individuals may attempt to launch other forks designed to steal users’ PoS ETH. Be very careful before signing trades on an ETH fork; If in doubt, do nothing. It’s better to lose a few hundred dollars than lose your entire ETH stack.
The latest estimates put the merger taking place between September 13th and 14th. If you plan to send ETH to a centralized exchange or your own wallet, you should do it in good time. Most exchanges plan to halt ETH transactions a few hours before the merger to ensure no user funds are lost, so don’t leave things to the last minute.
Whether you’re sticking to exchanges or planning to hold your ETH yourself, double-check everything before sending transactions and stay safe.
Disclosure: At the time of writing this article, the author owned ETH and several other cryptocurrencies.
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