The cryptocurrency Ethereum wants to say goodbye to mining in September. With the big update, the network could split into two coins.
With the Ethereum merge update scheduled for September, several crypto exchanges have already hinted at support for a possible fork that will remain true to energy-intensive mining. As the most recent example, the trading platform Bitfinex explained that it would offer tokens in derivatives trading on the two coins that may soon be created. Depending on the outcome of the update, you can then exchange them for the coins that have been created. The Huobi exchange had even declared itself neutral and would support all coins resulting from the update, provided they met security requirements. Something similar was heard from the exchanges Gate.io, Bitmex and Poloniex.
The world’s largest stock exchange, Binance, has so far kept the option open. They stand behind the merger and, in the event of a split, will at least think about whether to include a possible alternative coin, according to a blog post. The stock exchanges Kraken and Coinbase have not yet responded to a request from voonze online.
However, there have already been clear rejections: Circle, publisher of the second largest stablecoin USDC, does not want to support any tokens on a separate proof-of-work chain. The largest stablecoin, Tether, also opposed divisions in the community. You only stand behind an Ethereum with Proof of Stake. The Chainlink protocol also declared its rejection of proof-of-work forks – Chainlink is one of the largest Ethereum projects for the automated feeding of smart contracts with data.
From mining to staking
Ethereum’s transition is usually referred to as a merge, because it is about merging the execution layer still working with Proof of Work with the Beacon Chain using Proof of Stake in the existing mainnet. The Beacon Chain has been operational since the end of 2020. It introduces a consensus layer in which blocks are no longer confirmed by mining, i.e. the computationally and power-intensive finding of suitable hashes. Instead, there is now the role of the validator, who buys into this position with a deposit of 32 Ether and is supposed to ensure the generation of compliant blocks.
Whenever a decentralized network changes its protocol so profoundly, participants can choose to deny the change and continue to use the client software with the old rules. This creates a split blockchain, also known as a fork: one chain network builds its blocks with the new rules and the other builds its own with the old rules. The block versions are no longer compatible with each other. The two chains then only share a common history – all previous coins, NFTs, Smart Contracts are available twice. And the future runs separately.
Just a small Gallic village…
A fork for Ethereum has already been announced. The resisters call themselves EthereumPoW. In an over Twitter published manifesto accuse the makers of the Ethereum Foundation of having thrown their ideals overboard – although the consensus change has always been planned. Instead of relying on decentralization, staking will make Ethereum a club of the rich. They want to switch off the so-called Difficulty Bomb in their own fork and also partially withdraw the EIP-1559 update, which is perceived as hostile to miners, in order to be able to continue mining with hardware coins.
The Difficulty Bomb is a mechanism to move as many people as possible from mining to proof-of-stake consensus: The requirements for finding suitable hashes for the blocks are artificially inflated to such an extent that mining is simply no longer worthwhile. A fork should literally defuse this bomb.
The brain behind EthereumPoW is former cryptocurrency miner turned venture capitalist Chandler Guo. According to him, a team of 60 volunteer developers supports him.
Ethereum had such a fork in 2016: After a hack against the blockchain flagship project The DAO, the developers decided to iron out the consequences with a hard fork that put the blockchain in a state without the hack. Critics saw this as a violation of central principles such as the integrity of the blockchain. A project was formed that did not support the change and then established it as an alternative under the name Ethereum Classic. Incidentally, Ethereum Classic will also continue to mine.
In general, however, an overwhelming majority of the ecosystem around Ethereum has so far clearly backed the farewell to mining and the switch to Proof of Stake. Given this, it is unlikely that another prospecting Ethereum branch could snatch PoS Ethereum’s rank as the number two cryptocurrency. Whether the merge update fails due to technical difficulties is of course another matter.
