What is Ethereum PoW (ETHER)? How does the change of ETHV affect the crypto market?
As the event of The Merge draws closer, the debates about the EthereumPoW fork are also becoming more and more intense. Many people think that Ethereum using the Proof of Stake consensus mechanism will be better than the current Proof of Work consensus mechanism, but there are also opinions that Proof of Work is a more appropriate solution for Ethereum. So let's learn about EthereumPoW with Fox Crypto News through the following article!
Ethereum Proof of Work Overview
What is ETHW?
EthereumPoW (ETHW) is a hard fork Proof of Work of Ethereum after The Merge event took place. This means that EthereumPoW is a fork that completely retains the functionality of Ethereum before The Merge.
Ethereum Proof of Work was initiated by Chandler Guo, a Chinese “miner” and is supported by China-based crypto exchanges such as: Huobi, Poloniex, Gate.io and MEXC Global. In addition, there is participation from the majority of the community from China.
ETHW's view on the development direction of Ethereum
The EthereumPoW community said: "The Dragon Warrior is finally turning into an evil dragon" when it said that the Ethereum development team is abandoning "decentralization" with the move to Proof-of-Stake. This is contrary to the purpose of founding Ethereum in the first place.
- See also: ETH PoW announces the changes that will apply if the chain is split
Besides, EIP-1559 was developed to create an incentive to increase the cost of miners. This has a huge impact on the most important pillar of any Proof-of-Work (PoW) network: “miners”.
Miners are also a part of project governance and should hold some power and influence on the direction of the network, but the Ethereum Foundation's power is said to remain concentrated as long as there are can force miners to voluntarily comply with their policies.
The ETHW community believes that after The Merge, the Ethereum Foundation will completely eliminate the Proof of Work mechanism, a mechanism similar to Bitcoin and make a difference and unique compared to the current traditional finance, and the Ethereum Foundation. I think this is fine even at the expense of the interests of the entire miner.
Therefore, EthereumPoW will retain the features developed by the old Proof of Work method and continue to build according to criteria such as:
- There is no Premine (buy first or print money first) or inflation because it ensures fairness and continuity on Ethereum. Still maintaining the Proof of Work and Nakamoto Consensus mechanism. Remove EIP-1559. Do not idolize the head and the development team. Open source for client nodes, mining software and wallet applications to support the network. Get support from exchanges and they will also get full hash rate. The EthereumPoW network (to distinguish it from the upcoming PoS) will eventually become fully autonomous and self-sustaining, without any governance, and the goal will be achieved in 3 years.
The Impact of EthereumPoW on the Cryptocurrency Market
The value of ETHW is affected
There is no denying that the Ethereum ecosystem is one of the gathering places for many good quality projects and developers. So, the PoW fork of Ethereum will carry all the copies of all the tokens of the Ethereum projects. This also presents a new challenge for developers and the cryptocurrency market.
It can be seen that the large amount of assets locked in the protocols and the complexity of DeFi will make a huge impact on EthereumPoW so users have the ability to liquidate most of the forked assets on the blockchain. EthereumPoW to switch to Ethereum PoS. So the value of assets on EthereumPoW will fluctuate greatly.
Not only that, but the two largest-cap stablecoins, USDT and USDC, both disagreed to work on EthereumPoW. Meaning, all assets backed by stablecoins USDT and USDC on ETHW are likely to become worthless.
While there is no USDT and USDC support, EthereumPoW still has USDD support – an algorithmic stablecoin created on the TRON network. However, the USDD depeg incident that took place in June did not create too much confidence in the development of USDD on ETHW.
So there are some assumptions that: if the ETHW fork takes place, users can try to liquidate positions that are based on the former asset-backed tokens to ETHW and then to ETH, while simultaneous ETH holders rush to sell their airdropped ETHW tokens for stablecoins or ETH. As a result, we may see selling pressure disproportionately affect the value of assets that were forked along with ETHW.
Perhaps realizing this, the price of ETHW has fallen further in recent days:
Unnecessary complexity for developers
The ETHW fork could cause new problems for many Ethereum-based protocols in addition to other asset-backed tokens on ETHW losing value.
The next issue is that when a project's token holders vote to deploy on a new blockchain, the circulating supply in the project will usually remain unchanged to prevent dilution of the token's value and utility. there. However, on the PoW fork, the entire project and tokens will be cloned, and this means they can trade at a different price than the original EthereumPoS.
As a result, projects will need to determine how to manage the amount and value of tokens held in duplicate projects' coffers, NFT ownership, and more.
So this will be a challenge or a problem exclusively for developers on Ethereum.
From the above points, it can be seen that The Merge will bring a significant change to the Ethereum network in particular or the cryptocurrency ecosystem in general. ETHW can be a good solution for miners given that Ethereum is still too centralized at the moment, but it cannot be said that Ethereum after The Merge is not decentralized when there are many validators. participate in the operation of the network. Not only that, the deep drop in ETHW price also partly speaks to the community's confidence in this fork.
Besides, projects that are prominent and have an important role in DeFI like Tether or Circle refuse to work on EthereumPoW. Therefore, Fox Crypto News recommends that you consider carefully before investing in ETHW.
Through this article, you have somewhat grasped the basic information about the project to make your own investment decisions. Fox Crypto News is not responsible for any of your investment decisions. Wish you success and make a lot of profit from this potential market.
Aug 19, 2022