“The long-term outlook is unclear.” Is it possible to make money on the Ethereum fork?

The idea of a likely split of the Ethereum (ETH) network after the transition to the Proof-of-Stake (PoS) algorithm is beginning to gain traction as cryptocurrency exchanges make statements about supporting the ETHPOW token, whose appearance is likely if supporters back Proof-of-Work (PoW) versions of Ethereum. Following Poloniex, which was the first to announce the listing of tokens for a potential fork of the main network, some exchanges and cryptocurrency services followed suit, or spoke out against any version of Ethereum other than the official one.

The situation resembles stories with exchanges' support of Ethereum Classic (ETC) or Bitcoin Cash (BCH), the most successful fork of bitcoin. In 2016, Poloniex was the first exchange to announce the launch of trading pairs with ETC, and then other trading platforms followed suit. As a result, even the largest exchanges, such as Coinbase, listed the coin.

According to TerraCrypto founder Nikita Vassev, support for the fork will come from those cryptocurrency exchanges that traditionally have a wide list of tokens listed. At the same time, one should not expect ETHPOW to appear on exchanges such as Coinbase or Gemini in the near future, as these trading platforms are more conservative in their choice of new tokens. As for the distribution of coins in case of a fork, probably, the airdrop will not affect those addresses that have ETH in staking. Tokens will be distributed to those who hold coins in their personal wallet or exchange wallet, the expert believes.

In our article we describe how the idea of creating the ETHPOW token appeared after the probable split of the Ethereum network

Prospects for the development of new forks depend on various factors, Sergey Mendeleev, InDeFi Smart Bank CEO, commented on the situation. First of all, we need to consider what team of developers will be behind the fork, and whether they can at least cope with overcoming the difficulty bomb embedded in the mechanics of Ethereum.

It is important to consider the number of miners who will continue to support the old network, how much liquidity will remain in the smart contracts and the branching process itself, the expert said. “In general, I would compare this fork to ETC, which has brought great profit to its holders since its appearance, and is still in demand. Whether it will succeed to repeat the success this time will depend on the mentioned factors,” Mendeleev notes, adding also that powerful influencers, who will support the new asset through their channels of communication with the audience, can contribute to the fork's popularity growth.

Ethereum Classic cryptocurrency emerged in 2016 in response to the Ethereum Foundation's decision to fork the Ethereum blockchain to return funds to investors in The DAO project who suffered a hacking attack. Vassev notes that the main idea was that you should not change the blockchain to return funds, it was philosophically contrary to the very idea of decentralization and the crypto world, where transactions are not subject to rollback.

According to Vassev, in the case of the ETHPOW fork, on the contrary, there is no philosophical background. The participants of the ecosystem have a material interest and do not want to lose the opportunity to earn money from mining in the PoW network. “This is decentralization in action. Whoever disagrees, arranges a fork, and new chains emerge. Time will tell which one will survive and be in demand by the community,” the expert concluded.

Speaking at the ETHSeoul conference on August 5, Ethereum founder Vitalik Buterin answered journalists' questions about the consequences of a likely split of the network. In his opinion, the ETHPOW fork lacks potential, and Buterin called those who are pushing the idea of network splitting “a couple of outsiders with exchanges” who “want to make quick money.” “Hopefully, whatever happens, it won't cause people to lose money,” Buterin added.

Exchange support

Following Poloniex, which was the first to add the ability to exchange ETH for tokens of the potential ETHPOW fork, several other exchanges made announcements about plans to list PoW-net tokens or derivative products.

The Poloniex and MEXC exchanges have added the ability to exchange ETH for ETHPoS (IOU) and ETHPoW (IOU) tokens, at a one-to-one ratio. IOU functions like promissory notes, allowing users to trade the native token of a yet-to-be-launched blockchain. However, if the Ethereum upgrade is completed without a fork, exchanges will exclude tokens from their platforms.

On August 8, BitMEX platform, also supported the fork and announced the launch of margin futures contracts based on ETHPoW, which will be secured by Tether (USDT) stablecoins. The product is called ETHPOWZ22 and will be open for trading from August 9. Several other exchanges, including Huobi, Gate, Digifinex and OKX, similarly supported the listing of new versions of ETH, subject to demand.

Unlike centralized platforms, representatives of DeFi-services built on Ethereum are not going to support blockchain forks. The developers of the decentralized oracle network Chainlink, reported that they would not support any forks of the network. The protocol will continue to work in the main network after its transition to Proof-of-Stake (PoS). Representatives of the decentralized lending protocol Aave also said they would only use the main PoS algorithm, noting that customers use other networks at their own risk.

Nikita Vassev thinks it is reasonable that none of the decentralized Ethereum-based projects showed support for ETHPOW and opted for PoW. Decentralized platforms are interested in Ethereum's transition to PoS because it will reduce fees and increase the network's conductivity. At the same time, Vassev believes that the appearance of fork on decentralized services is possible over time. The expert assumes that pools with ETHPOW will eventually appear on the decentralized exchange Uniswap or liquidity aggregator 1inch, but it will happen only after the fork and the appearance of tokens.

According to Vassev, ETHPOW is seen as more of a speculative asset in the short term. “Amid the announcements, trading on the Poloniex itself will start to gain momentum, and the unissued ETHPOW rate will take off. But after the fork users will start to sell the new token, due to which the rate will collapse and only in the long term will begin to recover, but it is unclear to what extent. The long-term outlook is unclear,” the founder of TerraCrypto concludes.

As of August 9, 14:00 UTC, the ETHPoW token on Poloniex is trading at $88,66.