Merge Play: How to Get Free Money from Ethereum POS Upgrade

Important Takeaway

  • A consortium of developers and miners plans to split the Ethereum blockchain after the merger.
  • Doing so creates a new Proof of Work chain that matches users’ ETH balances with an equal amount of a new currency called ETHW.
  • ETHW probably holds some value and can be sold on central exchanges that support trading for it.

After Ethereum is split, addresses holding ETH will receive an equal amount of ETHW on the split blockchain.

Preparing for integration

Ethereum turns Proof-of-Stake, but miners are planning a Proof of Work fork.

A group of anonymous developers backed by several major Ethereum miners is expected to severely split the Ethereum blockchain after next week’s merger, while maintaining a version of the network running the existing Proof of Work (PoW) consensus mechanism during major Proof of Stake (PoS) blockchain transitions. ).

The fork, usually referred to as ETHPoW, will share the same transaction history as the Ethereum mainnet but will start generating its own blocks after the Merge update starts. As the PoW fork starts from the pre-merger state of the Ethereum network, all token and smart contract balances will also be transferred. This means that everyone with ETH on the chain will have an equal balance of ETHW on the ETHPoW forked chain. ETHW will only be native to the PoW fork and represents a completely different asset than the original ETH on Ethereum.

For many Ethereum believers, the planned PoW fork is not of much interest as an investment. Almost all of the DeFi, NFT, and network infrastructures have announced that they will support PoS chain, leaving the PoW fork in a difficult place. Upon launch, decentralized exchanges at the crossroads will likely stop operating, and centralized stablecoins such as USDC and USDT will be worthless, potentially causing mass liquidations and a breach of many DeFi protocols.

Although the PoW fork should start from square one, there is one token that probably has some value – ETHW. Like the 2016 DAO fork that created Ethereum Classic, the PoW fork may also have some loyal supporters who continue to develop it, creating demand for its token. Conversely, those who don’t think the fork is going anywhere may want to sell their ETHW tokens after the merger to get some extra profits. But what is the best way to ensure you get ETHW? Which exchanges are planning to support the Ethereum PoW fork? Read on to make sure you get the most out of your Proof of Work fork.

Central exchanges

The easiest way to play Merge is to deposit ETH on a central exchange that has announced that it will support the PoW fork. The list below is not exhaustive but covers the major exchanges that have published data:

  • Poloniex has already listed a placeholder token for ETHW and will list and support trading for the ETHW fork upon launch, including crediting user accounts with ETHW in a 1:1 ratio with the amount of ETH they own.
  • Binance, MEXC Global, and Gate.io will support the ETH PoW fork and also plan to deposit user accounts with ETHW at a 1:1 ratio with ETH.
  • OKX will list and support trading for the ETHW fork.
  • BitMEX launched ETHPOWZ22 – a USDT margin contract.
  • Coinbase, FTX and Kraken said they will review the ETH PoW fork like any other asset and will list it for trading if necessary.

Currently, it appears that Poloniex, Binance, MEXC Global, and Gate.io are the most trusted to give users the equivalent of ETHW after the merger. Among these, Binance probably has the largest market as it is currently the number one central exchange in terms of trading volume.

However, those who are unable or unwilling to deposit their ETH on one of these exchanges prior to the merger have another option. Holding ETH in an Ethereum wallet guarantees that your address will receive ETHW on the new PoW fork.

Care

A dishonest wallet should be the fastest way to access ETHW after merging. While users on centralized exchanges may have to wait hours or even days for ETHW to reach their account, taking control of your ETH funds is the safest way to ensure that you get your PoW fork coins.

However, the trade-off is that accessing the new Proof of Work chain requires some technical knowledge and can expose users to risks. Those using this approach will need to add the Proof of Work network to their EVM wallet at launch. In MetaMask, you can do this by clicking on the network at the top of the browser extension and choosing “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 to other Ethereum-compatible chains such as Polygon or Avalanche.

Another consideration for those planning to self-manage their ETH prior to the merger is consolidation. If your ETH is locked into a smart contract, sitting on a Layer 2 chain, or tied to a protocol like Lido, it will not be matched with ETHW in the PoW chain. To maximize the amount of ETHW you get, it’s a good idea to convert your holdings into regular ETH and keep it in your wallet before merging.

While using a dishonest wallet ensures that you will receive PoW fork coins, the limiting agent will find a market to sell them after the merger. Since all tokens in the forked chain except for ETHW will be virtually worthless, the use of decentralized exchanges is out of the question. Those who wish to withdraw will still have to wait for a central exchange to open their ETHW deposits.

To ensure you are prepared, consider setting up accounts on the various exchanges that will support ETHW in advance. This way, those who wish can transfer their ETHW as soon as possible and possibly sell it at a higher price.

Finally, it is important to understand the risks associated with merging and any new PoW forks. One Danger is often mentioned It is that if an Ethereum fork starts with the same chain ID as the main PoS chain, transactions can be “broken” in it. This is where transactions signed on a forked chain can be validated on Ethereum’s main PoS chain, enabling new scams likely to drain users’ wallets.

Although such scams are possible, it is doubtful that a PoW fork will be launched with the same chain ID. However, unscrupulous individuals may attempt to launch other forks designed to steal users’ ETH. Be very careful before signing transactions to any ETH fork; If in doubt, do nothing. It is better to lose a few hundred dollars than to lose your total ETH.

The latest estimates are that the merger is between September 13 and 14. If you plan to send ETH to a central exchange or your own wallet, be sure to do so in advance. Most exchanges plan to stop ETH transactions a few hours before the merge to ensure that no user funds are lost, so don’t leave things until the last minute.

Whether you stick to exchanges or plan to store ETH yourself, double-check everything before sending transactions and stay safe.

Disclosure: At the time of writing this article, the author owns ETH and several other cryptocurrencies.

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