Michaël van de Poppe - 10 August 2022
Chinese miners propose Ethereum PoW fork
You might have heard about the merge. Ethereum will switch from Proof of Work to Proof of Stake, and will mark one of the biggest upgrades to the Ethereum blockchain. After the upgrade to Proof of Stake, there will be no more need for mining to keep the Ethereum blockchain running, leaving Ethereum miners with worthless mining equipment. Most of the mining equipment is operated by Chinese miners.
As a solution to the problem of being left with unusable equipment, Chinese miners have come together and put together a plan to fork Ethereum and keep the PoW mechanism. The response from industry participants is polarized, with many people being for but also against the fork. Let’s have a look at what a fork of PoW ETH can do for us and what projects are for or against a fork.
Currently there are nearly $5B worth of graphics card and ASIC Ethereum mining machines being used to secure the Ethereum network. It would be a shame if all of that equipment would be rendered useless post-merge.
Enter ETH POW.
After famous Chinese crypto miner Chandler Guo said last week on Twitter that he would split the Ethereum blockchain to create what he called "ETH POW," the idea of the miner-led Ethereum fork gathered traction. He asserted that the fork would enable miners to continue their job after Ethereum switched to PoS. The attempt reportedly has the support of several Chinese companies manufacturing Ethereum mining equipment.
So far there already have been numerous responses from different players in the crypto space, positive and negative. Firstly, the most used argument against a new Ethereum fork is that there already exists an Ethereum fork that operates on PoW! It’s called Ethereum Classic. Even Vitalik came out and had some words for us on this topic.
Vitalik Buterin has made some public statements stating that he supports Ethereum Classic as a great product for people who are pro-proof-of-work. He says Ethereum Classic already has a great community and will be a great place for people who still want to support a PoW version of Ethereum.
Buterin even went as far to say that those who are pro-fork are just “a couple of outsiders that basically have exchanges and most just want to make a quick buck”. Interesting take, since indeed it has largely been exchanges who have publicly advocated for the fork. It makes sense for exchanges to support any fork, as that will earn them revenue from trading fees. BitMEX and Poloniex have already announced their support for the ETH fork.
At the same time it seems like the proposal doesn’t have great support from the community. After opening a donation address for funding product development, they received less than $3000 in ETH in 6 days. Not very impressive to say the least.
Chainlink is the #1 data oracle in the crypto space. The Chainlink team has decided to distance themselves from any forks. They said in an official announcement that its services remain only on the original Ethereum blockchain and they will continue operations after the merge.
Since Chainlink is one of the most important pieces in the DeFi puzzle, a fork of Ethereum without Chainlink support is almost certain to doom.
Even Circle, the issuer of the USDC stablecoin has come forward to announce their stance on Ethereum forks. In a blog post Circle states that they plan to “fully and solely support the Ethereum proof-of-stake chain post-merge. Additionally, Circle has stated that they are aware of their responsibility as a core building block for DeFi on Ethereum and that they intend to do the right thing for the Ethereum ecosystem and businesses, developers and end users that depend on USDC.
A fork of Ethereum with support for Proof of Work might seem like a good idea for the Chinese miners in order to continue their profitable operations, but it seems like the crypto ecosystem does not have the same vision. It is not good for the crypto space to create more segregation and confusion by forking Ethereum again when we have already had a functional Ethereum PoW fork for years already. Even if the miners continue their plans and end up forking Ethereum, one might look for very short term opportunities to profit off of it, but do not expect great longevity out of the fork.