Ether (ETH) is the second largest cryptocurrency by market capitalization and the overall leader in decentralized applications by deposits. After becoming a victim of its own success, fees for the network increased in November 2021, when the average transaction cost exceeded $50.
That’s precisely why Merge is a critical step in implementing a fully functional scaling solution. Confirmation of the move to proof-of-concept (PoS) was the main driver of the rally towards $2,000 on August 15th.
Investors were partly excited about the reduced issuance schedule and the likely transition to a deflationary scenario, but forks are also expected. Therefore, hard-forked coins can be allocated to Ether holders on different blockchains, although there is no guarantee that these will gain sufficient traction or liquidity.
On the one hand, there is the temptation of free money and even non-fungible token bonuses (NFT), because the forked chain will be initiated in the same state as the original Ethereum network, which means that each address will contain the same content . token terms and transaction history.
On the other hand, there is also disappointment after Ether’s 29% torturous correction that occurred after the $2,000 resistance proved to be more difficult than expected. It is possible that when investors realized that the practical utility of the ranges would be much lower than expected, the exuberant prospect of free money disappeared and reality set in.
ETHPoW is a potential new chain, backed by proof-of-work (PoW) miners. Several exchanges have launched futures trading on the forkchain’s native asset, ETHW. The markets seem to have had their say, as the contract is now trading below $55 at Poloniex and Gate.io.
There is no warranty or oracle support for forked stables
The two main coin stables, namely USD Coin (USDC) and Tether (USDT), have officially declared their intention to exclusively support the Ethereum Foundation-backed Merge chain. Cointelegraph previously reported that with the two stablecoins in charge, issuer support should lead to a smooth transition for Ethereum.
Meanwhile, the core team behind EthereumPoW (ETHW) said it will temporarily freeze tokens in certain DeFi application liquidity pools to protect users’ assets after the hard fork.
The idea of freezing users’ assets without their permission does not go down well with many. Some users called the Twitter account behind EthereumPoW a scam because the public did not vote for such a change.
DApps go beyond facilitating transactions as they require off-chain computation by interacting with external data and this is where oracle’s blockchain technology comes in.
Chainlink improves smart contracts by connecting them to real-world data, events and transactions. In an official announcement on August 8, the protocol revealed that its services will remain on the Ethereum PoS blockchain backed by the Ethereum Foundation.
Also read: MakerDAO co-founder suggests deprecating DAI-USD to limit attack surface
Large Decentralized Apps Will Get Better at Expelling Users of Forked Views
On August 16th, Aave (AAVE) holders were invited to participate in the vote to “commit” to the Ethereum PoS consensus, allowing authorities to shut down any deployment of Aave on any other fork of Ethereum.
Although it was designed exclusively as an Ethereum application, Aave has become interchain over the years and its official versions currently work on Avalanche, Arbitrum, Optimism, Polygon, Fantom, and Harmony.
Investors are starting to realize that DApps and stablecoins will not support forked chains, which means that “free” tokens and NFTs are less likely to be accepted on major DeFi marketplaces and apps. Regardless of the value of the ETHPoW token, the utility of the PoS network supported by the Ethereum Foundation far exceeds the utility of competing chains.
Ethereum Classic never gained popularity
Ethereum Classic (ETC) is an existing example that supports the thesis that a competing chain will not harm the price of Ether (ETH). The original hard fork followed a consensus change in 2016 and aimed to reverse a $60 million exploit. The DApps on this competing proof-of-work (PoW) chain have not gained any traction despite its market capitalization of $4.5 billion.
Current data suggests that ether traders should ignore the upcoming forks and focus on the roadmap towards scalability and whether the network maintains its position as a leader or not in terms of total value locked.
Ethereum Classic (ETC) is a preexisting example that supports the thesis that a competing chain will not significantly weaken the price of Ether (ETH). The initial hard fork followed a consensus change in 2016 and aimed to undo a $60 million exploit. DApps on this competing proof-of-work (PoW) chain never gained traction despite its market capitalization of $4.5 billion.
Current data suggests that Ether traders should ignore upcoming forks and focus on the roadmap for scalability and whether the network maintains its position as a leader by total value locked.
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