Ethereum’s GPS-powered proof-of-work (POW) generated roughly $19 billion in revenue last year for eth miners. but these revenue streams are in jeopardy as ethereum is expected to become a proof-of-stake (pos) blockchain via the “merged” upgrade in september.
miners could then rebel against the new update by continuing to mine on the old ethereum pow after the hard fork chain split.
Reading: Ethereum chain split
A survey by cryptocurrency hedge fund galois capital recently revealed that 33.1% of respondents believe the merger would create two parallel blockchains: eth1 (pow) and eth2 (pos).
question 1: what happens during the merge? if you choose option 2 or 3, go to questions 2 to 5.
However, the majority of respondents, or 53.7%, expect the ethereum chain to seamlessly transition from pow to pos.
is the pow eth1 “illogical”?
but controversial hard forks are nothing new. in fact, the current ethereum chain emerged in 2016 following a controversial hard fork intended to reverse a $60 million exploit, resulting in a split chain between ethereum and ethereum classic (etc).
This is where the ethereum classic versus eth1 argument begins. Since ethereum classic is already a pow chain, creating a similar chain, eth1, won’t have “much relevance” according to some redditors.
several other reddit comments explaining why eth1 will fail include:
- eth1 will not attract users;
- decentralized finance and the non-fungible token sector will collapse into a chain of power; and
- merchants will download eth1 tokens to stake more eth.
meanwhile, the majority of respondents in the galois capital survey also believe that exchanges and projects (especially tether) will support eth2 over eth1 in the event of a hard fork.
question 4: how do perps and futs handle trades?
what does it mean for ethereum classic?
After reaching an all-time high in May 2022, the ethereum network hash rate has been trending downward, indicating that miners are pausing or shutting down their rigs in the weeks leading up to the merger.
on the other hand, they could also become participants in the ethereum pos chain.
The miners’ exit from the Ethereum network is visible in the recent increase in GPU sales in the secondary market (against lower demand), according to Tom’s Hardware GPU Pricing Index.
However, there is also an increase in the number of social media threads which shows that miners’ strategy after the merger will likely be to switch to whatever mining chain is most profitable.
As of July 29, ethereum classic has outperformed miner interest with its weekly return of 116%, data from whattomine.com shows.
amazing: mining/hashing revenue in usd for etc. they just outperformed eth… (chart @coinmetrics) pic.twitter.com/x5rjs7lurj
simultaneously, the price of etc. it has shot up more than 200% in July.
But that does not take away the fact that Ethereum Classic is a very small project compared to Ethereum.
As of June 29, ethereum classic had over 53,000 daily active addresses vs. 763,000 for ethereum.
The difference suggests that ETC’s ongoing price boom is purely speculative since Ethereum Classic remains largely underutilized as a chain and with only a handful of projects. Therefore, ETC is certainly at risk of a “sell the news” event after the Merge.
at the same time, a possible eth1 power chain can also reduce the demand for etc.
etc target price
on the weekly chart, the price of etc. has reached a confluence of resistance, waiting for a breakout as the euphoria surrounding the merger grows.
Related: Crypto Mining Remains Profitable in the Long Run, Expert Says
the confluence comprises the 0.786 fib (~$43) line and a multi-month downtrend line. both have historically capped bullish attempts by etc. in the past, as the graph below illustrates.
However, a breakout move increases the token’s potential to hit $75 next, due to its proximity to the 0.618 fib line.
Conversely, a pullback move from either the resistance confluence or the 0.618 Fib line could have ETC eye a drop toward the support area illustrated above. It is defined by the red bar, the multi-year rising trendline support (purple) and the descending channel’s lower trendline (green).
in other words, etc. risks falling towards the $10-$12 area in September, 75% lower than the price on July 29.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of cointelegraph.com. Every investment and trading move involves risk, you need to do your own research when making a decision.