Ethereum Merge: ALL you need to know (including ETHPOW/ ETHW)
Description
Ethereum is finally getting its ETH 2.0 update - via the "Ethereum Merge". This is a major milestone and involves a huge change in the consensus mechanism for ETH. In this definitive guide, we tell yo...
AI Analysis
The Ethereum Merge, a monumental upgrade, is finally happening, bringing together the current Ethereum chain with its long-anticipated upgrade, Ethereum 2.0 (now just "Ethereum"). This transition completely overhauls how the network validates transactions, moving from an energy-intensive Proof of Work (PoW) system to a more efficient Proof of Stake (PoS) system. This isn't just a technical upgrade; it's a foundational shift that paves the way for future improvements like sharding, aiming to make Ethereum faster and more scalable.
Here's a breakdown of the key aspects and what to know about this major event:
* Understanding the Ethereum Merge
* The Merge is the event where the old Ethereum, which relied on miners using graphics cards (Proof of Work), is finally upgrading and combining with ETH2 to become entirely Proof of Stake.
* This is a huge change in how Ethereum functions, moving from a system where miners secure the network to one where "stakers" (people who lock up their ETH) do. This makes the network significantly more energy-efficient.
* This upgrade also lays the groundwork for future improvements like "sharding," which is designed to make Ethereum much faster and support more transactions down the line, essentially taking it to the "next level."
* For the average user interacting with Ethereum for NFTs or transactions, you don't need to do anything. Your ETH, how you store it, how you transfer it, and all existing apps will remain the same. It's a smooth transition for users.
* Be extremely careful about scammers who will try to take advantage of the confusion around the Merge. They might tell you that you need to transfer your ETH or do something specific to avoid losing it. These are scams, and you should ignore them.
* The Ethereum PoW Fork ($ETHW)
A significant development around the Merge is the potential for a "fork," which means a segment of the community might decide not* to upgrade to Proof of Stake. They want to keep Ethereum as a Proof of Work chain.
* This desire for a PoW fork, often called ETHPOW or ETHW, is strongly pushed by miners who want to continue profiting from their mining operations.
* If a fork is successful, it's like a "copy-paste" of the entire Ethereum blockchain. This means if you hold Ethereum on the main chain, you will also receive an equivalent amount of ETHPOW on the new, forked chain.
* This potential ETHPOW token is already being traded as an "IOU" (meaning "I owe you," a placeholder for a future asset) on some exchanges, especially gaining momentum in the Chinese market. People are trading these futures to estimate its potential price.
* How to Get Your Potential ETHPOW/ETHW Tokens
* If your Ethereum is stored in your personal wallet (like MetaMask or a hardware wallet), you don't need to do anything. If the ETHPOW fork is successful, your wallet will automatically contain the ETHPOW tokens.
* However, if your Ethereum is on a centralized exchange, you need to check if that exchange plans to support the ETHPOW fork and distribute the tokens. Many exchanges might not, so if you want to ensure you receive any potential ETHPOW, you should consider moving your ETH out of exchanges and into your personal wallet before the Merge.
If your ETH is actively being used in Decentralized Finance (DeFi) protocols, such as lending platforms or liquidity farms, it technically might not belong to you directly anymore as you've lent it out. In this case, you will likely not* receive the free ETHPOW airdrop. You need to check the specific protocol's policy on how they'll handle a potential fork.
* Personally, I'm moving my Ethereum out of DeFi farms to ensure I get any potential free ETHPOW, whether I decide to keep it or sell it later.
* Ethereum Price Outlook Pre and Post-Merge
* Expect significant price volatility in Ethereum leading up to the Merge. There's a lot of attention on ETH, and some people are buying it specifically to get the potential free ETHPOW tokens, which fuels this volatility.
* The Merge is largely considered "priced in" by the market, meaning its positive impact is already reflected in Ethereum's current price.
Because of this, there's a real possibility of a price drop after* the Merge, especially once any free ETHPOW tokens are distributed. People who bought ETH just for the airdrop might sell off their holdings.
* There's also some "Fear, Uncertainty, and Doubt" (FUD) in the market regarding the unlocking of ETH that was staked on the ETH2 Beacon Chain. However, this unstaking process won't happen all at once; it's a gradual, controlled release. I don't anticipate this will cause a massive market impact, as many of these stakers are "convicted holders" who are in it for the long term.
* Overall, a "mini-dump" of around 10-20% after the Merge is a common expectation among many market observers due to these factors.
* Advanced Strategies for Free Tokens
* Some people are exploring advanced strategies to maximize their potential free ETHPOW tokens. One such strategy involves borrowing Ethereum from platforms like Compound.
* The idea is to borrow ETH (at current rates of around 3.2% interest), hold it in your personal wallet, and then receive the free ETHPOW tokens if the fork occurs. Afterwards, you can return the borrowed ETH. This could potentially net you free tokens if the value of ETHPOW is higher than your borrowing cost.
* However, some platforms like Aave are anticipating this behavior and are actually freezing Ethereum lending during this period to prevent such strategies.
* While I'm not recommending this as financial advice, it's an observable strategy that some individuals are employing, and it's likely to cause Ethereum borrow rates to increase in the days leading up to the Merge.
The Merge is a truly exciting and historic event for Ethereum, finally bringing years of development to fruition. It's a huge step forward for the network's efficiency and future scalability. Once the "sharding" upgrade eventually rolls out after the Merge, Ethereum is expected to become incredibly fast, which will be awesome!
Transcript
It is finally happening. The biggest upgrade to Ethereum is coming known as the Ethereum Merge. This is when Ethereum, that's current Ethereum that's happening right now, merges with its upgrade itself that was previously called Ethereum 2, EVE2. They're now going to become one full unit. All the worlds are going to unite and there's going to be a huge upgrade also to how it functions in the backend. Now, Ethereum Merge is happening in less than seven days. This is going to happen finally. No m...