The ETHereum network, which powers the second largest cryptocurrency Ether (ETH) by market capitalization, is making moves to become more sustainable. That move is termed ‘The Merge’, which will enable Ethereum to switch from an energy-intensive proof-of-work consensus mechanism to a more sustainable proof-of-stake system.
In this article, we will provide a brief overview of the merge and the date of its likely occurrence, and take a look at the possibility of a chain split between ETHPoW and ETH2 when the merge occurs on Ethereum, that would result in two separate coins.
What is The Merge?
The Merge is the most significant upgrade in the history of the ETHereum blockchain. It is the process whereby the network switches from using a proof-of-work consensus mechanism to proof-of-stake.
The Merge represents the joining of the existing execution layer of ETHereum (the Mainnet we use today) with its new proof-of-stake consensus layer, the Beacon Chain. It eliminates the need for energy-intensive mining and instead secures the network using staked ETH, enabling more scalability, security, and sustainability.
ETH 2.0 Release Date
After several delays, ETHereum is expected to finally begin ‘The Merge’ in Q3/Q4 2022. The client developers are currently working to a soft deadline of 19th September 2022, but could change depending upon the success of the final testnet merge (Goerli) in mid-August, continued client refinements and the hashrate of the existing miners continuing in a predictable manner.
This is for the first major part of the merge, when Proof of Work mining is switched off. The consensus part of ETHereum that chooses which blockchain to follow, will then transfer to the already existing proof-of-stake Beacon Chain. As such, it should be noted that the 19th September 2022 date is far from final – a client with merge timing parameters has yet to be released and until that happens, there is still significant uncertainty over the exact timing of the merge.
Case for ETHPoW and ETH2
When discussing the merge, many have reported widespread support in the ETHereum community for switching off Proof of Work. However, as one might expect, the existing PoW miners of Ethereum today, do not support switching off PoW for they would be totally shut out of the Ethereum system. Their income generated by keeping the network secure through mining is going down to zero instantly.
As a result, some miners – behind the scenes for months – have been expressing their opposition to the merge leading up to it, and being vocal about wanting to “do somETHing”. Finally on the 29th of July 2022, one of the largest players in the Chinese mining ecosystem, Chandler Guo, indicated that he may be planning to continue mining on the Ethereum PoW chain.
If the PoW chain remains alive and continues to be extended, some are speculating this coin could be called ETHPoW. There is certainly an argument that the chain could survive for the long term – perhaps PoS has some weaknesses compared to PoW that eventually make PoS chains less appealing than PoW chains for certain use cases. Regardless, ETHPoW looks set to potentially generate some interest from market participants.
Ice Age
Over seven years ago when ETHereum’s PoS systems were nothing more than an idea, Vitalik had already anticipated this potential problem (a persistent chain split after the transition to PoS). A solution was proposed, something called the “ice age”. This is a system where the PoW mining network difficulty gets exponentially harder as time progresses and eventually the chain cannot be effectively extended.
The so-called difficult bomb has actually gone off several times in the past. For example in early October 2017 the average ETHereum block time was around 30 seconds for a few days, before the difficulty bomb system was reset and the block interval fell back down to the normal 13 or so seconds. The difficulty bomb has already been reset 6 times in Ethereum’s history and the next was proposed to expectedly “go off” in the middle of September 2022, just as the switch to PoS occurs, as originally planned way back in 2015.
Although the bomb will start in September, according to previous times the bomb has exploded, the impact on the average block interval could take several months to become significant. For example, some calculations have estimated it could take 175 days until the block interval time reaches around 30 seconds. After which, the situation should get exponentially worse.
New ETHPoW Hard Fork Client
The ice age would mean that the legacy PoW chain may only be viable for up to a few hundred days after the split. If the PoW chain is going to persist in the long run, it may need a new hard fork client to permanently remove the ice age feature. This then generates several problems for ETHPoW, perhaps exactly the problems the ice age was designed to create. It removes a layer of legitimacy from ETHPoW and no longer can ETHPoW claim to be the incumbent or original rules chain.
At the same time, any ETHPoW community will need to find developers with technical expertise to produce the new client. They will also need to solve a schelling point problem, to agree on a new client and new parameters to activate and enact the ice age removal hard fork. Exchanges and custodians may then need to be convinced to run and support this new client, which may be slightly harder than convincing them to continue running their old Geth nodes alongside the new ETH2 infrastructure.
However in practice, these problems could be overcome fairly easily and the size of the ETHPoW community is not likely to be especially large and therefore this may not be a major problem. It could be a few large miners behind the scenes financing the whole operation.
Conclusion
Although there are many technical challenges that ETHPoW faces, as long as the chain survives, it looks likely that there could be positive narratives around the coin and leading centralized exchanges are likely to list it. Regardless, the crypto space is still largely about narratives and noise and a scenario where ETHPoW and ETH2 could both coexist post-merge definitely generates a lot of excitement.
If you’re a market participant be it a user, staking node operator, or a dApp/smart contract developer, wishing to find out how you can prepare for the upgrade, you can head over to the official ETHereum website to learn more.
