You might have heard the rumors that the Ethereum proof-of-work chain will live on and be maintained after The Merge, which is the hard fork event that will make Ethereum proof-of-stake.
Are those rumors true? What exactly is a hard fork? Read on to find out.
What is a hard fork?
A blockchain is a distributed ledger that is updated constantly by computers running the same compatible software to make sure the transactions that are included in the ledger are valid. For Bitcoin and Ethereum, running this software is also called “mining”.
But what happens when a new software version is released that is not backward compatible? This upgrade is known as a hard fork. The miners can choose either to upgrade their software and keep on being a part of the network or be left behind.
However, some miners choose deliberately to be left behind to keep maintaining the old blockchain. They might disagree with the updates to the new version or have some other incentive to keep the old chain alive.
Imagine a popular game releases a major update with which some players do not agree. They choose to copy the old version of the game and maintain their own vision for it. That is essentially what happens to a blockchain when it hard forks — it splits in two.
The Bitcoin hard fork
We saw a hard fork happen with Bitcoin when it upgraded to include SegWit, which is a protocol to make transaction sizes smaller. Even though the upgrade to SegWit was backward compatible, also known as a soft fork, some community members did not agree with the new protocol.
They chose to split from the main blockchain and maintain the old chain that did not include SegWit. Today, that is known as Bitcoin Cash.
Ethereum: The Merge
Ethereum uses proof-of-work to validate its transactions, which means a bunch of miners are using pure processing power to secure the network. The process is extremely energy intensive, which is why many are against it.
The most popular solution is proof-of-stake, which uses barely any energy. Validators, not miners, secure the network based on how many coins they are staking. Were they to cheat the network, their coins would be lost.
The Merge will change Ethereum from using proof-of-work to proof-of-stake to secure its network, which means miners cannot use their mining hardware anymore as validating Ethereum transactions would depend only on how much ETH you have staked.
Will Ethereum PoW continue to exist?
The Merge is anticipated highly among ETH holders, but some people on Twitter believe that a few miners may choose to keep the old chain, which had already been dubbed ETHW, alive. While this would not affect the new proof-of-stake Ethereum, it brings up some questions.
However, an ambassador for Chainlink tweeted his opinion that all off-chain dependencies for ETHW will break, which makes it unfeasible for miners to continue their old activities. This could take the form of exchanges ceasing support for the ETHW coin, critical Web3 apps disregarding it, or DeFi price oracles becoming defunct.
Some exchanges like Poloniex have even announced already that they will support ETHW if it should come into existence.
The miners’ choice
In the end, the existence of ETHW is only up to one group of people: miners. They could theoretically choose to continue mining to keep the old chain running, but they may face an uphill battle.
Miners are already being offered other opportunities, like using their hardware to help layer 2 scaling platforms. And with staking yields on the new Proof of Stake chain estimated to run up to 10%, it makes more sense to be on board with the future of Ethereum.
How to buy Ethereum
You can buy Ethereum and other cryptocurrencies in Exodus, in any way you prefer, to get ready for The Merge:
- Use a credit / debit card, bank account, or Apple Pay. The easiest payment gateway, Ramp or MoonPay, is chosen for you depending on your region and availability.
- Exchange Bitcoin and 200 other cryptocurrencies for Ethereum (ETH) using the built-in exchange appLink Exodus with the FTX exchange for even more options
This content is for informational purposes only and is not investment advice. You should consult a qualified licensed advisor before engaging in any transaction.