After eight years of work and delays, the long-awaited event has finally happened. On September 15, 2022, Ethereum merged, changing the consensus mechanism from proof-of-work (PoW) to proof-of-stake (PoS). This transition has allowed Ethereum to reduce its energy consumption by 99.9%.
Hard forks are nothing new to Ethereum. Following the merge, Ethereum experienced yet another hard fork, and now there are at least three different versions of the cryptocurrency: Ethereum, Ethereum Classic, and EthereumPoW. Let's examine the new EthereumPoW hard fork in more detail.
What is proof-of-work (PoW)
Before we dive into ETHW, we must first understand what proof-of-work (PoW) is.
Blockchain running on PoW requires a significant amount of processing power because virtual miners from all over the world compete to be the first to solve a mathematical puzzle in order to secure and verify proof-of-work blockchains.
The winner will update the blockchain with the most recent verified transactions, and the network will pay out a predetermined amount of cryptocurrency to them.
What is proof-of-stake (PoS)
After the merge, Ethereum transitioned from proof-of-work (PoW) to proof-of-stake (PoS).
Proof of stake blockchains uses a network of "validators" who contribute or "stake" their own cryptocurrency in exchange for the opportunity to validate new transactions, update the blockchain, and receive a reward.
Instead of miners competing to be the first to solve a mathematical puzzle, the network chooses a winner based on the amount of cryptocurrency each validator has in the pool and how long they have had it there.
ETHW (or EthereumPoW) is a hard fork of the original Ethereum blockchain network, created by a group known as ETHW Core - a group of Ethereum miners equipped with massive computing power for processing and validating transactions on PoW networks. While Ethereum switches to the more energy-efficient PoS consensus, EthereumPoW will maintain its contentious PoW consensus system.
The Reason for the Hard Fork
When a community has serious disagreements about the direction, a cryptocurrency project should take, forks frequently happen. To avoid being left behind by the PoS transition, ETH miners decided to keep using the old PoW network.
The $19 billion Ethereum mining industry is dependent on dedicated GPUs (or graphics processing units), which are computer chips designed to handle the high computational demands of crypto mining. You might think that they can switch to mining Bitcoin, but these chips can't be used to mine Bitcoin as it uses ASICs (application-specific integrated circuits).
Naturally, as Ethereum transitions to PoS, these expensive and massive GPU rigs will become obsolete. Supporters of EthereumPoW believe the PoW consensus mechanism is superior to PoS. PoW supporters see it as more reliable, secure, and simple while also supporting decentralization.
The Future of ETHW
ETH Regulatory Issue
The Securities and Exchange Commission (SEC) chair, Gary Gensler, made a suggestion that the current Ethereum blockchain might be subject to regulation because of its new staking features, which could turn it into a security.
Since ETHW doesn't provide staking features, it is more likely that it will not be subjected to this regulatory issue, which may enhance its appeal to investors.
Additionally, a number of significant cryptocurrency exchanges, including Binance, the largest cryptocurrency exchange in the world based on trading volumes, have declared their support for EthereumPoW. A pool for mining ETHW with no fees has been launched, according to a tweet from Binance.
No Stablecoin Support
Unfortunately, the two main stablecoins, USDT and USDC, had not provided any support for the fledgling project even before The Merge. Essentially, since lending and collateralization are frequently done using stablecoins, this lack of stablecoin support leaves EthereumPoW with little to no DeFi activity.
The remaining miners may be forced to give up their dreams if the project is unable to maintain interest and value. It simply makes no sense to keep mining if it isn't profitable. Many miners were ultimately forced to shut down or migrate to other blockchain networks.
ETHW Purpose
Until the team behind ETHW announce a concrete plan, it appears that EthereumPoW is primarily designed to meet the demands of ETH miners who risk going bankrupt when Ethereum switches to the more environmentally friendly PoS consensus.
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