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Experts of a large asset management firm Grayscale believe that the Ethereum hard fork token after the Merge update (“Merger”) ETHW is unlikely to be successful. This conclusion is made by comparison with the 2016 Ethereum hard fork, which led to the creation of the endlessly sleeping giant Ethereum Classic (ETC).
Over the past six years, the Ethereum network, which returned users to their funds after the DAO hack, has developed a well-established ecosystem for users, decentralized applications (dApps), smart contracts, decentralized finance (DeFi) and much more.
PoW-hard fork of the current Ethereum network will lead to the appearance of duplicates of all available tokens, which can create serious problems for developers and market participants, Grayscale tried to explain.
More precisely, the very complexity of DeFi and the number of asset-backed tokens locked in DeFi protocols pose a catastrophic risk to the ETHW price due to possible attempts to liquidate positions.
Back in 2016, the DeFi ecosystem didn’t actually exist. To date, about 530 DeFi protocols are hosted on the Ethereum blockchain, in the smart contracts of which assets worth more than $ 40 billion are blocked.
In the event that a PoW fork of Ethereum is launched, users of this protocol will try to eliminate positions “using leverage in relation to tokens previously secured by assets in ETHW tokens.” At the same time, ETH holders will rush to sell free ETHW tokens received for ETH. Grayscale says this will lead to “disproportionate pressure from sellers” on ETHW.
At the same time, Ethereum co-founder Vitalik Buterin said that his team will not solve any technical problems of ETHW after the successful completion of the merger of networks.
Note that now the price of ETHW in relation to ETH is steadily decreasing.
In addition, Grayscale believes that ETHW does not pose a serious threat to Ethereum Classic (ETC). Regardless of whether ETHW is successful or not, ETC will still work normally (it is unclear what the relationship is).
Supporters of the continuation of the Ethereum Proof-of-Work version may find that the complexity of the ETHW fork will not be worth the effort, since a stable version of the network already exists in Ethereum Classic, Grayscale added.
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