On September 15, 2022, the long-awaited update of the Ethereum blockchain - The Merge took place and the ETHW token appeared. Crypto enthusiasts have been looking forward to the transition from Proof-of-Work (PoW) consensus to Proof-of-Stake consensus (PoS).
Before the merger, some ETH miners, whose livelihoods are now at risk, were determined to fork the Ethereum blockchain into EthereumPoW, which would continue to run on PoW.
Ethereum is no stranger to hard forks. After the merger, Ethereum has at least three different versions - Ethereum, Ethereum Classic and now EthereumPoW. This article is a guide to everything you need to know about the new EthereumPoW hard fork and whether it is worth investing in.
What is ETHW?
ETHW (or EthereumPoW) is a hard fork of the original Ethereum blockchain that was launched after the merger. EthereumPoW will continue to use the controversial PoW consensus mechanism, while Ethereum will switch to an energy-efficient PoS consensus.
ETHW is the brainchild of a group of Ethereum miners who provide massive computing resources for processing and confirming transactions on PoW networks. Worried that the switch to PoS would leave them stranded, they decided to keep the old PoW network.
The group behind ETHW, known as ETHW Core, announced on September 13, 2022 that their ETHW network will be up and running within 24 hours of the merger. While members of ETHW Core remain anonymous, some prominent supporters include ETH miner Chandler Guo and (originally) TRON founder Justin Sun. However, Justin Sun later decided to support a competing fork.
Poloniex, backed by Justin Sun, became the first exchange to list the ETHW token. Other exchanges have followed suit and you can now buy ETHW on Gate.io, Phemex, MEXC, CoinW™ and DigiFinex.
Why did the Ethereum hard fork happen?
Forks usually occur when there is significant disagreement in the community about the trajectory of a cryptocurrency project. In some cases, forks have been used as a means to raise funding for new projects.
Community members who are dissatisfied with the status quo or new changes to the project can initiate a hard or soft fork.
A hard fork is a fundamental deviation from the existing network protocol, invalidating previously valid blocks or revalidating invalid blocks. As a result, the network is divided into two parts, and all nodes and users who want to follow the new path must switch to the latest version of the protocol.
Bitcoin Cash (BCH), Bitcoin SV (BSV), Terra Classic (LUNC), and Ethereum Classic (ETC) are some of the notable crypto projects resulting from the hard fork. EthereumPoW (ETHW) has joined the list of projects that have forked from their original blockchain networks.
Reasons for separation
The $19 billion Ethereum mining industry relies on specialized GPUs (or GPUs) — computer chips well-suited to the heavy computational tasks of crypto mining. These chips cannot be used to mine bitcoin because bitcoin uses ASICs (Application Specific Integrated Circuits).
Naturally, these expensive and massive GPUs will become unnecessary when Ethereum moves to PoS. Proponents of EthereumPoW believe that the PoW consensus mechanism is superior to PoS. Proponents of PoW see it as more reliable, secure, and simpler, as well as supporting decentralization.
Ethereum founder Vitalik Buterin's suggestion that ETH miners should switch their hardware to mining Ethereum Classic (ETC), which he called a "great" alternative, did not reassure ETHW Core.
Chandler Guo, who is now the poster boy for the new EthereumPoW fork, disagrees with Buterin. He argues that ETC did not have an ecosystem and was insufficient. Guo says that some ETH miners felt like their hands were forced by The Merge and so a hard fork was inevitable.
Forking the blockchain also allows ETHW Core to change the network as it sees fit, including trying to send itself coins to an entirely new PoW blockchain.
Why is EthereumPoW so popular?
Even before the merger, EthereumPoW was popular among Ethereum cryptocurrency enthusiasts who earn mostly from mining.
Miners consider validating Ethereum blocks a lucrative business. In a recent report prepared by Arcane Research, Ethereum PoW miners were able to generate $18 billion in earnings in 2021, which is $1 billion more than Bitcoin mining revenues.
Given that miners have already invested in mining hardware, they are reluctant to give up such a lucrative platform to move to PoS.
Another major catalyst for the popularity of EthereumPoW is the recent batch of Ethereum.
Leading cryptocurrency trading platform Bitget, also one of the largest cryptocurrency derivatives exchanges in the world, was giving away free ETHW to its users during The Merge.
Following the Merger, Bitget launched an ETHW giveaway campaign in which 5 ETHW was distributed into a reward pool. Campaign Airdrop is a type of marketing strategy that involves sending multiple tokens or coins to crypto wallet addresses in exchange for completing small tasks, such as posting a message on social media. This is usually done to raise awareness... lasted two weeks, starting on September 1, 2022 and ending on September 14.
Distribution of ETHW tokens to users of the new chain will be made in a certain ratio in accordance with the already agreed distribution rule.
Crypto.com App Crypto Wallet and Crypto.com Exchange Spot Wallet will also withdraw ETHW tokens to their users' wallets at a ratio of 1 ETH:1 ETHW.
The announcement of the ETHW mining service by Binance on September 29, 2022 caused the value of ETHW to skyrocket as users can mine ETHW for free.
As of October 14, 2022, ETHW is trading at $7,12/ETHW, according to CoinGecko. There are currently over 1 million ETHW coins in circulation with an equivalent total supply. The 106-hour trading volume was over $24 million, with a low of $55 and a high of $7,02, according to CoinMarketCap.
On September 3, 2022, ETHW reached an all-time high of $58,54, and on September 19, 2022, an all-time low of $4,17.
Is ETHW a good investment?
Within a week of the fork being launched, ETHW was down over 80% and was trading at $8.
Despite the promises of ETHW Core and Mr. Guo's bravado, the new EthereumPoW did not take off as smoothly as planned. In fact, the previous Ethereum Merge performed much better.
From the very beginning, the hard fork was marred by technical problems. A faulty third party contract exposed the network to a malicious exploit resulting in the loss of 200 ETHW (~$1,600).
In addition, many users complained about the inability to access the EthereumPoW servers using the information provided by the blockchain.
As if that wasn't enough, Justin Sun, a supporter of Poloniex and one of the early promoters of the new project, has backed out by backing a never-before-seen new Ethereum fork.
The project did not start very well, but there is reason to hope.
Gary Gensler, chairman of the Securities and Exchange Commission (SEC), hinted that the existing Ethereum blockchain could be subject to regulation due to its new rate-related features, which could make it a security.
ETHW may not be subject to this regulation as it does not offer staking features, which could make it more attractive to investors.
In addition, several major crypto exchanges have announced their support for EthereumPoW, including Binance, the largest crypto exchange in the world by trading volume. Binance announced via Twitter that it has launched a zero-fee ETHW mining pool.
Other exchanges supporting the new Ethereum fork include Coinbase, OKX, Gate.io and Poloniex.
The recent and ongoing ETHW Ethers could also help grow the EthereumPoW ecosystem, possibly adding to its community.
Lack of support for stablecoin
Unfortunately, even before The Merge, the main stablecoins - USDT and USDC - did not offer any support for the nascent project. Essentially, the lack of support from stablecoins leaves EthereumPoW with little to no DeFi activity, as lending and collateral are typically done with stablecoins.
Critics of the project argue that it was created only to drive up the price through the usual tricks, and then dump worthless tokens on unsuspecting victims.
If the project fails to sustain interest and value, then the remaining miners may have no choice but to give up their hopes. If a Mining does not bring profit, it simply does not make sense to continue it. Many miners eventually switched to other blockchain networks or were forced to stop working.
For those who followed Buterin's comment about switching to Ethereum Classic mining, things are not much better. As more miners switched to ETC, it became more and more difficult to successfully mine a block and earn rewards.
ETHW Price Prediction
A few days after the launch of ETHW, there was an initial bullish reaction followed by weeks of a bearish trend that saw the price of the token drop to $4,17 on September 19, 2022. Currently, the value of the token is steadily declining.
If ETHW follows in the footsteps of Ethereum Classic (ETC), an early fork from the original Ethereum, and Bitcoin Cash (BCH), a hard fork of Bitcoin, it may be able to slowly increase in value.
According to DigitalCoinPrice, a well-known cryptocurrency price tracking platform, the price of ETHW is bound to rise in a few years.
However, the likelihood of a price increase depends on what kind of ecosystem and community ETHW can create. Without the ability to support DeFi, the use case for ETHW is questionable. And, as always, the cryptocurrency market is very volatile. No one can say with certainty what the future holds for the EthereumPoW blockchain and the ETHW coin.
If you are an interested investor, make sure you are DYOR - do your own research.
Hard forks are usually born out of controversy and therefore cause a lot of controversy. EthereumPoW seems to primarily serve the needs of ETH miners, who could go bust as a result of Ethereum’s transition to a more Earth-friendly PoS consensus.
The project's takeoff has not been easy, and the team behind it still doesn't seem to have a clear roadmap. Investing in ETHW comes with the risk of the community not being able to sustain itself, although its developers remain hopeful.