The long-awaited Ethereum Merge into Proof-of-Stake finally occurred in September 2022. However, it was met with a number of problems shortly afterward. Following the Merge, concerns about centralization have emerged among the Ethereum community.
In addition to the concerns about centralization, Ether has also formed forks. Several investors were aware that a proof-of-work (PoW) crypto asset called ETHW was created following The Merge on September 15. The fork was announced weeks before the mainnet launch.
Prior to and after the merge, Ethereum was trading between $1.500 and $1,600. However, that price quickly vanished. According to CoinMarketCap, today, Ethereum is only worth $1382.46. In the last 24 hours ago, ETH is down by 5.60%.
Ethereum’s PoS Merge gives birth to 2 forks
ETHW is not the only ETH-based PoW fork. In fact, there’s another one called Ethereumfair (ETF). The Ethereumfair team has a website and can be found on a few social media channels.
On September 15, ETHW’s hashrate hit an all-time high (ATH) of 80.56 terahash per second (TH/s). Despite this, ETHW’s hashrate has fallen recently, and the PoW network has lost 53.35 percent of its hashing power since then. ETHW is not the only one suffering, as ETF has also dipped 17.6% and is currently at $1.57 per unit against the U.S. dollar.
According to CoinGecko.com data, the price of ETF has fluctuated between $1.48 and $3.50 per unit and $3.43 million in worldwide trade volume over the last three months. ETF’s price hit an all-time high of $20.59 per unit two days ago, then plummeted to its lowest level at $0.99 per coin on the same day
Ethereumfair has also gathered a small percentage of hashrate leftover from The Merge. At the time of writing, Ethereumfair’s hashrate is at 7.9 TH/s, and seven nodes are dedicated to the new network. Compared to ETHW’s hashrate, ETF’s hashpower represents 21% of ETHW’s total hashrate.
Centralization fears mount and gain ground
Mevboost.org has recorded six active relays that have each delivered at least one block. Of these relays, Flashbots dominates with 82.45% of the blocks delivered–this raises alarms for centralization within the community. The active relays in addition to BloXroute are Blocknative, Eden, and BloXroute Regulated.
Some in the crypto community are concerned that Flashbots is a centralized entity that could undermine Ethereum’s plans to migrate to PoS. The theory is that if the block building infrastructure isn’t rebuilt, it will leave the network vulnerable to attacks. Some have argued that the Flashbots system will eventually become decentralized, like a DAO.
As of September 15, Santiment data showed that two wallets processed 46.15% of Ethereum transactions. Gnosis co-founder Martin Köppelmann said that the two wallets belonged to Lido and Coinbase.
According to Köppelmann, the top seven entities have over two-thirds of block verification power. The situation, he says, is frankly pretty disappointing. Before now, the crypto community had been arguing about whether or not centralized enterprises’ dominance of Ethereum staking is a concern for the ecosystem’s “decentralization.”
The discussion came to a boiling point when U.S. officials sanctioned Tornado Cash. According to some community members, regulatory pressure could force some validators to censor transactions on the network.
Brian Armstrong, the founder of Coinbase, said that the exchange would close its staking product rather than comply with such demands. Meanwhile, according to reports, if Coinbase thinks it is necessary, it could blacklist the staked Ethereum of its users. Furthermore, the Wrapped Staked ETH (cbETH) smart contract in the US-based exchange has a blacklist function.
ETH stakers on Binance and Lido to miss out on ETHW airdrop
The ETHW airdrop will not be available to ETH stakers on various platforms. The Ethereum fork will not be supported on some of these platforms, including Binance and Lido. While most stakers expect new tokens to be airdropped into their wallets after the fork, Binance, Lido, and others have stated that they will not support the distribution.
The news has dealt another major blow to ETHW supporters, anticipating the airdrop. When asked whether Lido would support ETHPoW, the company said that unless there is a company’s proposal to do so, they will not be distributing any ETH PoW tokens to stETH holders.
Although Binance boasts broader support for ETHW, holders of BETH (staked ETH on Binance) will not be receiving any ETHW airdrops.
Will the PoW forks stand?
EthereumFair has no much information provided about the fork. According to the project’s Twitter feed, ETF tokens will be dispersed among bitcoin (BTC), dogecoin (DOGE), ether classic (ETC), and classzz (CZZ) token holders. Ether holders are going to be excluded from the airdrop due to the fact that they hold ETH rather than CZT.
Many analysts question the longevity of any project based on the proof-of-work algorithm, but many traders were looking to make a quick profit off them long before the Merge. They planned to acquire or borrow ETH in order to be eligible for the airdrop.
Then, after collecting the ETHW (or any other fork’s) tokens, they would dump them on the market. Because the tokens were given away for free, any earnings were regarded as a bonus for holding Ethereum.
The pressure to sell ETHW was immense, largely because few large investors took the breakaway project seriously. According to market analysis, 90% of miners on the EthereumPOW network will go bankrupt.