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As Ethereum Merge Approaches, OpenSea says it will not support Forked NFTs
2022-09-09, 01:53
TL;DR
🔹 Ethereum has long announced its plan to merge its system, moving from a proof-of-work system to proof-of-stake.
🔹 A group of miners has decided to cause a hard fork that will create what they term ETHPoW, security for them in the face of the possible loss of work with the new proposed system.
🔹 Cryptocurrency ecosystem bigwigs like OpenSea, Circle, and Bitfinex are making clear their stance if a fork occurs through the Ethereum merge.
🔹 OpenSea has said it will not support forked NFTs.
Introduction
While the Merge promises a cryptocurrency that's 99% more energy efficient and will supposedly be great for decentralization, many people are skeptical. Critics and analysts are foretelling different ways things could go wrong with the merge, which has led to discussions around forking Ethereum.
Who is supporting the Ethereum fork?
The campaign launched by the controversial Chinese miner Chandler Guo to hard fork the Ethereum network if the merge is gone through has received mixed reactions. The campaign aims to create a proof of work variant, which he intends to name ETHPoW. Many crypto exchanges and NFT marketplaces are making clear their stance if a fork does occur.
OpenSea, in particular, has stated in a series of tweets that it will continue to support NFTs on the improved Ethereum Proof-of-Stake (PoS) chains. It also made known that NFTs on potential forks will not be kept or permitted to reflect in its marketplace.
Famous for being the first NFT marketplace that set up camp on Ethereum as far back as 2017, the marketplace now supports over 80 million NFTs and, according to DappRader, boasts about $31 billion in total volume since its establishment.
If a fork does occur and NFTs are produced on it, it is potentially unsafe. Even though it carries the Ethereum tag, it is, in essence, not protected by the Ethereum network and its team of hard-core developers and engineers.
The second largest United States dollar stablecoin USD Coin (USDC) 's mother company, Circle, also joined OpenSea's stance, announcing that their primary intention is solely to support the upgraded Ethereum Proof-of-Stake chain.
Some marketplaces & Exchanges are favorably disposed to EthPoW.
Interestingly, several crypto exchanges and NFT marketplaces have decided to act more favorably towards a possible new fork. APENFT is the first decentralized NFT marketplace to support Ethereum hard fork.
Among the exchanges, Coinbase stated in an article on its blog that any resultant fork will be considered and reviewed with the same rigorous process to which any other asset listed on its exchange is subjected.
Crypto exchange Bitfinex has also shown a favorable leaning saying that through its platform, it will allow traders to choose from the different Ethereum variants if a fork emerges from the merge.
Can ETHPoW survive?
Over 500 fellow miners and volunteer developers have pledged to join Chandler Guo to make the ETHPoW a reality, but as analysts suggest, it might not be as easy as they think. The effort that goes into launching, maintaining, and growing a suitable token is no walk in the park.
crypto.com
This work ranges from constant security threats, the bug surveillance to necessary software upgrades to keep the coin viable and secure for its holders. Marketing, administration, economics, and legal matters are also present, leaving one in doubt if this union of convenience brought on by mutual grievances against the possible economic effects of the proposed merger could achieve anything worthwhile.
The proof-of-work system on which Ethereum presently operates relies on miners to create new ETH by channeling humongous amounts of power at hard-to-solve computer puzzles. The merge proposes upgrading the present Ethereum to a faster, more energy-efficient proof-of-stake model, characterized by plugging or staking large quantities of pre-existing ETH to make new ones.
The merge will therefore put an end to the practice of Ethereum mining, cutting off the income stream ETH miners have known for years and leaving them burdened with expensive and now potentially useless specialized hardware in which they have invested.
Guo and his fellow miners hope that by creating ETHPoW, they can maintain the old proof-of-work system needing their mining power, acting as a security for them against possible losses.
Ethereum classic, a previous fork created, is still in existence and doing well. Many people are left wondering why the miners and their supporters cannot channel their resources into making it a formidable competitor for the new Ethereum system rather than create a new fork.
Coinmarketcap.com
As a holder, should you be worried?Many developers say there's nothing to worry about, believing the merge will not affect asset security. The developer team at Ethereum has been perfecting their security plan to ensure a smooth and secure transition to the new version.
It is worth noting that the phenomenon of replay attacks is a significant concern. As a result of the fork, all existing digital assets on the Ethereum network will, upon merging, move to the new proof-of-stake system. However, they may leave duplicates on the forked proof-of-work version leading to long-term implications and loopholes for any sorts of nefarious activities on holders' accounts.
Scammers could, in the moment's confusion, manipulate unsuspecting and uninformed holders into the loss of their tokens or into parting with valuable information. So, the best advice is to "do nothing." Let the merge take place and avoid transactions while it's in progress.
The Aftermath of the Merge
When the merge is complete, it'll be validators, instead of miners, who will validate transactions and add them to the blockchain. These validators will earn rewards for helping secure the network, similar to the proof-of-work reward arrangement with miners.
One of the down limitations of this approach is that validators have a high minimum entry cost. Intending validators would need to deposit at least 32 ETH collateral (worth approximately $52,000) together with the necessary hardware and software maintenance. The Staking pool requires that participant stake or lock up their Ethereum with a third party such as Coinbase, Lido Finance, or Beacon Chain. Those companies will use the funds to set up validators and run the show. In return, they share a percentage of the profit with stakers in a pre-agreed formula.
In preparation for the merge, several companies have been verified by Ethereum as validators, with 4 topping the charts.
According to the reputable Blockchain analytics company Nansen, a study of the total staked ETH shows that 30% is by Lido Finance, 15% by Coinbase, and 8% by Kraken.
Nansen.ai
This staking pattern effectively leaves 60% of the total volume of ETH stackable in the hands of 4. What a shocking path to monopoly in an industry that claims decentralization as its foundation.
Final thoughts
A lot will play out in the aftermath of the Ethereum merge. If a fork does occur, we will see ETHPoW distributing airdrops in order to attract new holders to themselves. While it'll be tempting to accept all, you should apply some caution as a number of them may be an attempt by unscrupulous elements to get your keys. If they will survive is a matter to be seen, but early investors might be able to make some quick trade and cash before it does. On the part of NFTs, the extent OpenSea's unfavorable stance on ETHPoW will affect the project will be exciting to watch out for.
Author: M. Olatunji, Gate.io Researcher
* This article represents only the views of the observers and does not constitute any investment suggestions.
*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all other cases, legal action will be taken due to copyright infringement.
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