Crypto miners plan to fork Ethereum, will it make a difference to the merger?

The so-called “Merge” of the Ethereum network plans to take a blockchain with the most developers and a market value of over 200 billion dollars to a cheaper, faster and less energy-intensive method of operation. Ethereum miners don’t like it.

They claim that changes made to the network through the merger are freezing them out, turning multi-million dollar investments in hardware into stranded assets.

The response from miners is a plan to split the blockchain to maintain the current proof-of-work (PoW) method and keep them validating transactions on the network and earning Ether tokens as payment.

That may sound like setting the stage for conflict and disruption, but Jonathon Miller, Australian head of US-based cryptocurrency exchange Kraken, told Discard in an interview that the fork sounds dramatic, but he is not worried about it.

“I can give Ethereum tomorrow [but] will people use that fork? That is another question, he said. “That’s a question miners have to ask themselves.” Ethereum is the network of choice for developers and will remain so for some time, he added.

Ethereum had approximately 4,000 active monthly developers in areas such as decentralized finance, or DeFi, non-fungible tokens (NFT) and many others as of December 2021, far more than any other blockchain, according to venture capital firm a16z’s 2022 State of Crypto report.

Forks in the road

A PoW system requires miners to solve complex algorithms using massive banks of expensive, energy-guzzling computers to validate transactions on a blockchain, and they are rewarded with the network’s token.

Proof-of-stake (PoS) systems, which Ethereum is transitioning to, are validated by users according to how much of the network’s token they have “put” back into the network.

Popularly likened to changing a plane’s engine mid-flight, The Merge will see the Ethereum network combine with the PoS Beacon chain sometime between September 16th and 19th.

Shortly before, a “difficulty bomb” will be triggered on the Ethereum network, drastically increasing the energy and computational requirements to validate the network, therefore preventing miners from continuing on the mainnet.

This is not the first major fork for the world’s second largest blockchain. The current ETH network is actually a fork of the original blockchain – renamed Ethereum Classic (ETC) – which was split in 2016 to address a hack of 3.6 million Ether on the network.

It was a decision that divided the community between those who believed it was against the ethos of blockchain, where all transactions must be immutable, or unchangeable, and those who wanted to preserve the value of the network.

“I think in retrospect that some people who argued for that fork may have changed their views over time,” Miller said, adding that there isn’t much to learn from the previous fork ahead of the merge, as it was done under very different circumstances circumstances.

While both ETH and ETC have seen their prices rise amid interest in the run-up to the merger, ETC’s market capitalization is currently 97.5% less than ETC’s at just $4.9 billion, according to CoinMarketCap.

Mining manager

One of the proponents of a PoW fork is Chandler Guo, a former cryptocurrency miner in China who now lives in the US in Silicon Valley and is pulling together a team of developers to create an Ethereum fork that maintains its original consensus mechanism.

“Many miners would have to shut down their businesses [after the merge]”, Guo said in a recent interview with Discard.

Guo has faced backlash from the Ethereum community. In early August, ETC Cooperative, an advocacy group for the ETC blockchain, sent Guo an open letter saying they do not believe a PoW chain will work.

However, Ben Caselin, head of research and strategy at Seychelles-based crypto exchange AAX Inc. Discard he thinks it’s possible, but he’s unsure if it will pay off, since Ethereum’s strength lies more in its users and developers than its miners.

“[Miners] will split a chain with a code exactly like Ethereum and continue mining, but they won’t see their profits go anywhere in the long term, he said. “Assuming of course that the majority of people will use and bet on the Beacon chain.”

Caselin is also not worried about the fork having any impact on the merger.

“With so much anticipation for Ethereum POS,” Caselin said, “unless the miners in question can destroy the reputation of the current ETH network by a major hack, a double spend, or something else that would convert other validators, they won’t be able to stop the merger.”

Instead of being worried about a fork being disruptive, Kraken’s Miller welcomes it.

“Forks are normal; in fact, this is how open source software works. Every time there is an upgrade to open source software, there is debate. This is the beauty of open source software,” Miller said.

“All power to people who want to innovate. We may see some innovation as a result of the merger that is unexpected, which is a great thing.”