Ethereum’s original coin ETH prices rise as miners migrate ahead of Merge
Over the past two weeks, Ethereum’s popular ETH coin has jumped by nearly half as confidence builds over its long-awaited switch, or “Merge,” to a leaner, more efficient blockchain technology called proof of stake.
Still, its gains pale in comparison to the sudden surge of interest in another, long-forgotten alternative from the very beginning of Ethereum’s history.
The value of ETC, a kind of illegitimate offspring born in 2016, has tripled in the same period, nearly taking out peaks last visited in March, according to data from CoinGecko.
The price rally really started to take off after Vitalik Buterin, Ethereum’s founder, urged users and developers last week to migrate back to their original creation if they were not convinced by the upcoming merger.
“It’s a very welcoming community,” Buterin told the Paris conference. “If you like proof of work, you should use Ethereum Classic, it’s a really nice chain.”
ETC resulted from the so-called DAO Hack of the Ethereum network where $60 million was stolen from a decentralized autonomous organization just a year after Buterin’s creation first went live in July 2015 – at the time a fortune for a fledgling crypto industry.
A vote was held by DAO users responsible for governance decisions, with a majority supporting a “hard fork” in the chain that would restore investors their stolen money.
Since the decision was highly controversial, another part of the community refused to play along and instead continued with the original chain, known as Ethereum Classic, and its original currency, ETC.
Buterin’s comments have helped revive interest in the ETC cryptocurrency from miners, most of whom have not had it easy with the recent collapse in ETH and are now effectively losing their income entirely.
The reason is that Ethereum, the second most popular blockchain after Bitcoin, will no longer require mining services as it moves to a faster and more efficient technology as part of the merger tentatively scheduled for September 19.
Replacing them will instead be stakers, who will take on their job of maintaining the security of the trustless payment network.
Faced with the impending loss of business, mining pool AntPool pledged to invest $10 million on Tuesday to support the further development of Ethereum Classic, which is now independently operated.
Mining Vs. strike
To understand the difference between miners and stakers, it is important to first understand the underlying technology.
Normally, financial transactions require a trusted counterparty such as a bank to ensure that both sides of an exchange can fulfill their end of the deal before it clears the trade and credits or debits an account.
However, cryptocurrency changes hands on a completely permissionless basis. Complete strangers can buy and sell coins using anonymous wallets without fear of being shorted.
That’s because an asset like Bitcoin operates using a shared ledger of transactions distributed to anyone interested in maintaining the network. Transactions are recorded in the form of blocks on a chain with miners paid newly minted Bitcoin as an incentive to validate each of these immutable entries.
This majority consensus mechanism is known as proof of work (PoW), and it requires an enormous amount of computing power for each miner to keep their copy of the ledger always current and up to date.
Because Bitcoin’s network prioritized security and decentralization above all else, it requires enough electricity to power a small country and can only process transactions at a snail’s pace by today’s standards.
This is why new types of blockchain technology have emerged such as Solana which takes a completely opposite approach, using what is known as proof of stake (PoS) to improve energy efficiency and scalability to achieve speeds similar to credit card giant Visa.
Instead of transactions being validated by whoever is willing to set aside their computing power as a mining rig, people stake a certain amount of their own holdings similar to a deposit.
The downside of this solution is that more influence is centralized in the hands of a smaller, select number of people who can benefit from being the only ones to reap blockchain rewards by maintaining the network.
However, there are penalties to ensure that the system is not abused. In the event of an attack, either staged on purpose or allowed due to negligence, your deposited crypto may be lost in whole or in part.
Ethereum is now in the process of switching from PoW to its so-called Beacon chain which is currently running in parallel using PoS. Validators who want to earn crypto must agree to first unlock 32 ETH, roughly $55,000 in current value.
For those miners who either don’t want to or can’t do that, they can switch to Ethereum Classic.
“They will definitely welcome proof-of-work fans,” Buterin said.
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