Playing the Merger: How to Get Free Money from Ethereum’s PoS Update

Playing the Merger: How to Get Free Money from Ethereum's PoS Update
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Key Takeaways

  • A coalition of developers and miners plan to hack the Ethereum blockchain after the Merger.
  • Doing so will create a new Proof-of-Work chain that will match users’ ETH balances with a new coin called ETHW in equal amounts.
  • ETHW will likely have some value and can be traded on centralized exchanges that support its trading.

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After Ethereum forks, addresses holding ETH will receive an equal amount of ETHW on the forked blockchain.

Preparing to merge

Ethereum is moving to Proof-of-Stake, but miners are planning a Proof-of-Work fork.

A group of anonymous developers backed by many major Ethereum miners are expected to hard-fork the Ethereum blockchain after next week’s Merger, preserving a working version of the network’s existing Proof-of-Work (PoW) consensus mechanism. Proof-of-Stake (PoS).

The fork, commonly referred to as ETHPoW, will share the same transaction history as the main Ethereum network, but will start generating its own blocks once the Merge update is released. As PoW forks start from the pre-Merger state of the Ethereum network, all token balances and smart contracts will also be carried over. This means that everyone holding ETH on the chain will have an equal ETHW balance on the forked ETHPoW chain. ETHW will only be native to the PoW fork and will represent a completely different asset than the original ETH on Ethereum.

For many Ethereum believers, the planned PoW fork is of little interest as an investment. Virtually all DeFi, NFT, and network infrastructure protocols have publicly announced that they will support the PoS chain, leaving the PoW fork in the doldrums. Once launched, decentralized exchanges in the fork will likely cease to function and centralized stablecoins such as USDC and USDT will become worthless, potentially causing mass cancellations and breaking many DeFi protocols.

Despite the PoW fork starting from square one, there is one token that will probably hold some value – ETHW. Like the 2016 DAO hack fork that created Ethereum Classic, the PoW fork may have some loyal supporters who continue to develop it, creating demand for its token. Conversely, those who don’t believe the fork will go anywhere may want to sell their ETHW tokens after the Merge to make some extra profit. So what is the best way to make sure you get ETHW? Which exchanges plan to support the Ethereum PoW fork? Read on to make sure you’re getting the most out of the Merge and PoW forks.

Centralized Exchanges

A simple way to play Merge is to deposit your ETH on a centralized exchange that announces it will support a PoW fork. The list below is not exhaustive, but includes the major exchanges that issue statements:

  • Poloniex has already listed the ETHW placeholder token and will list and support its trading when it launches the ETHW fork, including crediting users with ETHW at a 1:1 ratio with the amount of ETH they hold on their accounts.
  • Binance, MEX Globaland all will support the ETH PoW fork and also plan to credit users’ accounts with ETHW at a 1:1 ratio of ETH.
  • OKX will list and support trading for an ETHW fork.
  • BitMEX ETHPOWZ22 – Launched ETHPoW Linear Futures Contract with USDT margin.
  • Coinbase, FTXand Kraken They said they would consider an ETH PoW fork like any other asset and list it for trading if needed.

Currently, Poloniex, Binance, MEXC Global and seem to be the most confident to issue their equivalent ETHW to users after the Merger. Of these, Binance will likely have the largest market as it is currently the best centralized exchange by trading volume.

However, those unable or unwilling to invest their ETH in one of these exchanges prior to the Merger have another option. Storing ETH in a jail-free Ethereum wallet guarantees that your address will receive ETHW on the new PoW fork.

Taking custody

A non-custodial wallet should be the fastest way to access ETHW after the merge. While users on centralized exchanges may have to wait hours or even days for their ETHW to hit their accounts, monitoring your ETH funds is the most secure way to ensure you have access to your PoW fork coins.

However, the trade-off is that accessing a new PoW chain requires some technical knowledge and may expose users to risk. Adopters of this approach will need to add to their EVM wallets after launching the PoW network. In MetaMask, you can do this by clicking on the network at the top of the browser extension and selecting “Add to Network”. You will then need to enter the ETH PoW chain name, RPC URL and Chain ID (these details will be announced once the PoW chain is launched). The process is relatively simple, similar to adding RPC for other Ethereum-compatible chains like Polygon or Avalanche.

Another consideration for those who plan to self-control their ETH before merging is consolidation. If your ETH is secured by a smart contract, sits on a Layer 2 chain, or is secured by a protocol like Lido, it will not be compatible with ETHW on the PoW chain. To increase the amount of ETHW you receive, it is a good idea to convert your assets to normal ETH and keep them in your wallet until the Merge.

While using a non-custodial wallet is sure to get you PoW fork coins, the limiting factor will be finding a market to sell them after the Merger. With the exception of ETHW, all tokens on the forked chain will be virtually worthless, so using decentralized exchanges is out of the question. Those wishing to withdraw cash will still have to wait for a centralized exchange to open their ETHW deposits.

To make sure you’re ready, consider setting up accounts on different exchanges that will support ETHW in advance. So those who want to can transfer their ETHW at the earliest opportunity and potentially sell it at a higher price.

Finally, it is important to understand the risks associated with Merge and any new PoW forks. one an oft-mentioned danger If an Ethereum fork is launched with the same Chain ID as the main PoS chain, transactions are “transferable”. This is where transactions signed on the forked chain can be verified on the main Ethereum PoS chain, allowing for new scams that potentially empty users’ wallets.

Although such scams are possible, it is doubtful that the PoW fork will be launched with the same Chain ID. However, unscrupulous individuals may attempt to launch other forks designed to steal users’ PoS ETH. Be very careful before signing transactions on any ETH fork; if in doubt, do nothing. It’s better to lose a few hundred dollars than to lose your entire stack of ETH.

The latest draft estimates that the Merger will take place between September 13 and 14. If you plan to send ETH to a centralized exchange or your own wallet, make sure you do it well ahead of time. Most plan to exchange Stop ETH transactions A few hours before the Merge to ensure no user funds are lost, so don’t leave things to the last minute.

Whether you stick to exchanges or plan to keep your ETH for yourself, double check and be safe before sending transactions.

Disclosure: The author owned ETH and several other cryptocurrencies at the time of writing this piece.

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