Why the Ethereum Merge Will Cause Price Volatility on ETHPoW

Stablecoin providers have mostly chosen to back Ethereum Mainnet


Source: Shutterstock


key takeaways

  • Uniswap will still be able to operate on the ETHPoW chain
  • ETH PoS and ETH PoW can be the differentiated by different ChainIDs after the Merge

As the hours tick down until the Ethereum Merge, the plans of die-hard proof-of-work advocates are coming into focus — as are the growing prospects for volatility for the up-and-coming token.

The Merge is set to transition the Ethereum blockchain’s mechanism for processing and validating transactions from proof-of-work — a similar mechanism to that of Bitcoin, albeit technically distinct — to proof-of-stake, likely sometime early Thursday morning ET. 

A relatively small, but vocal, minority of ether miners preparing to fork the protocol recently tweeted “ETHW mainnet will happen within 24 hours after the Merge.”

“The exact time will be announced 1 hour before launch with a countdown timer and everything including final code, binaries, config files, nodes info, RPC, explorer, etc. will be made public when the time’s up,” the tweet said.

Not everyone is as optimistic about the contrarian project’s viability — over the short or long term.

ETH holders will be airdropped ETHPoW tokens at a 1:1 ratio, but the token will have very limited places where it can be spent or used, making it obsolete.

Sunny Aggarwal, co-founder of Osmosis Labs, told Blockworks “most of the tokens on ETHPoW are going to go to zero.” 

Circle, the issuer of USDC — the largest dollar-backed stablecoin issued on Ethereum blockchain with a market capitalization of more than $45 billion — confirmed that the company plans to fully support the PoS chain post Merge. DeFi projects employing USDC for collateral, as such, ought to have virtually zero value on the PoW chain.

Instead, its staking-friendly counterparts are primed to reap the benefits, according to Kiril Nikolov, part of Nexo’s strategy team.

“The Merge is not only making the network more secure and eco-friendly — it’s also making ETH better money and a better store of value,” Nikolov told Blockworks. “With its staking yields, it will generate an infinitely scalable, long-term source of revenue for digital asset institutions, lenders and exchanges.” 

The Merge is expected to bring 7%-14% yields on its first day, Tom Dunleavy, senior research analyst at Messari, tweeted.

Even still, Aggarwal said the ETHPoW token will likely still have some element of intrinsic value. 

Decentralized protocols, such as Uniswap that don’t run via oracles — or bridges between a given blockchain and other asset classes — are supposed to continue to function on ether’s proof-of-work version.

“Uniswap doesn’t require oracles,” Aggarwal said. “It doesn’t have any dependencies, so it can still keep working,” he said. 

Loading Tweet..

After the Merge, a simple way to be able to differentiate between ETH PoS and ETH PoW will be by examining chain ID, or a unique series of numbers that effectively tells a smart contract what blockchain in question a given asset originates from.

When Ethereum Classic and Ethereum went through a hard fork — a foundational event that triggers a crypto protocol to splinter into two or more blockchains — in 2016, developers for both parties were reluctant to alter their respective identification mechanisms. The move allowed for so-called “replay” attacks, where transactions on the former ledger were also deemed valid on the latter.

But, in the Merge’s case, that’s unlikely. Proof-of-work developers have already confirmed the plan is to use a more-modernized verification solution as a viable workaround.

Article updated at 4:19 am, Sept. 15 to correct Nikolov‘s role.

Don’t miss the next big story – join our free daily newsletter.


Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

MON - WED, MARCH 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience:  Attend expert-led panel discussions and fireside chats  Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts   Grow your network […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Frax report cover.jpg


Frax saw continued development in its frxETH liquid staking derivative and Fraxlend money market throughout 2023. Frax V3 introduces an RWA strategy to drive utility to the protocol's cornerstone product, the FRAX stablecoin.


In a bid to woo institutional crypto traders, Binance wants help from a bank


Musk’s hesitation to launch his own crypto made sense in previous cycles. But there’s no shame left around here — he should just go for it


Commissioner Peirce would have done things differently if she could when it comes to her agency’s crypto enforcement actions


MicroStrategy discloses the purchase of 16,000 bitcoin throughout November


Digital asset firms face potential new regulatory landscape under Treasury’s proposed authority expansion


Uniswap Labs will be providing trading APIs to Talos investors through Fireblocks