Top 10 PoW Dominance Evaporates 9 Years Later, Only Two Proof-of-Work Coins Will Remain After The Merge

August 19, 2022 Bitcoin.com

Ethereum’s Massive Upgrade Won’t Boost Speeds or Lower Transaction Fees, Cautions Crypto Asset’s Main Backer

August 18, 2022 The Daily Hodl

Coinbase Could Be a Material ‘Beneficiary’ of Ethereum’s Merge Transition, JPMorgan Analyst Says

August 18, 2022 Bitcoin.com

Coinbase would rather shut down staking than enable on-chain censorship — Brian Armstrong

August 18, 2022 Coin Telegraph

Brian Armstrong

With a ban on Tornado Cash, many DeFi proponents were worried that crypto exchanges, which are also key validators of Ethereum, would succumb to pressure and impose protocol-level censorship.

In light of the recent ban on crypto mixing tool Tornado Cash and the subsequent arrest of the Tornado Cash developer, there has been a growing debate around what crypto services providers would choose between decentralization and censorship in form of compliance.

The question has become more prominent as Ethereum (ETH) is moving from its current proof-of-work (PoW) blockchain to a proof-of-stake (PoS) mining consensus. With the transition less than a month away, a user pointed out that more than 66% of validators on the Beacon chain (Ethereum PoS chain) will adhere to the United States Department of the Treasury's Office of Foreign Assets Control (OFAC) regulations.

Start with the big, current one.

Currently it looks like over 66% of the beacon chain validators will adhere to OFAC regulations, @LidoFinance @coinbase @krakenfx @stakedus @BitcoinSuisseAG pic.twitter.com/qyq23tPnqV
— eylonverse X (@TheEylon) August 14, 2022

When asked whether Coinbase and others would choose to adhere to compliance requests and impose protocol-level censorship or shut down staking services, Brain Armstrong, the CEO of Coinbase, chose the latter. Armstrong said:

“It's a hypothetical we hopefully won't face. But if we did we'd go with B I think. Got to focus on the bigger picture. There may be some better option (C) or a legal challenge as well that could help reach a better outcome.”

First group of centralized #ethereum validators to answer my question say they would rather wind down their staking program than enable on-chain censorship at the protocol level in the ethereum blockchain. https://t.co/pKG8X50hDa
— Lefteris Karapetsas | Hiring for @rotkiapp (@LefterisJP) August 17, 2022

There was growing speculation about the actions of Coinbase, Kraken, and other prominent crypto exchanges who are also key ETH validators on the Beacon chain.

Many believed that centralized crypto exchange would take the easy way out and impose protocol-level censorship rather than block individual transactions from banned crypto mixers such as Tornado Cash.

U.S. validators (which includes very powerful Coinbase) are gonna push for protocol-level censorship

They can't self-help by merely avoiding facilitation of blocks containing U.S.-sanctioned txs, because under certain conditions they might be dramatically slashed from doing so.
— _gabrielShapir0 (@lex_node) August 13, 2022

The current dilemma comes from the OFAC sanctions that deemed all tornado cash transactions illegal. However, decentralized finance (DeFi) experts believe it has complicated the issue. Instead of sanctioning a particular address or the country, the regulators have decided to ban the protocol.

Here's the list of Tornado Cash resources that were banned

- Tornado Cash @GitHub organization
- personal @GitHub accounts of TC contributors
- all $USDC on Tornado Cash contracts @circlepay
- @infura_io RPC
- @AlchemyPlatform RPC
- https://t.co/SHvgEjTOMV domain @eth_limo
— ️ Tornado.cash ️ (@TornadoCash) August 9, 2022

Experts believe the decision of a ban would discourage many protocols and exchange operators from engaging with anything related to Tornado Cash, including ETH transacted through the mixer which could lead to unnecessary censorship.

BitMEX Founder Arthur Hayes Says Crypto Traders Should Prepare To Buy Ethereum Dip – Here’s When

August 18, 2022 The Daily Hodl

Ethereum Foundation Makes It Clear The Merge Will Not Improve Fees and Throughput

August 17, 2022 Bitcoin.com

Ethereum Foundation clarifies that the upcoming Merge upgrade will not reduce gas fees

August 17, 2022 Coin Telegraph

Coin Telegraph

The Merge will still reduce the network's energy consumption by an estimated 99.5%.

According to a new clarification by the Ethereum Foundation on Wednesday, the network's upcoming proof-of-stake transitory upgrade — dubbed the "Merge," — will not reduce gas fees. Regarding this, the Ethereum Foundation wrote:

"Gas fees are a product of network demand relative to the network's capacity. The Merge deprecates the use of proof-of-work, transitioning to proof-of-stake for consensus, but does not significantly change any parameters that directly influence network capacity or throughput."

The Merge, which seeks to join the existing execution layer of the Ethereum mainnet with its new proof-of-stake consensus layer, the Beacon Chain, will eliminate the need for energy-intensive mining. It is expected to land within the third or final quarter of 2022. While many investors and traders alike have bought Ether in anticipation of the Merge upgrade, some appear to have done so under misconceptions that the network's capacity will surge once the upgrade is live.

For starters, anyone is free to sync their own self-verified copy of Ethereum or to run a node, with no initial Ether staking requirements. With regard to staking, it is not possible to withdraw staked Ether until the following Shanghai upgrade goes live. Though, liquid ETH rewards in the form of fee tips will be available immediately. Validator withdrawals, once live, will be rate-limited to prevent a potential liquidity crisis.

Transactions will also not be noticeably faster after the Merge. However, post-Merge APR yields on the network are expected to increase by 50% compared to now to attract capital. Client developers are currently working on a tentative deadline of Sept. 19 to complete The Merge, which is designed for zero downtime during the transition.

EthereumPoW team plans to freeze selected contracts, community pushes back

August 17, 2022 Coin Telegraph

Coin Telegraph

The PoW hard fork of Ethereum is being propagated by a set of miners, but many experts believe that the chances of it succeeding is very less.

Ethereum (ETH) is all set to transition to a proof-of-stake (PoS) network by Sept. 15-16 that would see an end to its current proof-of-work (PoW) chain. This event would eliminate PoW mining from the Ethereum ecosystem.

The terminal total difficulty has been set to 58750000000000000000000.

This means the ethereum PoW network now has a (roughly) fixed number of hashes left to mine.https://t.co/3um744WkxZ predicts the merge will happen around Sep 15, though the exact date depends on hashrate. pic.twitter.com/9YnloTWSi1
— vitalik.eth (@VitalikButerin) August 12, 2022

In light of such a major upgrade, the PoW proponents, especially miners, have decided to keep the PoW chain alive. EthereumPoW (ETHW), the core PoW team on Tuesday recommended ETH holders withdraw their assets from liquidity providers (LPs) such as Uniswap Sushiswap, Aave, Compound, and other decentralized exchanges (DEX).

The core team said they would temporarily freeze ETHW tokens in certain LPs of DEX and lending protocols after the hardfork to protect user assets.

The core team believes right after the Ethereum PoW hard fork, especially for the initial several blocks, users’ ETHW tokens deposited in the LPs will be swapped or lent out by hackers and scientists using deprecated and valueless USDT, USDC, and WBTC, which would create a “huge mess for the community.”

The core team said:

“ETHW Core has to make the hard decision to temporarily freeze certain LP contracts to protect users’ ETHW tokens until the protocols’ controllers or communities find a better way.”

The team also said freezing will not be applied to the staking contracts that only involve a single asset such as ETH2.0 deposit contract and Wrapped Ether.

The idea of freezing users’ assets without their consent didn’t go well with many in the community. Users reminded the core team that freezing hardcoded LP smart contracts into the ETH clients is definitively not decentralized.

Converting ETHW into a slow, centralized chain, which has no market fit.

If you want to protect users from bots draining ETHW from LP, then other measures have to be taken.

Uniswap + AAVE + Compound have 1.8M ETH on their pools. Around $108M of implied value for $60 ETHW
— Alberto Rosas (@albertorosasg) August 17, 2022

Others went out to call it a scam and recommended reporting the Twitter account claiming to be the core ETHW team.

I recommend reporting this account as a fake. There is no "official" ETHW core team, and they are proposing a rushed changed to code which freezes contracts as selected by individual people. No EIP discussion or vote or anything. This will likely just create a 3rd fork. Scam. https://t.co/4bORc2bTZP
— Tommy Genesis (@0xTommyGenesis) August 17, 2022

The PoW Ethereum hardfork has got the support of a prominent Chinese miner Chandler Guo as well who claims to be behind a 51% attack on Ethereum Classic.

I am Chandler Guo, a 51% attack on Ethereum Classic (ETC) is coming with my 98G hashrate https://t.co/9VM6vPa8CS
— Chandler Guo (@ChandlerGuo) July 24, 2016

A majority of crypto exchanges and stablecoin issuers have thrown their support behind the upcoming PoS-based Ethereum network. However, the crypto exchanges have stated that if a forked PoW chain gains traction they would be in favor of listing the forked token as well, depending on the community’s demand.

The ETH mining sector is worth $19 billion, according to an estimate from crypto analytic firm Messari. With billions worth of infrastructure on the line, miners ought to favor a hard fork given mining other POW tokens such as Ethereum Classic (ETC) or Bitcoin (BTC) won’t be as profitable.

Experts belive a forked PoW Ethereum chain won’t be as profitable either, since the majority of the community would shift to the new network. Kent Barton, tokenomics lead at ShapeShift DAO, told Cointelegraph.

“While the free market will ultimately decide, it’s likely that, following some initial price discovery (and a potential opportunity to sell these forked tokens), these POW forks will die off. A strategy that’s more likely to succeed is mining on other POW chains such as Ethereum Classic.”

Ethereum co-founder Vitalik Buterin has been critical of the PoW fork as well, calling it an act of greed of a few outsiders. He recommended miners shift to ETC as well.

Coinbase will ‘briefly pause’ ETH and ERC-20 token deposits and withdrawals during Ethereum Merge

August 16, 2022 Coin Telegraph

Business

The crypto exchange also warned users against scammers offering ETH2 tokens, saying users did not need to take additional action to receive staked ETH prior to the Merge.

United States-based cryptocurrency exchange Coinbase has announced it will be temporarily suspending certain token deposits and withdrawals when Ethereum’s core developers transition the blockchain to proof-of-stake, or PoS.

In a Tuesday blog post, Coinbase product manager Armin Rezaiean-Asel said that during the Merge event, the crypto exchange will “briefly pause” deposits and withdrawals of Ether (ETH) and ERC-20 tokens “as a precautionary measure” to handle the migration. The exchange also warned users against scammers offering ETH2 tokens, saying crypto users did not need to take additional action to receive staked ETH prior to the Merge.

“Although the Merge is expected to be seamless from a user perspective, this downtime allows us to ensure that the transition has been successfully reflected by our systems,” said Rezaiean-Asel. “We do not expect any other networks or currencies to be impacted and expect no impact to trading for ETH and ERC-20 tokens across our centralized trading products.”

EthereumProof-of-Stake

It's finally happening! Here's how we're getting ready for The Mergehttps://t.co/AIIUqWcDxm
— Coinbase (@coinbase) August 16, 2022

The crypto exchange will likely not be the only one to announce precautions or changes in trading activity as the date for the Ethereum Merge approaches. Cointelegraph reported on Friday that though there could be “unforeseen circumstances,” core developers anticipated a tentative Merge date on Sept. 15.

After the Ethereum network transitions from proof-of-work to PoS, many expect its energy consumption will drop precipitously, scalability will improve, and it will be less vulnerable to attacks. Cointelegraph reported on Saturday, however, that ETH gas fees may not necessarily go down and transactions on the network will likely not be noticeably faster than before.

Ethereum ICO-era whale address transfer 145,000 ETH weeks before the Merge

August 15, 2022 Coin Telegraph

Coin Telegraph

The high amount of ETH transfers just a month prior to the Merge generated community curiosity, with some claiming it to be a dump while others believe it could be done for staking.

An Ethereum (ETH) whale wallet that participated in the Genesis Initial Coin Offering (ICO) and obtained about 150,000 ETH in 2014 was activated again on Aug. 14 after three years of dormancy.

The whale address transferred 145,000 ETH to multiple wallets as Ether price surged to a new 3-month high of over $2,000. The transfers were made in a batch of 5,000 ETH per transaction and a few transfers of over 10,000 ETH. The total value of the transferred ETH is over $280 million, and the wallet address currently has a balance of 0.107 ETH.

Ethereum ICO era wallet transactions Source: Etherscan

The 145,000 ETH transfer was only the second instance after the ICO when the whale wallet was activated, the first coming in July 2019 when the wallet sent out 5,000 ETH to Bitfinex3 exchange with ETH trading at $219, and the value of the whole transaction was just over a million dollars.

The movement of such a high amount of ETH attracted community reactions, with many claiming it could be a possible dump before the Merge, the official transition of the current Proof of Work (PoW) based blockchain to a proof-of-stake (PoS) one. However, it is important to note that most transactions are to unknown wallets rather than an exchange.

Even if the whale eventually decides to dump their 145,000 ETH, a $250 million selling pressure isn’t considered significant enough to initiate a market dump. A few others believe that the whale might be trying to stake their ETH to become a validator on the PoS network and generate passive income.

Maybe selling 5000eth to open 5000 future nodes ?
— Gary R (@bucko4aFREEusa) August 15, 2022

Ethereum’s transition to a PoS-based network is slated for September 15 after a successful merge of the Goerli testnet to the Beacon chain(PoS chain activated in 2020), the final rehearsal before the official transition.

The Merge in September 2022 is considered one of the most significant upgrades for the second largest cryptocurrency since its inception in 2015. The three-phase transition process began in 2020, and after several delays and testnet integration, it is all set for the official PoS transition in the third week of September.

Proof-of-Stake

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