Summary: The Ethereum Merge is one of the most anticipated and exciting events in the history of blockchain. When it happens, the Ethereum blockchain will switch from being validated by proof of work to proof of stake. Even though this change is overwhelmingly positive, some critics condemn the change and are planning to create their own ...

The Ethereum Merge is one of the most anticipated and exciting events in the history of blockchain. When it happens, the Ethereum blockchain will switch from being validated by proof of work to proof of stake. Even though this change is overwhelmingly positive, some critics condemn the change and are planning to create their own version of Ethereum, and anyone who holds ETH will get their new token. Let’s take a look at what this means, if this new coin will be worth anything, and how to be eligible for the airdrop.

The Ethereum Merge has been described as trying to change out the engines in a passenger airplane while it is in mid-air. Right now, physical computer hardware is being used to validate transactions and secure the network. After the Merge, anyone can stake their Ethereum as collateral, validate transactions, and get paid a portion of the transaction fees. The feat is incredibly technologically impressive and will pave the way for mass Ethereum adoption, as it will lower energy consumption by 99.97% and make it a potential investment for ESG-conscious corporations. Additionally, it will also reduce Ethereum emissions and potentially make the cryptocurrency deflationary, as well as significantly increase the decentralization of the blockchain.

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 Even with all of these positive changes, some skeptics express concern over the potential issues with proof of stake. For example, with the recent sanction of Tornado Cash, it has been proven that the government has some level of control over DeFi and that the infrastructure surrounding Web3, like websites, code repositories, stablecoins, and communication channels are still subject to government censorship. With the change to proof of stake, some believe that the government could go after custodian services that help users stake, like Coinbase or Lido, and force them to shut down or cripple the blockchain in some way.

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While this seems like a valid concern, it is severely overblown and is not an issue that leading experts in the space are concerned about. Nonetheless, there has been a vocal minority on Twitter and other platforms advocating for the continued existence of proof of work Ethereum, and they plan to hard fork the network to keep the proof of work chain running. This means that, at the moment of the Merge, two separate chains will exist: the original and deprecated proof of work chain, and the new proof of stake chain. Users who held funds in an Ethereum address at the moment of the Merge will have their assets duplicated on both chains. This includes not just ETH but also any tokens, stablecoins, or NFTs.

Unfortunately, this does not mean that everyone’s money will be doubled. Every asset will trade separately depending on which chain it is on. For example, Poloniex has preemptively listed trading pairs for both versions of ETH. Currently, proof of work ETH, or ETHW, is trading at around $70, and proof of stake ETH, or ETHS, is trading at $1,921. Interestingly enough, the total value of both versions put together is the same as the current price of Ethereum, meaning that the market has already optimally priced both assets. 

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Even though it may seem like a good investment to buy the proof of work ETH in case it explodes in popularity, it will likely fizzle out immediately after the Merge for several reasons. First, there already exists an Ethereum chain that will be using proof of work indefinitely: Ethereum Classic. ETC was created in 2016 after Ethereum was hacked and there was a disagreement about whether or not to reimburse users. The Ethereum we know today is a result of this reimbursement, while the original chain lives on as Ethereum Classic, and is an established smart contract platform. Second, almost every major stablecoin issuer and DeFi protocol has chosen to support the Merged Ethereum. This means that stablecoins like USDC will not be backed by anything on the proof of work chain and are consequently worth $0. This will cause a cascading domino effect over the entire ecosystem, as a worthless stablecoin will ruin all decentralized exchanges, lending protocols, and decentralized stablecoins like DAI. The proof of work chain will be in a catastrophic state as soon as it launches, and there is no obvious solution to keep the DeFi protocols working as intended.

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Ultimately, the new Ethereum chain seems like a cash grab by influential individuals who are fear-mongering on social media. The majority of Ethereum holders will not be impacted by this chain and may make a few hundred dollars from the airdrop before completely abandoning proof of work Ethereum. Post-Merge Ethereum is the future and will usher in a new era for the blockchain and its potential to be the world computer.

By Lincoln Murr