The Merge is going to commence tomorrow morning. If everything is going as planned, the transition will be smooth and a few minutes after the Paris upgrade went live, the Ethereum blockchain will switch entirely to Proof of Stake network consensus.
What is the EthereumPoW fork, what is the timeline and how can investors possibly play this event?
Some miners are going to continue a new chain
EthereumPoW is the attempt the continuation of the current Ethereum proof of work blockchain. While some prominent figures like the Chinese miner Chandler Guo signaled their support, it is still unclear how many businesses will opt for ETHW.
Many miners are already switched to viable alternatives like Ethereum Classic or even Ravencoin which are both relying on proof of work and offer opportunities for GPU miners.
Still, there is a website of EthereumPoW, social media accounts, and even a GitHub. While nobody can be too sure that this is going down, there is a good chance that ETHW will start after the Merge.
This is the timeline for the fork
According to the Twitter account of EthereumPoW, the hard fork is most likely to happen within 24 hours after the Merge commenced. The exact time is going to be announced 1 hour prior to the fork. This puts traders and investors in a tight spot.
Many are looking forward to trading the Merge by holding ETH in their wallets to get the free ETHW as an airdrop directly after the event. Depending on whether a trader is bullish or bearish on the shift to proof of stake he or she might consider selling ETH after receiving the airdrop. With only 1 hours’ notice within a 24 hours timeframe prior to the ETHW fork, management of trading positions is harder than having a hard fork at the same time when the Merge happens.
The idea is to start the ETHW blockchain 2048 blocks after the Merge went down. Therefore, the first block of the new blockchain will be created one block later.
How can you get that airdrop?
The simplest solution would be to buy ETH and hold it in a wallet that is your own. Meaning you have to hold and manage the private key by yourself. Once the waiting is over and the ETHW fork is successful you would need to wait for further instructions from the team to set up your ETHW wallet with your forked coins in them.
Another option is to create a trade where your position is considered to be delta neutral. Meaning that a trader buys spot Ether and shorts ETH futures at the same time. No matter where the price would move, he would still retain the same Dollar value from both positions minus the fees involved. Please note that this is still carrying a higher risk due to the complexity of derivatives trading, despite the fact that this strategy is meant to minimize the impact on the value of the portfolio.
What are the risks?
As pointed out before, there is already risk involved since you have to buy Ethereum which is considered to be a volatile asset. There are three risks associated that are exclusive to this specific situation:
- The Merge could fail. In this case, the ETH one needs to hold could lose value dramatically.
- EthereumPoW finds no support from the industry. In this case, the forked coins are useless since nobody is supporting them for trade.
- The ETHW fork fails for some reason and there is no airdrop available.
Will LiteBit support ETHW?
We are carefully evaluating how the whole situation plays out and we may or may not support any forks after the Merge. For more detailed information, please read our FAQ regarding the event.