<p>With the Merge scheduled to take place in September, <strong>Ethereum Proof of Stake (PoW)</strong> rose to prominence, sparking extensive speculation over whether entrenched players will embrace post-Merge <strong>Ethereum PoS</strong> (ETH2) or <strong>Ethereum PoW</strong>. As the story progresses, a few centralized exchanges have begun to provide ETHS tokens for ETH2 and ETHW tokens for Ethereum PoW. Looking deeper at the emergence of Ethereum PoW, it appears that this fork is the result of Ethereum miners fighting back. With the impending switch to <strong>PoS</strong>, Ethereum miners fear losing substantial revenues from mining activities. Now, let’s analyze the intrinsic value of ETH PoW after the Merge as well as get to know about the miners’ recent behaviors.</p><h2>What happens to Ethereum Proof of Work after the Merge?</h2><p dir="ltr">We need to consider how the impending Merge will function and what will be left behind to comprehend both the pros and cons of a post-merge "ETH PoW" chain.</p><p dir="ltr">In general, the historic state of the Ethereum chain at the time of the Merge, including the most important address balances, will be moved to the new proof-of-stake consensus environment.</p><p dir="ltr">However, the identical state history will remain on the proof-of-work miners running until the microsecond before the Merge. Using proof-of-work, those miners could easily continue processing transactions and adding blocks to their copy of the Ethereum chain. It also means that they will continue to be rewarded by the pre-Merge PoW algorithm with tokens that resemble ETH but exist only on the degraded PoW blockchain.</p><p dir="ltr">However, one important ambition of Chandler Guo and his ETH PoW initiative would be to raise enough awareness of ETH PoW that exchanges list it and allow trading of it as a token distinct from ETH itself. While decentralized exchanges would probably offer ETH PoW trading sooner, maintaining widespread market interest would require mainstream centralized exchange listings.</p><p dir="ltr">For proponents of ETH PoW, this is where the money is at its most basic level. It will effectively guarantee that there is at least some market value for both the tokens they presently own and, maybe, more importantly, fresh ETH PoW tokens they mine post-Merge if they receive enough exchange listings.</p><h2>The value of the post-merge ETH PoW is being questioned</h2><h3>The downgrade usability</h3><p dir="ltr">After all, there should be no controversy on how useful ETH PoW is in reality. The firm answer is that it is almost useless. Is there any justification for the existence of a proof-of-work version of Ethereum other than to discover a price for something that has drastically decreased in value after the Merge? What are the possibilities that ETH PoW will actually see users' demand, resulting in a longer-term steady value or increase?</p><p dir="ltr">For continuing the proof-of-work chain as "ETH PoW" (or whatever they ultimately decide to call it), there are several non-financial arguments. There will be some uncertainty, justified or not, regarding the stability of the new Ethereum chain following the Merge.</p><p dir="ltr">There is a risk that users, apps, and even assets (see below) will return to the PoW chain if the Merge genuinely goes horribly wrong. Positions on the "old" chain could serve a similar function to insurance in this case.</p><p dir="ltr">That likelihood is vanishingly small, to be very clear. At this time, there have been multiple successful Ethereum test merges so the chance of a huge fall is nearly equal to zero.</p><p dir="ltr">In the long run, there are still some questions about Proof of Stake as an Ethereum security scheme. Most specifically, there are persistent worries that Proof of Stake promotes centralization over time by benefiting those who are already large holders. Another perceived concern of proof-of-stake consensus techniques is governance manipulation. These problems may lead to migration back to the PoW chain.</p><h3>Stablecoin issuers opting out, oracle providers turning their backs</h3><p dir="ltr">However, there are more significant and obvious reasons why the ETH PoW chain will have little substantial utility. In fact, it will most likely be such a complex and fractured landscape that it will have a negative value.</p><p dir="ltr">Above everything, most of the assets and processes that people actually utilize on Ethereum would be basically dead on the forked proof-of-work chain. Stablecoins designated on the degraded chain, for example, will not be recognized by entities such as Circle. That alone would render DeFi systems on ETH PoW to be ineffective.</p><p dir="ltr">But there's an even bigger issue, especially in the immediate aftermath of the Merge: the decentralized pricing oracles that enable DeFi platforms to work, particularly for trading programmable assets, would be broken. Chainlink has stated that it will no longer handle proof-of-work Ethereum forks following Ethereum's conversion to <strong>proof of stake (PoS)</strong>. The smart contract oracle provider stated in a memo to the community that it wants to line with the Ethereum community's social consensus to shift Ethereum's consensus method to <strong>proof of stake (PoS)</strong>. Chainlink is undertaking a thorough quality check to ensure minimal inconvenience.</p><h2>The miners’ status</h2><p dir="ltr">In the last two years, mining has been a profitable procedure with average daily revenue of 25K ETH. Transaction fees and coin rewards make up the miner's income. After The Merge, validators rather than miners would be responsible for processing transactions, which would result in miners losing the majority of currency rewards and, should they choose to become validators, merely sharing transaction fees with other existing validators.</p><p dir="ltr">Additionally, as Ethereum's on-chain activity declines, fee transactions as a fraction of total miner revenue keep dropping below 10%, which implies that miners have lost at least 90% of their pre-Merge mining earnings.</p><p dir="ltr">In terms of financial returns, becoming a validator post-Merge is still less profitable than mining. Despite the fact that Ethereum's higher hashrate indicates increased competition, HIVE's ROIC remained close to 50% due to surging Ether prices. As a result, large miners may decline to become validators because the validating return is inadequate.</p><p class="prosemirror-p-center"><img src="https://cdn.builder.news/news/11ed25217a743302a8e6023f659fee92.jpg" alt="ROIC from hive blockchain" title="ROIC from hive blockchain" width="600" height="341" class="lykafe0"></p><p class="prosemirror-p-center"><em>Source: Bybit.</em></p><p dir="ltr">Uncertainties in income streams would make managing cash flow more difficult after The Merge. Take HIVE as an example; over the previous two years, the mining business has raised impressive amounts of debt or equity funding while also making large capital expenditures. The Ethereum mining uncertainty may put pressure on the operating cash flow in the future, and miners might not be able to recoup their initial investments and fundraising efforts.</p><h2>The solutions to miners’ dilemma</h2><h3>Two most-discussed solutions</h3><h4>Ethereum PoW fork</h4><p dir="ltr">Many miners want to continue using Ethereum PoW. However, there is a problem. Ethereum's designers included a time bomb to encourage the switch to <strong>proof of stake (PoS)</strong>. After the Merge, this 'difficulty bomb' is supposed to make mining the chain virtually impossible, slowing down all transactions.</p><p dir="ltr">The ETH PoW camp would need to unite behind yet another fork, this one to eliminate the difficulty bomb, in order to carry out its plan. In the unavailability of the Ethereum Foundation and other leaders who frequently provide direction on significant Ethereum upgrades, this could prove to be quite difficult.</p><p dir="ltr">Theoretically, the ETH PoW group could also collaborate with stablecoin creators and oracle upkeep staff to bring operational versions of those products back to the ETH PoW chain. However, doing all of this would require a lot of money and coding resources. The proponents of ETH PoW may have plenty of cash to spend, but finding engineers to work on a defunct remnant may be difficult given the severe shortage of qualified Ethereum developers.</p><h4>Ethereum Classic</h4><p dir="ltr">Another suggestion made for miners is to switch to Ethereum Classic as the target for their pricey and potent specialized computers. This is the network that split off from the main Ethereum network in 2016 following a hack in which $60m from one of the first decentralized autonomous organizations (DAO) on the Ethereum network was taken. There are now two chains of Ethereum. The new one adopted the Ethereum moniker and rewrote history to make it appear as though the DAO breach never occurred. Ethereum Classic is a continuation of the original version.</p><p dir="ltr">Ethereum Classic has operated in the shadow of its namesake for most of its existence. Although its native coin, ETC, only had a $5.5b market cap as of August 17 (still dwarfed by roughly $230b of Ethereum), it experienced a 150% increase in value over the previous month.</p><p class="prosemirror-p-center"><img src="https://cdn.builder.news/news/11ed25217a743bb4a8e6023f659fee92.jpg" alt="etc vs eth" title="etc vs eth" width="600" height="298" class="lykafe1"></p><p class="prosemirror-p-center"><em>Source: Internet</em></p><h3>How they already reacted</h3><p dir="ltr"><strong>Miners</strong> are indicating a range of strategies to adapt to Ethereum after the Merge.</p><p dir="ltr">For instance, Bitmain-affiliated mining pool AntPool disclosed last month that it had spent $10 million in the creation of apps and development for Ethereum Classic, and Ethermine, the largest Ethereum mining pool, revealed the beta release of EtherMine Staking, a staking pool service. Then, there were reports that Ethereum miners will oppose the Merge by hard-forking, or fundamentally altering, the network. But the chances of that happening and succeeding are incredibly low.</p><p dir="ltr">Despite the potential for a future modification in the consensus method, Luxor Technology, a provider of full-stack bitcoin (BTC) mining software and services, has also made investments in Ethereum mining.</p><p dir="ltr">A PoW advocacy group was formed by Luxor with the goal of preserving this consensus technique for the blockchain. Although Luxor feels Ethereum is best served on PoW, the company will be pleased for the ecosystem and continue to support it as a whole if the switch to <strong>PoS</strong> is successful. They did not indicate whether Luxor believes Ethereum Classic is a superior alternative, only that it will work with its partners to decide where its mining practices will go.</p><p><strong>Conclusion</strong></p><p dir="ltr">Given the foregoing, an ETH PoW fork is unlikely to establish a vibrant, much alone truly viable, ecosystem. However, even in its most limited form, it will spark a wave of genuinely insane speculative trading as people try to benefit from the "free" tokens left behind by the fork.&nbsp;</p><p dir="ltr">The subject of value distribution between the two chains is a basic and useful framing for traders analyzing their holdings. According to Kevin Zhou of Galois Capital, while 96% of Ethereum's value will remain with the new <strong>PoS</strong> chain, 4% may accrue to the new ETH PoW network.</p><p dir="ltr">As no one can predict the future precisely including the success or failure of the Merge), there is a high chance that miners will continue their path and try to keep the Proof-of-Work Ethereum alive.</p><p class="prosemirror-p-right"><em><strong>Written by Blue Pine</strong></em></p><div class="pr-block-special"><strong>Disclaimer:</strong><br>This article is intended for and only to be used for reference purposes only. No such information provided constitutes advice or a recommendation that any investment or trading strategy is suitable for any specific name.</div>

With the impending switch to Proof of Stake (PoS), Ethereum miners fear losing substantial revenues from mining activities

How will Ethereum's Proof of Stake affect miners?