[Feature] What the Fork Is Happening After the Merge?

The Ethereum Merge was completed on 15th September, eight days ago from today. There is a saying in the Chinese crypto scene, “one day in crypto equals one year on earth”, meaning anything could happen in the world of blockchain at the speed of light. So, what happens to Ethereum and its hard forks after day 8?

The short answer is, no good.

Let’s look at Ethereum first. The most sophisticated upgrade in crypto's history was completed at 2.42 PM (UTC+8) and so did the recent high of Ethereum. The price was pumped to $1,653 in celebration of the Merge. It began to slightly retrace from there and all this was the calm before the storm. Suddenly and without any warning, Ethereum slumped 5% in 30 minutes the same night, yet bitcoin and the major stock indices saw only little retracement. There wasn’t any news during then telling us why it plummeted unexpectedly. A few days later on 20th September, the U.S. Securities and Exchange Commission (SEC) suggested that it believes the U.S. government has jurisdiction over all Ethereum transactions, during a civil complaint against crypto influencer Ian Balina. Aside from this news, the Ethereum blockchain is running smoothly, with no hiccup and whatnot after merging. As of the time of writing, Ethereum fell a total of 19% from $1,653 to $1,334.

It may seem bad as for what happened to Ethereum, but wait until you see the performance of these hard-forked chains. Currently, there are two popular hard forks: ETHPoW (ETHW) and Ethereum Fair (ETF). The purpose of these spinoff blockchains is to continue maintaining the older Ethereum state, including its transaction history and all records of assets as if the Merge never happened. All miners from Ethereum have to switch to proof-of-work (PoW) blockchains, fighting to survive. However, it all only lasted for a moment.

The network difficulty is a measure of how difficult it is to mine a block. A high network difficulty means that it will take more computing power to mine the same number of blocks, making the network more secure against attacks. By the difficulty of mining and the number of miners, hashrate is derived to measure the computing power and also acts as a key security indicator. In short, if the number of miners increases, the network hashrate goes up and the security is strengthened, and vice versa. Hashrate drops if miners stop mining, even though it becomes easier to mine the block, the network security does down and nobody would want to use an insecure blockchain. This happened to both Ethereum hard-forked chains.

There are plenty of reasons why miners decided to stop mining, and the main reason is always the same thing – profit. If mining is not profitable anymore, why would one still continue to mine? The hashrate of both ETHW and ETHF had slumped more than 50% from the first-day peak and continued downtrending. The loss of miners isn’t the worst thing yet, ETHW suffered a smart contract hack called the “replay attack” as soon as the chain deployed. The attacker has successfully exploited a total of 200 wrapped ether (WETH). Even these spinoff WETHs aren’t worth that much (~$1,200) in the hard-forked network, the incident however did seriously harm ETHW’s reputation. ETHW was later dumped below $4 from $8 and is now sitting at around $6. Before this, ETHW had encountered a huge dump on 16th September too. ETF on the other hand has only very little traction as miners choose ETHW instead. Its price is floating between $2.70 to $2.90 after the huge selloff on 20 September.

Other than the objective of mining, I don’t see any reason of using these spinoff Ethereum chains. A blockchain without dApp or smart contract developers loses its original purpose, especially Ethereum being a blockchain with smart contract functionality.