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Vestige of Old Ethereum Finds New Life as The Merge Approaches
By: Samuel Haig
It’s one of the mysteries of the summer rally.
Ethereum Classic, that often-overlooked fork from the early days of the Ethereum, has skyrocketed 174% since July 13.
Actually, its performance isn’t so mysterious. The Ethereum Classic community is betting that The Merge will be a boon for their sleepy token.
Jamyye, an Ethereum Classic mining pool operator, told The Defiant that The Merge will bring “a ton of hash power over to ETC.”
Translation: Miners are backing Ethereum Classic in anticipation of Ethereum’s forthcoming chain-merge — which will boot Proof of Work (PoW) miners off the network in favor of Proof of Stake (PoS) validators.
Colin Wu, a Chinese cryptocurrency journalist, recently estimated The Merge will displace $5B worth of GPU and ASIC-based mining hardware. The Ethereum Classic community believes a significant portion of this hashing power will be redirected to ETC.
Traders are already betting that Ethereum Classic will win big amid The Merge. Its native ETC token has doubled relative to ETH in past two and a half weeks.
ETC/ETH on Binance. Source: TradingView
“This will drastically change the network difficulty, making it harder for miners to earn coins,” Jamyye said. “ETC will be the largest PoW smart contract blockchain — with no centralized foundation controlling it,” Jamyye continued.
The Merge will unify Ethereum’s PoS consensus layer — the ‘Eth2’ Beacon Chain — with the existing execution layer — the PoW mainnet. The upgrade will improve Ethereum’s energy efficiency by more than 99% and is tipped to reduce new Ether issuance by 90%.
The shift, expected to take place in September, lays the groundwork for Ethereum to become much faster when it comes to processing transactions, and could mean more ETH is destroyed through burned transaction fees than is newly issued to validators. Yet die-hard devotees of the PoW approach see an angle, too.
Setvin, an Ethereum Classic community member, analyzed the hashing effect. “Right now, there is 900 [terahashes per second (th/s)] on ETH and 30 th/s on ETC,” Setvin told The Defiant. “Even if only 10% switch over that will be a huge uptick… for those who value the security that the network effect brings, that’s big.”
Large Ethereum miners are already looking to support Ethereum Classic.
On July 28, Innosilicon, a manufacturer of mining hardware, tweeted that it is currently working on firmware allowing its Ethereum ASICs to be used to mine Ethereum Classic.
On June 26, AntPool, the mining pool associated with major mining hardware manufacturer Bitmain, revealed that the firm invested $10M to support the Ethereum Classic ecosystem.
Lv Lei, AntPool’s CEO, Lv Lei, said funds have been earmarked to attract developers to the ecosystem, incubate leading protocol building on Ethereum Classic, and support Layer 2 scaling solutions. Speaking at a mining summit, he added that the firm intends to make further investments backing Ethereum Classic in the future.
If investors needed any more evidence The Merge is driving a rally in Ethereum here’s one more compelling datapoint: Open interest on ETH options just leapfrogged Bitcoin.
Bob Summerwill, the executive director of ETCCooperative, an organization providing grants and funding to the Ethereum Classic ecosystem, met with AntPool at the recent mining summit. He told The Defiant there are ongoing discussions between the Ethereum Classic community and other companies representing the mining sector.
“There is a huge quantity of GPU mining hardware which will be looking for a new home,” Summerwill said. “And ETC is by far the largest such project by block rewards after ETH. Other chains have no hope of absorbing even a fraction of the hash rate before becoming unprofitable.”
Summerwill also predicts that Ethereum Classic will experience “sizable growth” amid The Merge. “Many people trust in POW and are uncertain or downright untrusting of PoS. ETC is a natural home for such people… with The Merge, there will finally be a practical differentiation between ETC and ETH which has been lacking while ETH remained PoW,” he said.
“With ETC Coop’s existing funding, plus Antpool, plus others, we will have a good sized war chest to fund ecosystem growth of stablecoins, DEXes, DOAs, NFTs, and Defi and dApps of all types,” Summerwill added.
Ethereum Classic even appears to have found an unlikely post-merge ally in Vitalik Buterin, Ethereum’s co-founder and chief scientist.
Speaking at the fifth EthCC conference on July 21, Buterin suggested that PoW devotees should consider joining the Ethereum Classic ecosystem. He described the chain as “the original Ethereum which did not betray the vision by forking The DAO” and “a very welcoming community.”
“I think they’ll definitely welcome PoW fans,” Buterin continued. “It’s not even a joke — if you like PoW, you should go use Ethereum Classic. It’s a totally fine chain.”