The Merge is the hottest topic as of late. Now, we answer one of the most common questions – will ETH holders receive new tokens?
It’s safe to say that most of the crypto-related conversations are currently centered around the merging of Ethereum from proof-of-work (PoW) to proof-of-stake (PoS).
Known as “The Merge,” this event is a first of its kind, and it’s the most significant upgrade in Ethereum’s lifespan. However, with something of this magnitude about to take place in a few weeks (barring any unforeseen circumstances), there are also a lot of questions that are worth looking at.
However, with something of this magnitude about to take place in about a month (barring any unforeseen circumstances), there are also a lot of questions that are worth looking into.
For example, some notable exchanges have announced support for the hard fork, and they’ve stated they would also support trading of the resulting tokens. This begs the question if users will be airdropped new tokens after the Merge, and that’s what we’re going to explore in this article.
To understand whether or not you’re going to receive some new tokens, there are a few important clarifications that have to be considered. Before unpacking, let’s first check what is is all about.
What is The Merge?
“The Merge” is a term, a crypto slang, if you will, that’s used to describe the transition of Ethereum from a proof-of-work consensus algorithm to one that uses proof-of-stake.
This is designed to take care of the energy-intensive mining process while also securing the network using staked ETH. The move is expected to provide for more security, sustainability, and scalability to Ethereum’s network.
“The Merge represents the joining of the existing execution layer of Ethereum (the mainnet we use today) with its new proof-of-stake consensus layer – the Beacon Chain.”The Ethereum Foundation
What Happens After The Merge?
As mentioned above, The Merge will mark the end of ETH mining. This is because of the new consensus algorithm – proof-of-stake – which has entirely different economic implications for the network.
With PoS, network validators no longer need to compete to solve increasingly complex computational problems. Instead, they are selected randomly based on the stake they have in the network.
That said, switching to PoS presents a few important benefits:
- Makes it easy to run a node
- Uses considerably less electricity
- Unlocks additional possibilities such as sharding
However, there are those who also make strong arguments about the drawbacks of proof-of-stake networks. Without getting into specifics, it’s important to understand that there are many people who support proof-of-work. Namely, and somewhat expectedly, some ETH miners and mining groups have joined forces to lobby for a hard fork that would also see the creation of a new token that will remain on the PoW consensus algorithm.
Will There Be a Hard Fork?
To answer this question, we must first examine what a hard fork is. It can be described as a permanent divergence from the latest version of the blockchain, which leads to a separation of the blockchain. Some nodes will no longer meet the consensus, which means that there are two different versions of the network running separately.
By this definition, the Merge is a hard fork because it will mark the end of the blockchain governed by proof-of-work and will set the beginning of a new one that’s run by proof-of-stake.
However, for a hard fork to have any economic or social significance, it needs support – there need to be nodes that are going to continue operating on the old network.
“We currently have more than 1 million ETH. If Ethereum hard fork succeeds, we will donate some forked ETHW to ETHW community and developers to build Ethereum ecosystem.”Justin Sun – Founder of TRON
This was in response to Poloniex (a cryptocurrency exchange he owns) stating that they will be “the first one to support potential forking of ETH with a listing of two potential forked ETH tokens: ETHS and ETHW.”
Other exchanges that have announced support for the hard fork and the tokens that might spawn out of it include BitMEX, which will even enable leverage trading for POW-based ETH after the Merge.
“In case of new forked tokens, Binance will evaluate the support for distribution and withdrawal of the forked tokens.”Binance
What Does Vitalik Buterin Think?
Speaking at a developer event called ETH Seoul on August 5-7, Vitalik Buterin voiced his concerns.
First of all, he dismissed the possibility of a potential fork harming Ethereum “significantly.” Discussing new forks, he argued that this is what Ethereum Classic is for. What is more, he even said that those who support the trading of potential tokens resulting from the hard fork are trying to make a quick profit.
Will ETH Holders be Airdropped New Tokens?
At the time of this writing, it’s unclear how the entire situation will unfold because all of the above is largely dependent on whether or not the Merge will be a success.
In any case, it’s also up to the exchanges who support any resulting tokens to determine how ETH holders will receive them and how many they will get.
If one thing is sure, though, it’s that Vitalik Buterin, as well as the Ethereum Foundation, are firmly against it and have openly dismissed any support of forked tokens.
It’s also worth noting that during events of this magnitude, there are those who will try to take advantage and scam non-suspecting users of their ETH. Therefore, it’s strongly recommended to take a look at some of the most common ETH 2.0 scams and keep in mind that the promise of an airdrop is amongst the most popular ways of phishing and scamming victims out of their funds.