Etherium is predicted to unbundle the blockchain and grow in value. What are we talking about?
TRON founder Justin Sun recently announced the likely launch of two new tokens on his Poloniex cryptocurrency exchange – coins with the tickers ETHS and ETHW. As might already be guessed, they are hypothetical forks of Etherium following its transition to Ethereum 2.0. Accordingly, ETHS is the “new” Ether on Proof-of-Stake (PoS) and ETHW is the “old” blockchain on Proof-of-Work (PoW) in its current state. At the same time, a successful network upgrade will trigger a significant rise in the price of the token, experts say. We report on what is happening in the industry in more detail.
We’ve previously written about the likelihood of Ethereum’s blockchain splitting after the move to Proof-of-Stake consensus algorithm. At the time of the network upgrade, it will split into two. And if cryptocurrency miners continue to mine ETH based on POW and create blocks in this branch of the blockchain, then it will continue to exist.
That said, various cryptocurrency projects will play a key role in the future of the legacy blockchain. Stablecoin issuers, for example, will benefit more from supporting the new PoS network, as it will be the next stage in blockchain development. At the same time, they will not be able to interact with two networks at the same time, because then companies would have to find tens of billions of dollars to secure their own assets.
Which means that even now we can assume that the PoW blockchain's capabilities will be more limited once the Etherium network is updated. However, as the experience with separation in 2016 and the formation of Ethereum Classic showed, such "alternatives" may well exist and gain a fan base.
Etherium creator Vitalik Buterin
This, however, does not apply to exchanges, which benefit from the emergence of new popular assets, because trading with them will bring in additional revenue in the form of commissions. Now Buterin has spoken out about the initiative – he does not welcome such a policy and characterizes it as a desire for quick profits.
What will happen to the Etherium blockchain?
According to news outlet CryptoSlate, Justin Sun’s decision was supported by some Chinese miners who are still operating covertly in the country. San has also announced the formation of a million ETHW fund – this money is to be spent on new developments and community expansion.
In other words, San understands that the continued life of Proof-of-Work-based Ethereum will generate revenue for his platform - and so he is willing to invest in maintaining the initiative, among other things. Accordingly, the entrepreneur's financial interest, rather than anything else, is primarily evident here. And the reputation of the revamped Etherium network is already much better because of its green consensus algorithm, so Sun has no motivation to support PoW blockchain other than to make money.
Vitalik, on the other hand, stated that he has seen nothing but support for Proof-of-Stake within the Etherium community. Buterin also noted that most people who want to keep the current Proof-of-Work algorithm are “outsiders” in the altcoin community. That said, Justin Sun himself does not have any altruistic intentions, but only wants a quick profit.
Poloniex owner Justin Sun
Keeping the blockchain based on the Proof-of-Stake mechanism does make sense for cryptocurrency miners, because when they switch to Proof-of-Stake they won’t be able to mine ETH with computational hardware. In that case, they will have to look for other coins to mine like Ethereum Classic, Ravencoin and so on. However, judging from what is happening in the coin niche today, ETH based on POW will still continue its own existence.
According to former BitMEX crypto exchange head Arthur Hayes, Etherium has every chance of being more profitable than Bitcoin, given its own upgrades and development. In his blog post, Hayes said the price of ETH could rise as high as $5,000 by the end of the first quarter of 2023. The first trigger for the rise would be a move to PoS, and the second would be a change in policy by the US Federal Reserve.
Recall that so far, the US Federal Reserve is raising its benchmark lending rate, which has had a very negative impact on markets and the crypto-industry for several months in a row. However, for the foreseeable future, the Fed will start printing more dollars to support the economy. This could be the starting point of a new bull run, experts suggest.
That said, it's important to realize that Hayes previously predicted Bitcoin and Efirium would collapse to a maximum of $20,000 and $1,000, respectively. As the market has shown, such predictions have failed, meaning that Arthur can no longer be considered a reliable source of versions of events. He may trivially fail to guess the course of events, despite an extremely deep analysis of the situation.
Accordingly, this level should be treated with caution. This prediction could easily fail to come true, and anything at all could happen in the cryptocurrency market – a dead LUNA would not lie.
Former BitMEX CEO Arthur Hayes
Given the sentiment in the cryptocurrency community, we really think we should count on the separation of the Etherium network and the continued existence of a PoW version of the blockchain. Obviously, its capabilities will lag behind the PoS network at least at the start, although branch development initiatives could certainly remedy the situation over time.
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