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. We’ve prepared a designated guide, and if you want to know everything about it, you can check it here.
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 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. Let’s unpack.
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 complex complex problems. Instead, they are randomly selected 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.
This is where things get interesting.
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 maintained 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.
Stirring the waters considerably over the past weeks was Justin Sun – the founder of TRON – who said that they hold over one million ETH.
“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.”
This was in response to Polonie (cryptocurrency exchange he owns) a first that they will be “the one to support potential forking 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.
The world’s leading cryptocurrency exchange, Binance, said:
“In the case of new forked tokens, Binance will evaluate the support for distribution and withdrawal of the forked tokens.”
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 gains that this is what Ethereum Classic is for.
“I think Ethereum Classic already has a superior community and a superior product for people with those proof-of-work values and preferences. […] Pretty much everyone in the Ethereum ecosystem is supportive of the move to proof-of-stake validation and quite united.”
What is more, he even said that those who support the trading of potential tokens resulted 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 all of the above is significantly 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