Will the new tokens be released to ETH holders after the Ethereum hard fork?

Will the new tokens be released to ETH holders after the Ethereum hard fork? It is safe to say that most cryptocurrency-related conversation...

Ethereum hard forkWill the new tokens be released to ETH holders after the Ethereum hard fork?

It is safe to say that most cryptocurrency-related conversations are currently focused on Ethereum merging from proof-of-work (PoW) to proof-of-stake (PoS).

Known as "The Merge," this event is the first of its kind and is the most significant upgrade in Ethereum's lifespan. We have prepared a designated guide, and if you want to know everything about it, you can check it out here.

However, with something of this magnitude set to happen in a month or so (barring unforeseen circumstances), there are also plenty of questions worth investigating.

For example, some notable exchanges announced support for hard forking and stated that they would also support trading the resulting tokens. This raises the question of whether users will receive new tokens after the merger, and that is what we are going to explore in this article.

In order to understand whether or not you will receive some new tokens, there are some important clarifications that need to be noted. Let's unpack.

What happens after the merge?

As mentioned above, the merger will mark the end of ETH mining. This is due to the new consensus algorithm, proof of stake, which has completely different economic implications for the network.

With PoS, network validators no longer have to compete to solve increasingly complex computational problems. Instead, they are randomly selected based on their participation in the network.

That said, switching to PoS has some key benefits:

  • Makes it easy to run a node

  • Uses considerably less electricity

  • Unlock additional possibilities like fragmentation

However, there are those who also make strong arguments about the downsides of proof-of-stake networks. Without going into details, it is important to understand that there are many people who support proof of work. In particular, and somewhat expectedly, some ETH miners and mining pools have come together to lobby for a hard fork that would also see the creation of a new token that will remain in the PoW consensus algorithm.

This is where things start to 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, leading to a breakup of the blockchain. Some nodes will no longer reach consensus, which means there are two different versions of the network running separately.

By this definition, Merge is a hard fork because it will mark the end of the blockchain governed by proof-of-work and define the beginning of a new one that will be run by proof-of-stake.

However, for a hard fork to have any economic or social significance, it needs support: there needs to be nodes that continue to operate on the old network.

Justin Sun, the founder of TRON, stirred up the waters considerably in recent weeks and said that they have over a million ETH.

“We currently have over 1 million ETH. If the Ethereum hard fork is successful, we will donate some hard forked ETHW to the ETHW community and developers to build the Ethereum ecosystem.”

This was in response to Poloniex (a cryptocurrency exchange he owns) stating that they will be “the first to support a potential ETH hard fork with a list of two potential forked ETH tokens: ETHS and ETHW.”

Other exchanges that have announced support for the hard fork and the tokens that may come from it include BitMEX, which will even allow leverage trading for POW-based ETH after the merger.

The world's leading cryptocurrency exchange Binance said:

"In the case of new forked tokens, Binance will evaluate support for distributing and withdrawing the forked tokens."

What does Vitalik Buterin think?

Speaking at a developer event called ETH Seoul on August 5-7, Vitalik Buterin expressed his concerns.

First, he ruled out the possibility that a potential hard fork would hurt Ethereum "significantly." Speaking of new forks, I have argued that this is what Ethereum Classic is for.

“I think Ethereum Classic already has a superior community and a superior product for people with these values ​​and preferences for proof of work. […] Virtually everyone in the Ethereum ecosystem supports the move to proof-of-stake validation and is very united.”

Furthermore, he even said that those who support trading in potential tokens resulting from the hard fork are trying to make quick profits.

Will ETH holders get new tokens in the air?

At the time of writing, it is unclear how the whole situation will play out because all of the above largely depends on whether or not the merger is successful.

In any case, it is also up to the exchanges that support the resulting tokens to determine how ETH holders will receive them and how much they will receive.

However, if one thing is certain, it is that Vitalik Buterin, as well as the Ethereum Foundation, are firmly against it and openly reject any support for forked tokens.

It is also worth noting that during events of this magnitude, there are those who will try to take advantage and cheat unsuspecting users out of their ETH. Therefore, we recommend taking a look at some of the most common ETH 2.0 scams and noting that the promise of an airdrop is among the most popular forms of phishing and scamming victims out of their funds.

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