Let’s talk about Ethereum mergers and forks. How can ordinary investors participate?

On the eve of the Ethereum merger (the evening of September 5), OKX & TokenInsight jointly launched the theme AMA "Talking about Ethereum merger and fork, how can ordinary investors participate?" TokenInsight CEO Wayne, OKX Web3 Wallet developer Zakk, Ant Mining Pool developer Rory Hu, LiShuo founder Zhang Li, dForce founder Mindao and other guests discussed the Ethereum merger and fork, and gave their judgments and opinions on the event itself and the development trend of the industry from different angles, and also gave suggestions for ordinary investors. I hope it will inspire you! Enjoy~

Wayne: Teacher Mindao, could you first give the audience some background information about the Ethereum merger?

Mindao: Okay, actually this merger is basically within expectations. When Ethereum ICO was launched, the white paper already stated that it would switch from POW to POS in the future. It was expected to be realized in 2018-2019, but it may be delayed until now due to the incomplete research on POS. Of course, Ethereum is not the first to do POS. Eos in the last bull market and Solana in the last bull market all adopted the POS mechanism.

Now that the merger is finally going to happen, the Ethereum community, smart contract participants, and developers are actually looking forward to it, which is very friendly to them. On the one hand, Ethereum inflation will be reduced by about 90%, GAS will also be reduced, and of course miners' income will be cancelled; on the other hand, it will be more energy-efficient than before.

Wayne: Let me ask Rory Hu here. Ant Pool should be the first to clearly express its attitude. What does the mining pool think about the merger?

Rory Hu: Our attitude is very clear, that is, we will continue to support the POW ecosystem. Gaining income through mining with mining machines is like building a bridge between the physical world and the digital world. In addition, POW is highly secure and highly decentralized, while POS is relatively more centralized. In the future, the logic of POS will become more and more similar to DPOS, the degree of centralization will become higher and higher, and the censorship resistance will also weaken, and the regulatory issues will become more and more serious.

Mindao: I personally am not worried about this issue at all. Anti-censorship cannot be achieved simply by relying on consensus algorithms, decentralization, and anonymity. The most effective anti-censorship ultimately depends on how many stakeholders can be bound together, and through asset accumulation, prosperous ecology, and application construction, the external system is highly dependent on the network, and ultimately forces them to accept the established facts of technology neutrality and anti-censorship, so that anti-censorship can evolve into a part of social consensus at the legislative and judicial levels.

Wayne: What impact will the Ethereum merger have on the crypto community? Will the existing public chain structure be broken? Zakk, can you talk about this first?

Zakk: In my opinion, it is definitely beneficial, which means that Ethereum 2.0 is one step closer and that industry-level problems are closer to being solved. But for OKX, whether it is DeFi or CeFi business, it is a platform that provides one-stop services to users. The focus is on users rather than any chain. In theory, as long as users have needs, we will work hard to meet them, including ETH fork chains, miners have needs, the community has needs, and users have needs. Then our Web3 wallet will naturally support it, which is for DeFi. For Cex, there are more criteria to be evaluated. To evaluate whether the chain is truly valuable, we may have to wait until after the fork to observe. If the assets of the forked chain enter a death spiral as soon as they go online, Cex will not support it, and vice versa.

Wayne: We all know that Layer2 was created to solve the performance issues of Ethereum Layer1. Now that Ethereum has upgraded to version 2.0 and its performance has improved, does Layer2 still have a meaning? Will the high-performance new public chains that have been popular recently no longer be able to stand?

Mindao: I personally think that switching to the POS mechanism will not have a big impact on the Ethereum expansion technology route. Even if sharding is possible, it may take three years to see. To be honest, the technical reliability of sharding remains to be studied. This matter was mentioned in the white paper stage, but it has not been implemented yet.

Moreover, Ethereum's expansion idea is different from that of POS chains such as Solana. The latter hopes to solve all problems on one layer, but Ethereum's first layer (Layer 1) includes the data layer, consensus layer and incentive layer, and the second layer (Layer 2) has the contract layer and application layer. The main function of Layer 1 is to ensure network security, decentralization and final state confirmation, achieve state consensus, and serve as a trusted "crypto court" in a public chain network. It arbitrates through the rules designed by smart contracts and transfers trust to Layer 2 in the form of economic incentives; while Layer 2 pursues more efficient performance as its ultimate goal. Of course, sharding may be the future, but can this solution solve all problems? Not necessarily. New problems will definitely be encountered during the implementation process, so there is still room for competition in the expansion idea.

Wayne: What is the truth behind the controversy between POS and POW?

Rory Hu: The root cause is still the conflict of interests. In essence, POW and POS are two different levels of decentralization, representing different interest groups.

Mindao: It is a very interesting phenomenon. Ethereum used to have a large number of miners, but the developers did not care about the opinions of the miners, and the miners did not have any feelings for Ethereum itself. Both parties were forced to be together, and they were very unhappy. Miners have reaped most of the dividends on the development of Ethereum, but the ecological development has nothing to do with miners directly. DeFi and NFT are not created by miners, and the POS mechanism will bind all parties together through interests. No matter you are a developer or a project party, as long as you are a coin holder, you are bound to the ecological development.

Wayne: In this case, will developers have less freedom than before?

Mindao: Yes, many people think that POW introduces a group that has no interest in the ecosystem, which will play a check and balance role on the development team, but in fact, the game power of Ethereum is multi-party and complex. For example, in this fork, the biggest check and balance force is not the miners, nor the foundation, but the issuers of USDT and USDC assets. With so many checks and balances, do we still need a group of miners who have no direct interest in the development of the ecosystem? Maybe not necessarily. This is also the biggest difference between Ethereum and Bitcoin. The ecosystem on Ethereum is rich, but there are few applications and ecosystems on Bitcoin. In the end, the interest game will definitely be concentrated on individual large groups, but the Ethereum game is multi-party, and it is by no means a decisive influence from one side.

Wayne： Would forking be a good option for miners?

Zakk: Whether to choose or not is determined by interests. Miners are very smart. They will calculate the benefits and follow the money in the end. But since the community has not stopped POW, miners have found enough interests to leverage them. In the short term, forking is indeed a good choice.

Rory Hu: It is not very suitable for miners to switch to ETC, so the only way to prevent their current graphics cards from returning to zero is through forks. However, it should be noted that each fork will have a certain conspiracy in the short term. The assets on the chain will change from one to two, and many assets will face various strange problems, including the emergence of speculation. But in the long run, it is hard to say. I think some forks are relatively successful, such as BCH and BSV.

Mindao: I think this is a question of social consensus, and it cannot be said to be a good or bad choice. After the fork, the forked coin actually has a market value but no value. It is difficult to find your own way, and it requires the support of top technical talents.

Zhang Li: I think forking is a natural human right, and there is no right or wrong. But for some existing fork teams, it seems that there is no long-term roadmap and the prospects are not very clear.

Wayne: We entered the merger phase on September 6. What threats and risks do you think are still not being paid attention to?

Zakk: If we regard blockchain as the world's computer, the current POW is its database. Forking is nothing more than copying the database, and the user's on-chain assets will also be copied synchronously, but the price depends on the market's recognition of the forked chain.

We have seen that many protocols have publicly stated that they do not support forks. This means that the assets forked from these protocols will be sold off quickly, especially robots or scientists, who will exchange LP Tokens back to ETH as much as possible, after all, the mainnet currency can be finally realized.

There are also some DeFi protocols that have not issued clear announcements. If these protocols support forks and subsequent miners maintain their ecosystems well, they may retain users and enter a positive cycle. In addition, ETHW officials also issued a statement saying that there will be a lock-up proposal for DeFi protocols that support forks to prevent these protocols from entering a death spiral at the moment of forks. If the proposal is eventually passed, I believe this is a more responsible approach to user assets.

Of course, if you are just an ordinary user who wants to participate in the free gift, you can choose to deposit your ETH into the Ethereum mainnet wallet in advance. Of course, the most convenient way is to deposit it directly into a trading platform that supports the Ethereum fork chain; if you are a scientist or a senior player, there are many complex arbitrage strategies on the market for reference, but you must pay attention to the risks. If the ETHW lock-up proposal does not take effect, the asset price on its chain will easily enter a death spiral.

A wallet is nothing more than a display of a database, but many wallets have not publicly stated that they support ETHW. If you use a Little Fox wallet, you can find a miner node and pair it with RPC to see your assets. Experienced players are familiar with this, but it is not very user-friendly for ordinary players. When the time comes, everyone can use the OUYI Web3 wallet, which will directly display your assets, and we will help you take care of it.

Mindao: I have a few suggestions and advice:

1. Before the fork, it is best to transfer all the coins on the cross-chain, side-chain and second-layer network to the main network;

Second, if you are a stablecoin LP, I do not recommend doing too much arbitrage operations, because you are not sure what the price of the forked assets will be, which will increase the risk;

3. If you plan to borrow ETH through Aave or Compound to get the airdrop, but since many people do this, the interest rate is already very high, so it is not recommended;

4. During the merger and fork period, it is best not to perform any operations between the two chains. No one is sure whether the forked chain will be stored and protected. It is very likely that when the forked chain assets are sold, the main network assets will be sold at the same time.

Wayne: There has been public opinion that Ethereum 2.0 will be the starting point for Ethereum's market value to surpass Bitcoin's market value. What do you think?

Zhang Li: This question has risen to the level of ideology. Although I think Ethereum and Bitcoin are now taking completely two different paths, it is entirely possible for one to surpass the other. After all, Ethereum will be issued indefinitely, and it has a good ecosystem and a good mass base.

Rory Hu: I think it is unlikely to surpass. In fact, the payment scenario of Bitcoin has not changed much, and the scenario of Ethereum has not changed much. The application scenarios have not changed much, and both have their own fields.

Mindao: My point of view is very clear. It should have exceeded the last cycle. This can be proven mathematically. The market value depends on the flow of people. For example, Bitcoin is more like the ancient and single city of Xi'an, while Ethereum is more like Beijing and Shanghai. They are political, cultural, economic and financial centers, which attract many people at any time.

Zakk: I hold a similar view. Nothing can remain excellent all the time. We can clearly see the potential and advantages of Ethereum.