Sticking to the logic of PoW: Analysis of the legality and feasibility of Ethereum Merge hard fork

I believe that not everything that can be counted counts, and not everything that counts can be counted.

I believe that what can be calculated is not necessarily important; and what is important cannot necessarily be calculated.

— Albert Einstein

The original intention of decentralization should not be ridiculed, especially since it concerns the soul of the Web3 world and determines the future of the construction of the encryption ecosystem.

Instead of calculating the gains and losses after switching to POS, it is better to think carefully about what is going on - why are people applauding the trend towards centralization?

Signs of the urgency and importance of the decentralized concept needing to be re-emphasized are already emerging. After Aave and Circle responded to the U.S. Treasury Department's sanctions on Tornado Cash, hundreds of celebrity addresses were "accidentally injured" by Aave, USDT circulation surpassed USDC within a week, and MakerDAO re-examined the collateral composition of DAI... The consequences of stablecoin centralization have already warned everyone that when all this happens in Ethereum, it will completely backfire on the first principle of decentralization.

If we don’t stop it, then more than a decade after the advent of Bitcoin, the impossible triangle of the blockchain world will be solved—at the cost of abandoning decentralization, it will completely become a mediocre financial game that is no different from Wall Street. Since Bitcoin, Satoshi Nakamoto’s imagination of “opening a window and letting in a beam of light” for the world will also disappear.

Fortunately, there are still people in the crypto market who insist on decentralization: BitCoke and the mining farms it invested in officially announced support for hard forks and token transactions, believing that this adherence is a defense of the spirit of Satoshi Nakamoto's blockchain; BitMEX launched ETHPOWZ22 derivatives; EthereumFair is ready to defend the ideal of PoW with technology and build a complete financial ecosystem belonging to ETHPOW... This is also a preparation to defend our original dream. If we give up our faith without firing a shot this time, then the dragon slayer will become a dragon in the process of careful calculation.

Ethereum is facing the most divisive hard fork in history, which is by no means just a desperate struggle of miners to protect their own interests. At the critical moment of Ethereum Merge hard fork, ThePrimedia interviewed BitCoke, EthereumFair community and various forces in the Ethereum ecosystem who strategically support the hard fork, trying to analyze the logic of Ethereum Merge hard fork for everyone.

Previous article: The legitimacy of the resisters

Ethereum's switch to the PoS mechanism means giving up the adherence to Nakamotoism, which is the "mission" of the hard fork of the adherents. The Ethereum Merge hard fork can be summarized as energy saving + scalability VS security + decentralization. This is essentially a dispute over the path of blockchain development, rather than a fork dispute in which miners drag everyone down for their own interests. The PoS mechanism will directly force the network maintainers and miners out. On the surface, it seems to reduce the historical burden of the past, but handing over to new staking nodes will inevitably promote the centralization of the network.

Currently, Ethereum's TVL accounts for 60% of the public chain track. The win-win situation of miners, users and Ethereum under the PoW model has made the decentralized encryption ecosystem prosperous today and left more room for people's expectations. A thousand men are worse than one man who speaks out. As the consensus of the EthereumFair technical community has said, the PoW mechanism is the best way to guard the original intention of blockchain decentralization. If we let it go, decentralization will become a distant castle in the air.

Ethereum grew up standing on the shoulders of Bitcoin. Don’t forget the basic elements of Ethereum’s success — PoW + smart contracts together constitute the prosperity of Ethereum’s ecosystem:

• PoW is a mining mechanism. Miners compete for the right to record and sort transactions through hash collisions. PoW is a guarantee for everyone to participate in Ethereum fairly.

• Smart contracts are the basis of complex operations such as DeFi, NFT, and GameFi, and for the first time realize a public chain ecosystem where multiple on-chain assets coexist.

The PoW model created by Satoshi Nakamoto is not a golden rule. Fundamentalist orientation towards technology will only tie our hands and feet, but the development of Bitcoin from its launch on the mainnet to the present is the best annotation of PoW, which can be understood as "Satoshiism" has passed the test of history. In the blockchain world, decentralization, security and scalability are an impossible triangle that has never changed. Ethereum's merger is just avoiding this problem, rather than seeking a fundamental solution. After abandoning PoW, the objectivity of transaction confirmation will disappear, and the physical connection between Ethereum and the real world will also disappear.

The logic of sticking to POW is clear: in the Bitcoin PoW model, the principle of final confirmation by miners is the longest chain principle. Specifically for Ethereum, it is the Heaviest Chain principle governed by the Ethash algorithm. But the common point is that it needs to be confirmed by the consensus of all miners. The steps are algorithm + mining machine computing power + block confirmation. In the PoS model, it is the consensus of the pledged nodes that governs the confirmation result . True random number confirmation can only be achieved in the fifth stage of Merge. Before that, Ethereum will be a random walk digital game.

Based on the communication with POW adherents, let's analyze the logic of V God. In V God's view, switching to PoS mode is the only way to upgrade TPS (processing per second) - but behind this is the competition for capital (32ETH) + high efficiency to cope with the catch-up of Aptos/Sui new public chain in the Move ecosystem. The first step of the ETH2.0 roadmap starts from the Ethereum beacon chain, aiming to introduce a safer and more efficient proof-of-stake mechanism for the Ethereum network consensus layer, and after merging with ETH1.0, it will break away from the intense energy consumption and move towards a consensus mechanism oriented towards proof-of-stake.

Let us understand the main events of the transition to POS - on the Ethereum route, "Ethereum 2.0" has two main upgrades: one is the consensus change from POW to POS; the other is the sharding technology for expanding network performance.

• “ETH 1” is now the “execution layer”, handling transactions and execution;

• “ETH 2” will be the “consensus layer” that handles proof-of-stake consensus.

After merging "ETH 1" and "ETH 2" into a single chain, there will no longer be two different Ethereum networks, and the term "ETH 2" will be completely abandoned, and only the overall concept of "Ethereum" will be retained (the term is only used to update the naming and will not change Ethereum's goals or roadmap).

In the view of the EthereumFair research team, these two upgrades are not only effective in the PoS mode. Defending PoW is not only beneficial to miners, mining pools and mining machine manufacturers. The PoS mechanism will not be the dividing point that changes everything. The PoS mechanism has been explored and is not a brand new algorithm concept. Vitalik and others will say that 32eth is more decentralized than thousands of mining machines. But compared with abandoning PoW and transforming to POS, a better solution is that Layer 1 only does what is necessary, such as consensus and distribution of accounting rights. All performance improvements can be placed in Layer 2.

"Sacrificing the security and decentralization of Layer 1 is actually completely unnecessary." This is the core idea of ​​EthereumFair, which is consistent with the official attitude of BitCoke, which strategically supports hard forks: security and stability are the cornerstones of the development of public chains, and efficiency is not the only goal pursued by public chains. Many application scenarios pursue security and stability, especially large funds, such as lending, mortgages, etc. There are many solutions to improve the efficiency of POW, such as Layer2, and POS is not the best solution.

In the logic of the defenders, the negative impact of the transition to POS is the split. The core competitiveness of a public chain is not a certain mining model, but its ability to operate steadily and gradually build its own ecology. The fork crisis faced this time will cause the community and the chain ecology to split. This split has happened once before. After the attack on The DAO in 2016, the community that insisted on the immutable nature of the blockchain insisted on confirming the block status after the attack and became ETC, while those who insisted on rolling back to the state before the hacker attack became today's ETH.

Later, the fact is that ETC is in a bleak state, while the ETH ecosystem is booming. Is this (ETC) a mistake? This time, the adherents need a belief in the legitimacy of the hard fork, which is the best interpretation of the concept of decentralization. The attitude of the EthereumFair team is that the fork is definitely not a one-time split, but a long-term construction after recognizing the reality. It can be assumed that the ETH-POW chain after the fork will encounter many problems, such as:

• Lack of on-chain DeFi/NFT/GameFi ecosystem

• Mainstream stablecoins such as USDT/USDC are not supported

• Lack of sufficient developers to update the client

• Insufficient network status confirmations

• Facing more rampant attacks from hackers

These difficulties exist objectively, but the rationality of the fork itself should not be questioned. Abandoning PoW will cause the fairest mining mechanism envisioned by Satoshi Nakamoto to become a game of capital. In Ethereum 2.0, the minimum stake amount of a node is 32 ETH. After switching to the POS mechanism, all nodes in ETH need to vote for each block. Only when a block receives 2/3 of the locked ETH votes from the entire network can it be considered a valid node. This has a tendency to expel small and micro retail investors in mechanism design, and relies more on the support of giant whales. After adopting the PoS mechanism, in order to ensure network stability and improve the ability to capture token value, increasing the number of stakes is almost the only solution, which will further exclude the degree of decentralization.

Therefore, the "Ethereum 2.0" plan, which is at the forefront of the storm, seems to be an upgraded version of Ethereum, but it is actually a brand new project. Conventional forks mostly require computing power to make choices, and the protagonist is the miner system. The focus of this POS fork is not the battle for computing power, but the game of capital. Currently, in the PoW state, Bitcoin has a total of 14,516 nodes worldwide, of which the number of full nodes is 13,097, accounting for more than 90%, while Ethereum has a total of 4,896 nodes worldwide. After switching to PoS, the number of pledges in the entire network will increase significantly, but the degree of decentralization cannot be guaranteed.

In this game that concerns the future, miners are faced with a life-and-death decision: the first option is to sell the mining machines and use the sold ETH to participate in the POS Staking mechanism and become one of the vast nodes; the second option is to directly switch the mining machines to the ETC network. In other words, ETH2.0 will prompt the mining industry worth $19 billion to find new gold mines; the third option is to hard fork ETH-POW, retain the original PoW model, and choose to rebuild the PoW ecosystem - in a sense, this is the most difficult path, but it is the most decentralized path.

This most difficult path has received a response from the ecosystem - for example, in addition to supporting hard fork token transactions, the exchange Bitcoke will also fully support the top ETH mining farm in which Bitcoke is an important shareholder and has invested $100 million. Bitcoke's strategic layout for investment in mining farms - the DeFi development vision of tokenizing assets and freely pledging, lending, and trading in the global market, has become the backing of those who stick with it at this moment of the Ethereum Merge hard fork.

Following the spirit of Satoshi Nakamoto of Bitcoin, Ethereum has been highly expected by the crypto world, but it has deviated further and further from the original goal. This is the mission and destination of those who stick with it - the concept of decentralization must be reconsidered.

Middle Part: The Struggle for Redemption

After reaching a consensus on the legality of a hard fork, how to conduct the fork became the core focus of the debate.

• Action-first faction: mainly BitCoke and other exchanges, strategically support hard forks and build offensive and defensive alliances among mining machine manufacturers, miners and the market, rebuild the ETHPOW ecosystem, and thereby leave room for discussion on secondary liquidity;

• Ecosystem construction group: mainly based on technical communities such as EthereumFair, hoping to build a complete ETH-POW ecosystem including stablecoins and DeFi application support as much as possible to continue the current ecological scenario;

• Waiting to pick peaches: ETC hopes to attract as much ETH computing power as possible to itself, and Conflux has initiated a community proposal to change its own PoW mining algorithm to Ethash to facilitate miners' switching.

BitCoke launched its official plan, the details of which are as follows: BitCoke supports all Ethereum hard fork tokens and related airdrops, BitCoke will launch hard fork token contracts, BitCoke believes that hard fork tokens are seriously undervalued, and predicts that hard fork tokens may reach $1,000; Sun Yuchen also stated that his USDD will support the forked ETHPOW chain to solve the problem of stablecoin deposit and withdrawal channels on the chain, but Guo Hongcai's perspective is completely focused on the miners themselves, believing that miners have paid a lot for the ecosystem, and at this time they must stand up to defend their interests...

It is worth mentioning that the viewpoint of Bao Erye (Guo Hongcai), who is currently the loudest voice in the market, is too focused on the interests of miners. There is no clear development schedule at present. Whether it can attract enough developers, applications and ordinary users to participate remains to be observed. Simply attracting miners to join is not attractive to users. Creating common interests between miners and users will make the forked POW chain truly alive.

Image source: https://ethereumpow.org/

Therefore, there will be more ecological forces in the market to make better choices and development directions in the game. Capital is the first to pour in, and V God also encourages miners to transfer, which can not only protect the interests of miners, but also minimize the damage to the Ethereum ecosystem. However, the potential harm of the influx of ETC mining has attracted the attention of the market.

A researcher at EthereumFair said, "When a large number of miners rush into ETC mining, it is good for ETC in the short term, but the secondary market must have sufficient liquidity to bear the pressure. When the price increase is limited, the result is that the difficulty of ETC will increase dramatically, making it more difficult to mine." The most important problem is that the capacity of ETC is too limited to bear so much computing power. Although ETH graphics card mining machines are not as power-consuming as Bitcoin mining machines, and the shutdown price is not as high as BTC, the competition for forcibly mining ETC is too fierce. Therefore, the influx of a large number of miners will form internal circulation, and the payback period will become long.

What the crypto world needs is ETHPOW, not ETC. According to CoinMarketCap data, the current price of ETC is about $40, which is about 1/50 of ETH. Unless ETC can rise to $2,000, it can fully accommodate the computing power of ETH while keeping the payback period unchanged. A 50-fold surge is an impossible spectacle. From a rational perspective, this is not a way out for miners. Neuroscience Ph.D@0xAA believes: "ETC cannot handle the computing power of ETH miners. The most favorable solution for miners is to hard fork when the Ethereum mainnet switches to POS and create an ETH-PoW, which is much more valuable than the current ETC chain. After all, the Ethereum ecosystem is much richer now than when ETC forked."

Final Chapter: Future Eco-Buidler

This is the second global crisis in the history of Ethereum’s development. The last one proved the weakness of ETC, but left a faint fluorescence of adhering to the concept of decentralization. This glimmer of light is not enough to become a prairie fire, but it gives enough legitimacy to the hard fork.

POW is the only blockchain system that has been verified to be fully decentralized and stable. All POS public chain systems have had security or inaccessibility issues, which is essentially because the POS system relies on centralized nodes. The fundamental difference between ETH and other public chains is POW, and only POW is something that other public chains cannot do. ETH's conversion to POS is a self-destruction and will lose its biggest advantage - it will be reduced to the same starting line as other second-tier public chains. Everyone's mechanism, speed, fee rate, security, etc. are the same. Why choose the Ethereum POS chain? Is it based on sentiment? This is the value judgment basis for the exchange BitCoke and its invested mining farm strategy to support the Ethereum hard fork.

From a value perspective, BitCoke's view is representative. POW is a heavy asset investment, and POW has value anchoring and support, while POS is a pure financial game, and value cannot be effectively supported. From a technical perspective, legitimacy is a fair definition of the objectivity of block confirmation, and from a consensus perspective, legitimacy is the effective adherence to and application of the PoW mechanism. PoS and PoW themselves have no absolute advantages or disadvantages. In the face of the pursuit of emerging public chains, Ethereum's civil war is undoubtedly an ineffective consumption of abusing its dominant position.

Image source: https://wenmerge.com/

ETHPOW is destined to have more than one fork, and the tension between users, miners and the ecosystem will dominate the future direction of the fork, and ecological construction will become a long-term wrestling field after a short-term carnival. This is the best era, we can fall into a carnival, and ordinary users will get airdrops from various forked chains; this is the worst era, we will witness the cruelty and bloodiness of ecological competition, and finally decide the king of the POW ecosystem. ETC is a mediocre person who can't help the wall, and it is difficult to undertake the historical mission of the new fork chain. New PoW chains such as EthereumFair will have the opportunity to run a new world - of course, which chain will win in the end still needs the test of time.

The future will definitely belong to the builder who focuses on ecological construction in the long term. In the competition of public chains, ecology is the root of everything. Users do not bear the responsibility for the survival of the public chain. Better experience and economic returns are always the most original motivation for their users. Only by building a better ETHPOW ecology can we ensure that the PoW chain after the fork will be evergreen, rather than a flash in the pan and fall into nothingness. Below, we will introduce the development concept, technical strength, ecological construction and progress of EthereumFair, the Ethereum fork chain that continues the PoW mining method, based on the research and interviews with the EthereumFair technical development team.

The development of public chains requires the support of supporting infrastructure. From the user's perspective, a public chain that is fully functional and easy to use is attractive enough. In the words of the EthereumFair technical development team, "ETH fork POW is fair, and it will not be a big profit for a certain investment institution in the early stage. I hope that these funds and friends who support EthereumFair in the early stage will support the EthereumFair technical community to lead the promotion of the ETH fork chain. The Ethereum Foundation is moving to the POS branch, and we will keep the original chain."

EthereumFair is a fork of EthereumFair (ClassZZ) technology community. Its ClassZZ public chain PoW technology has been successfully running for 3 years. The current technical research and development team includes mathematical experts, chip experts and developers with more than six years of experience in the industry. In terms of specific actions, the EthereumFair development team has implemented the following functions:

• Complete the development of cross-chain support functions for the ETHPOW chain.

• Testnet, browser and other infrastructure,

• Financial facilities such as DeFi and stablecoins are ready.

It can be seen that for this fork, the EthereumFair community will support Ethereum's POW mining model to maximize the continuation of the on-chain ecology. Ecology is the basis of public chain competition, and attracting enough miners to participate can build sufficient network security for high-performance networks and avoid repeating the mistakes of ETC.

The EthereumFair team set the mining difficulty coefficient from scratch, and the minimum requirement is a personal laptop to participate in it, which is also beneficial to ordinary users rather than large miners and mining pools. After solving the problem of on-chain security, more participants are needed to build together. The forked chain should not be an exclusive ETC-style self-entertainment, but an open chain of chains.

In terms of development, the EthereumFair community is currently focusing on implementing the test network, with an emphasis on difficulty control and block reward adjustment. It strives to provide a mining program similar to Ethereum for all users to download on their own. It will also provide infrastructure such as block browsers, which can be tested as early as August.

EthereumFair also intends to absorb fresh blood from external mining pools and large miners to supplement the existing public chain. After the public chain is stable, it will conduct in-depth docking with mining machine manufacturers. For example, it has already started negotiations with mining machine manufacturers to customize mining machines. The latest news is that for the hard fork of Ethereum, the exchange BitCoke and its major shareholder, which invested $100 million in the ETH head mine, will also fully support it.

In addition, well-known funds and ecological partners will cooperate with the EthereumFair technical community to promote the ETH fork chain. For example, EthereumFair's L2 public chain ecological R&D team will also enter the current fork simultaneously, and bitkeep, swftc and tokenpocket will provide in-depth support in terms of wallets, presenting the current Ethereum infrastructure and dex as the earliest tools provided to developers and users.

As the first successful fork project of Ethereum, ETF pays tribute to all blockchain networks that support the PoW consensus mechanism. The current staked amount of the address 0x00000000219ab540356cbb839cbe05303d7705fa is 13,185,717 ETH. The tokens in st-eth will be distributed according to the public key (transactions will be sent before September 6) to BTC token holders (55%) and DOGE token holders (15% each); and then distributed according to the address (no transaction is required) to ETC and CZZ token holders (15% each).

This fork event is a traffic feast that every exchange will not miss. At present, we can determine the attitudes of the following exchanges. Profitable ecological construction will attract their support in the secondary market and build the trading depth of ETHPOW.

Support or neutral mainstream exchanges

The follow-up of centralized exchanges will solve the problem of transaction depth, and the native financial assets on the chain will start with decentralized stablecoins, especially after Aave followed the sanctions, DAI will be more decentralized, which is also conducive to the development of native stablecoins on the chain. Specifically, although Usdt and Usdc will not publicly support POW or POS forked chains, it takes time to accumulate from on-chain stability to early ecological stability, which is a gradual process. In the early stage, decentralized stablecoins such as DAI may be used, as well as cross-chain stablecoins.

Moreover, in order to further consolidate the on-chain ecology, the focus of this fork is ETHPOW. This chain has added a cross-chain function, not an internal chain, but a POW+ external chain, which can support the forked chain to any other chain. This underlying technology can ensure the early stable financial activities of the public chain and avoid the death spiral caused by excessive speculation. Because the hard fork of the adherents not only obtains the spiritual support of legitimacy, but also has a clear and definite strategic deployment - what really determines the success or failure of the fork is whether the ETHPOW ecological construction can achieve results. Lose PoW, lose miners; without ecology, there is no future.