Several holders of Ethereum (ETH) are now wondering what will happen to their crypto holdings, with cryptocurrency exchanges, such as Binance, Coinbase, FTX`, WazirX, CoinDCX and Zebpay suspending trading of ETH and ERC-20 tokens until that the Ethereum merger is complete.
The Ethereum Foundation has been working on the merger for almost two years now. The upgrade will speed up transactions and reduce power consumption by 99.9% as ETH moves from proof-of-work to proof-of-stake.
However, this could lead to a hard fork as some miners could continue on the proof-of-work Blockchain.
In this case, there will be separation.
According to Dileep Seinberg, Founder and CEO of MuffinPay, a bill payment and utility company, “Crypto miners may riot against the new software upgrade and continue to mine the legacy proof-of-work Ethereum. after the hard fork chain split. There are chances of a split and the creation of two Blockchains, but we think it will be minimal, because we already have an Ethereum Blockchain (Ethereum Classic) on the proof-of-work consensus mechanism.
What will happen to ETH and ERC-20 tokens?
Even though many cryptocurrency exchanges have suspended trading of ETH and ERC-20 tokens, investors can still access tokens held in hot and cold wallets.
In the event of a hard fork after the merger, investors will receive the same amount of the token “forked” on the new proof-of-stake chain that they currently own in the proof-of-work chain in the event of a hard fork event . Investors will then have an equal number of Ethereum tokens on two separate Blockchains.
“Investor funds will not be impacted during the Merge Event. However, investors are advised to refrain from executing transactions involving Ethereum to avoid any loss resulting from unforeseen issues during the Merge Period,” says Sharat Chandra, vice president, research and strategy of EarthID, a decentralized identity management company.
What will happen to ETH-based DeFi products?
To earn interest on crypto, investors have the option to stake their crypto, which locks in the amount of crypto for a certain period of time and provides an annual percentage yield (APY) on the crypto.
Various exchanges have different parameters regarding staking and offer varying APYs.
Says Minal Thukral, Executive Vice President, Growth and Strategy, CoinDCX: “In the event of a hard fork, staked ETH will continue to remain staked. Listing the forked token for trading will go through CoinDCX’s 7 million listing process, as it may expose retail users to short-term risk.
On the effect of the hard fork on yield, Thukral adds, “Yield will definitely go up as ETH will stop being inflationary. This upgrade is a step in the direction of a highly scalable ETH chain. Therefore, more adoption will lead to more transactions, and therefore higher real returns.
What will happen to ETH-based NFT products?
If the next Ethereum merger results in the Blockchain splitting into two Blockchains, as happened in 2016 due to “THE DAO” hack, it could result in the duplication of non-fungible tokens (NFTs).
According to Amanjot Malhotra, country head of Bitay, the Indian subsidiary of the Turkish crypto exchange: “In any case, duplicate NFTs will exist due to the ETH proof-of-work chain and other potential forks, and there There will likely be some level of confusion as to which assets are ‘official’ or ‘authentic.’ Even so, there could be a frenzy for these copies, as NFT owners attempt to return proof-of-work versions of their precious tokens.
Malholtra further added that the market could see “a flurry of NFT selling on the proof-of-work chain, but if there is little social sentiment about the value of assets on the chain, then there may be little demand for them, and therefore prices for duplicate assets are likely to be a fraction of the real deal when it comes to popular projects.
What will happen to ETH-based gaming products?
Axie Infinity, an Ethereum-based gaming app, said on Twitter that it will “support Ethereum proof-of-stake (ETHPoS) after the Ethereum merger.”
1/ 🛠️ETH Transition 2🛠️
The Ronin Network and Axie Infinity will support Ethereum Proof of Stake (ETHPoS) after the Ethereum merger. To ensure the integrity of the Ronin Bridge, we will pause it 24 hours before the Merge and open it once we validate support for the Merge.
They also said on Twitter that to be on the safe side and ensure the integrity of the Ronin Bridge (a game-critical wallet protocol) they “will pause it 24 hours before the merge and open it once we have validated support for the Merge.”
Regarding support for the older version of Ethereum Proof of Work, Axie Infinity posted on Twitter that “Ethereum Proof of Work (ETHPoW) will not be supported.” They further advised users “to withdraw their Ronin WETH to Ethereum before the Ronin Bridge is suspended, if they wish to be exposed to ETHPoW.”
So, if you are using an Ethereum-based game app, be sure to contact the game developer regarding their stance on the Ethereum merger, so you don’t lose access to the game and your funds.