The Bellatrix update has been successfully activated on Ethereum’s (ETH) beacon chain, which operates on proof-of-stake (POS), and is expected to move to proof-of-work (PoW) post-merger later this this month.
The final part of the long-awaited Ethereum merger will occur when the execution layer, which runs on POW, reaches the specific Total Terminal Difficulty (TTD) – it refers to the difficulty of solving algorithms. This will likely happen around September 13-15.
“The motivation to complete the merger is the reduction of ETH issuance because the security of the PoW and PoS chains are funded by the issuance of ETH. After the merger, the PoW network will cease to exist, which will reduce The issuance of ETH has been named Triple Halving because the drop in issuance is similar to three issuances of Bitcoin halving,” said Rajagopal Menon, VP of WazirX.
What happens to ETH tokens in the event of a hard fork?
Merging can create two scenarios: the first, a hard fork event, which refers to a situation where a blockchain diverges into two different paths, and the second, when no split occurs. Both scenarios will affect ETH token holdings.
The second scenario is that if some miners continue mining on the execution layer, it will create a hard fork, and we will have two separate chains: the PoS beacon chain and the proof-of-work execution layer.
“After the hard fork event, users will receive the 1:1 distribution of ETH proof of work,” said Minal Thukral, executive vice president of growth and strategy at CoinDCX.
Prior to the Bellatrix upgrade, most exchanges suspended trading of ETH and ERC-20 tokens and will support the Ethereum token in the event of a hard fork event. “All coins will be automatically transferred to the new blockchain while all new forked coins will be issued to the investor,” said Vikram Subburaj, CEO of Giottos Crypto Platform.
“If a new fork happens, whatever token comes in, we’ll assign it to users. Trading support for this token would be based on community consensus and what major exchanges like Binance are doing, and we we’ll follow that.” said Gaurav Dahake, CEO of the Bitbns exchange.
In the case of the Hard Fork event, the investor will have two choices for ETH investments. “New investors will have the option to buy the other ETH if we decide to list it after executing it in our 7M listing framework,” Minal added.
What happens to ETH tokens in the absence of a hard fork?
This scenario is unlikely, but still a possibility.
When no miner decides to continue mining crypto on the execution layer, which operates on proof of work, no hard fork will be created and everyone will have the same amount of ETH and ERC-20 tokens.
Hard Forks in the past
There have been examples of hard forks in the past. “In 2018, BCH (Bitcoin Cash) was split into two: BCH and BCHsv (Satoshi Vision). Most exchanges decided not to support this token (BCHsv) and eventually removed it from the list; its trading has been suspended,” Dahake said.
In 2016, a DAO (Decentralized Autonomous Organization) called “The DAO” was hacked and the hackers got away with 3.6 million ETH tokens, about 5% of the total Ethereum supply at the time. Ethereum developers have chosen to help users who have lost money to hacking by implementing a “hard fork”.
This is how Ethereum was split into two different blockchains. The new blockchain was called Ethereum, which essentially reversed the hack, i.e. created new tokens to reimburse users, and the original blockchain was renamed Ethereum Classic.
Classic and Ethereum are not compatible with each other, and most users who have been hacked choose to migrate to the new ETH blockchain.
But not all users migrated to the Ethereum blockchain; therefore, some developers and community members stuck with Ethereum Classic. Ethereum Classic still uses a proof-of-work consensus mechanism to validate a block, while Ethereum will fully transition to proof-of-stake by September 15 or earlier.