Countdown to Ethereum Merger Check Out These Security Checklists

Interacting with ETHPoW can be quite risky, so here is a checklist you can use to avoid the risks you might encounter in a fork.

Countdown to Ethereum Merger!  Learn about these safety checklists

Author: William M. Peaster

Compilation: PANews

During the merger, a group of miners planned to fork and maintain a proof-of-work (PoW) alternative while the rest of the Ethereum community migrated to proof-of-work (PoS).

The fork, dubbed EthPoW, is not ready to embrace a well-planned future yet, but it should give ETH holders new ETHPoW tokens on a 1:1 basis.

Interacting with ETHPoW can be quite risky, so here is a checklist you can use to avoid the risks you might encounter in a fork.

Goal: If possible, sell your ETHPoW tokens for ETH

Skills: Moderate

Efficiency: 1 hour

ROI: Your ETH Coin Standard May Increase

ETHPoW Security Checklist

Learn the basics of merging

Regarding the merger, PoolTogether co-founder Leighton mentioned both energy and economic aspects:

energy

In PoW (Proof of Work), blockchain consensus is maintained by the “work” of computers solving complex mathematical puzzles. Miners prove they can be trusted by submitting solutions. As a reward for doing this “work”, they get tokens. This is the process of “mining”

By design, this process requires a lot of power, and proof of “work” will be difficult for the security of the network. It is also highly inflationary, with computers being rewarded with tokens for “working” and miners selling tokens to pay for electricity and earn a small profit.

In POS (Proof of Stake), computers prove that they can be trusted by putting their tokens at risk. Because if they submit incorrect information, their staked tokens are penalized.

Ensuring the energy consumption of the POS blockchain becomes irrelevant since math puzzles no longer need to be solved, so the move from PoW to PoS in Ethereum means that the energy use of the blockchain will be reduced by around 99%

economic aspect

In PoW, all newly minted tokens and transaction fees go to the miners. In PoS, newly minted tokens are handed over to stakers. This means that anyone who holds the token can stake and earn money.

Since the process is extremely energy efficient, inflation produces far fewer tokens. Currently, about 13,000 ETH, or about $19.5 million, is given to miners per day. In PoS, stakers will only be given 1,600 ETH per day.

On top of that, in PoW, all daily transaction fees go to miners (transaction fees are separated from mining rewards), and in PoS, most of the transaction fees are burned. This means that daily net output is likely to be negative.

This merge into PoS has overwhelming community support, which means that almost all Ethereum community members and projects are migrating to the merged Ethereum chain and will not support any PoW forks.

To learn more, visit the PANews Ethereum Merger feature

Understand the basics of ETHPoW forks

Since July 2022, a group of miners such as Chandler Guo has accelerated plans to fork a PoW version of Ethereum during or shortly after the merger.

Since basically the entire Ethereum community is moving to the PoS chain, this EthPoW fork doesn’t have a serious value proposition – it’s a “money grab” project, posing as a permissionless blockchain and letting participating miners Maintain a certain level of dominance after the merger.

When it launches, ETHPoW will airdrop ETHPoW tokens to ETH holders at a 1:1 ratio, trying to sell these tokens could expose you to a replay attack, in which case the attacker would drop the real ether “Copy” your ETHPoW transactions on the blockchain and steal your funds. Therefore, be sure to do the following to prevent this security risk.

Check ChainID

ChainID was originally introduced in EIP-155 to prevent replay attacks between Ethereum and Ethereum Classic; the ChainID for the former remained at 1, while Ethereum Classic moved to 61.

At the time of this writing, ETHPoW developers still haven’t updated their fork’s ChainID from 1 in their codebase – which means ETHPoW may soon be released with the same ChainID as Ethereum.

Countdown to Ethereum Merger!  Learn about these safety checklists

If ETHPoW develops in this dangerous state, it will create ideal conditions for hackers to conduct replay attacks.

What is a replay attack?

A replay attack is to take transactions from one network to another network for use.

If you sent someone 100WETH on the merged Ethereum PoW fork, a replay attack could repeat the action on Ethereum PoS without your permission.

If the ChainID is 1 when the network starts, do not interact with the ETHPoW fork under any circumstances, you may lose all your ETH.

In other words, the first major item on this checklist is to check if the initial ChainID of ETHPoW is 1 or the planned 10001. If the creator chose the former over the latter, please do not attempt to interact with the fork at any time.

Additionally, some DeFi projects, like Maker’s Dai stablecoin, are hardcoded to use a ChainID of 1, which means interacting with their version of ETHPoW will expose you to replay attacks anyway. Check project by project recent information to see how they are doing in this regard.

Thinking about whether ETHPoW is worth the trouble

Assuming that ETHPoW’s ChainID is 10001, alleviates most concerns about replay attacks – even so, whether it’s worth the time and effort to claim these tokens depends on how valuable ETHPoW is.

This is a big problem right now. At the time of this writing, ETHPoW futures are worth $29.30 per coin.

Countdown to Ethereum Merger!  Learn about these safety checklists

Furthermore, the difference between the spot price of ETH now ($1726) and the current price of ETH September 30 futures ($1710) suggests that the implied price of ETHPoW before listing is around $16.

Claiming $16-30 worth of tokens per token is not financially worthwhile for many ETH holders, although it is possible that by the time ETHPoW reaches exchanges, the price of ETHPoW will be pushed higher during the price discovery process. high range. Conversely, it is possible to see its price collapse quickly as many people sell the coin together.

What to do before EthPoW forks

If ETHPoW actually adopts a ChainID of 10001 and the ETHPoW token starts to have some decent price gains, it might be worth your while to sell your ETHPoW for real ETH, USD, etc.

To potentially prepare for the sale of ETHPoW, prior to the EthPoW fork, Coingecko co-founder Bobby Ong summed up the following:

1. To get ETHPoW tokens, you must first hold ETH in a wallet that supports the fork. For exchanges that support forks, this may be the easier option, as you don’t have to work to get the forked coins. Ideally, exchanges also support trading. Some exchanges may take several months for the forked tokens to be credited to your account. Please check the announcement of the exchange you use before the upcoming merger.

The best way is to keep your ETH in full custody on a hardware wallet. If you hold ETH on an exchange, your exchange may or may not give you the forked token.

2. Bridge all your ETH tokens back to the ETH mainnet. ETH held on Optimism, Arbitrum, Polygon, Avalanche or any other layer 2 chain will not receive any ETHPoW.

3. Convert all WETH to ETH

There will most likely be a DEX on the new ETHPoW chain to help you exchange WETHPoW tokens, but why use it in a new unstable ecosystem?

4. De-Liquidity of DeFi Protocols

The ETH you use to provide liquidity will not receive any ETHPoW tokens. Exit now and provide liquidity again after the merger. As more and more people do so, DeFi protocols could see a liquidity crunch.

5. Borrow ETH from Aave/Compound

Any ETH you hold will earn ETHPoW during the snapshot period. This means it makes sense to borrow as much ETH as possible. Combined with the previous step, I expect ETH utilization to be close to 100%.

Note, however, that some lending protocols, like Aave, have suspended ETH lending amid a spike in lending activity.

6. Monitor the stETH/ETH market

As the merger nears, you can buy or sell stETH, depending on what everyone else is doing. Some people are expected to sell stETH to ETH for a PoW airdrop. However, if the selling pressure is large enough, you can buy stETH at a low price.

7. Buy expectations, sell facts

Maybe speculating on ETHPoW is not worth it for you. Currently, ETHPoW IOUs are trading at around 2.8% of ETH. ETH is likely to sell off within hours of the merger. You can choose to sell ETH and take profit.

Choose an exchange

Some exchanges, like BitMEX, have announced plans to support ETHPoW trading. That said, it may take days, weeks or months for some exchanges to support ETHPoW deposits and/or account credits – make sure the exchange you’re landing on has clearly detailed their support plan so you can Know what you can do and when.

Worried? Then do nothing.

Now, there are a lot of “ifs” when considering whether you should try to sell ETHPoW.

The key thing to remember is that not participating is also a viable strategy to consider.

“Winning the ETHPoW fork” may just mean abstaining and watching as an outsider if you can’t confidently pass the checklist above.

The big question is whether this humble fork will launch with a ChainID of 1 or 10001. If it’s 1, then please don’t interact with the fork, as the risk of a replay attack against your real ETH far outweighs the gain you can get from selling.

What is the best case scenario?

ETHPoW starts with a ChainID of 10001 and you are able to deposit ETHPoW into a supported exchange and then cash out a desired price for USD, or buy more ETH, or whatever suits you.

However, if so, it means that the launch of ETHPoW seems unlikely to go smoothly.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/countdown-to-ethereum-merger-check-out-these-security-checklists/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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