Ethereum Offshoot Token Tumbles After Forking From Blockchain
The additional cryptocurrency token that investors received after the Ethereum blockchain transitioned to a new method of handling transactions has tumbled as much as 60% since it began trading late Thursday.
EthereumPOW, as the offshoot is known, represents the legacy computing operations of the blockchain that chose not to participate in the software upgrade dubbed the Merge. Ethereum moved from a so-called proof-of-work system to a more energy efficient proof-of-stake method for securing the network.
The cryptocurrency was listed at a price of as much as $33, according to data from CoinMarketCap.com over the past 24 hours, and on exchanges such as FTX before Ether holders received the token. It was trading at about $10.85 as of 13:39 p.m. in New York. Ether, the native currency of the blockchain, fell for a fifth day, dropping as much as 6% to $1,413.
“Ethereum proof-of-work does not have support from users, developers, institutions, and even most miners,” said Kunal Goel, a Mumbai-based research analyst at Messari. “It is likely going to fade to irrelevance as all other forks without community support in history like Bitcoin Cash, Bitcoin Satoshi's Vision, and Ethereum Classic.”
The first few hours after the launch of ETHW, as the token is called, will be chaotic as all stable coins and pegged assets fall to zero and users rush to exchange their tokens, Goel said.
“When the Ethereum Classic fork happened, there was much lower adoption. The ETHW fork now will also create a new version of all other assets on Ethereum,” Goel said.
Ethereum's move to a more energy efficient way to secure its network faced resistance from a group of miners led by Chandler Guo, a veteran Ether miner who was also a prominent backer of Ethereum Classic, another PoW offshoot of Ethereum.
Joseph Lubin, chief executive of ConsenSys and a co-founder of Ethereum, said that it's like duplicating a significant city without having the people and businesses that make it special.
“It's hard to imagine people putting valuable tokens on that network or trading or deploying new software when so much is broken on the network,” Lubin told Bloomberg in a video interview on Thursday after the Merge. “Essentially, it's the work of opportunists who are likely interested in convincing people that this cargo cult blockchain is really functional.”
The merge is just the start of a series of upgrades that are to come on Ethereum to make it more scalable and decentralized. Many challenges still await the second-largest cryptocurrency including a potential regulatory backlash.
Ethereum Classic, which saw a sharp rally in the run up to the Merge, was down nearly 8.3%.