The Merge has been part of the Ethereum roadmap for 6+ years: a community-wide effort telegraphed from the early days

Yet now, less than 8 weeks away from mainnet Merge, a wave of doubt is rising focused on a hostile PoW fork

Here's why a PoW ETH fork is a *non-event*:

First, what is a fork?

The ability to fork is a *fundamental right* for a blockchain's community. Forks provide the community the ability to choose; forks represent a right to underlying freedom

There are 2 types of forks - soft forks and hard forks - with key traits:

Soft fork: a "software upgrade" for a blockchain which is backward compatible with blocks prior to the fork

Hard fork: adds a fundamental update which is no longer backward compatible

The ETH Merge will be a hard fork into a fully PoS chain *no longer secured by miners*

Soft fork: if the update is accepted by all users - the end result is a single blockchain

Hard fork: could cause a split into an original chain and a new chain with the update. But - if the update is accepted by the whole community, the end result is also a single chain

How does this relate to the Merge?

The Merge has been a universal, widely broadcasted goal to upgrade ETH into an economically and environmentally sustainable blockchain

Any Merge hard fork perpetuating the original Proof of Work chain is detrimental to that goal

A PoW hard fork would only occur if existing miners keep mining PoW ETH rather than updating client software to PoS prior to the Merge

Does it make economic sense for a miner to keep mining PoW? To maximize profit, maybe.

But it creates a ghost chain with no legitimacy

Ethereum is not a single purpose blockchain whose job is to secure a store of value by maximizing miner profits

(That's #Bitcoin for #BTC)

Ethereum has a thriving DeFi, stablecoin, and NFT economy running on top of it which will be *more secure* under PoS and *not* PoW

If a miner-led chain split occurs, the Ethereum economy will exist on two chains:

ETH token, DeFi apps, stablecoins, NFTs will exist on the post-Merge PoS chain

And ghost clones of the exact same assets will exist on the PoW chain - including "PoW ETH" - causing chaos

Some examples of chaos:

There is $65bn of USDT and $55bn of USDC on ETH today. In a chain split, this amount would double

We cannot print new dollars (we are not the Fed). So, USDT and USDC would need to go to zero on one chain (the PoW chain) to stay redeemable for USD

Chaotic outcome: If stablecoins on PoW ETH go to 0, then all liquidity pools on PoW AMMs with stablecoin vs token pairs break, and tokens on PoW ETH can't be traded

More chaos: The same happens with the cloned PoW WBTC on PoW ETH - it goes to zero (can't create more BTC)

Chaotic outcome: if PoW WBTC on PoW ETH goes to zero, then all debt vaults (Maker, Aave) that use WBTC as collateral become undercollateralized and will need to be liquidated

If the vaults were used to borrow stablecoins, and if stablecoins go to zero, how do we repay?

We could go on, but it is a waste of mental space

Ethereum has a responsibility: it represents legitimacy for the economy built on top of it. ETH stands for more than near-term profit maximization

Thus, all the legitimate apps, stablecoins, NFTs will pick the PoS chain

The PoS ETH chain allows for better security, decentralization, economic and environmental sustainability - and players in the ETH economy will seamlessly move to PoS

The *only* actors that will sustain the PoW fork are profit mercenaries that want to sell their PoW ETH

Because nothing else will work!

There will be no DeFi to use PoW ETH, no stablecoins to borrow against PoW ETH, no staking of PoW ETH

The only game is hoping a centralized exchange lists PoW ETH to sell

Hence, the *only purpose* of the PoW ETH fork is to dump PoW ETH

At the end of the day, the Merge will succeed, and the Ethereum economy will seamlessly thrive on the PoS ETH chain

Even if there are 10 PoW forks, they will have no activity, no users, no assets (except hot potato PoW ETH waiting for CEX liquidity), and no *legitimacy*

PoW ETH has no community except profit mercenaries

As @VitalikButerin said, "even a billion dollars of capital cannot compete with a project having a soul"

PoW ETH will not have a billion dollars, and most certainly will not have a soul

*PoW ETH will be a non-event*

Few additional resources -

@ryanberckmans has a complementary thread on distractions caused by a PoW fork:

And @lemiscate has detailed analysis of what happens to DeFi on PoW ETH:

Lastly, here's an overview of what PoS $ETH looks like post Merge and why it results in a more secure, more decentralized, more economically and environmentally sustainable blockchain:

#Ethereum #ETH

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More from @VivekVentures

Jul 23
Why ETH will flip BTC:

There are 900 BTC mined per day. At current prices, that’s ~$20mm to miners daily

Let’s assume miners sell 90% to cover costs. That’s ~$18mm in sell pressure *every single day*

Meaning, without ~$18mm of new daily buy pressure, BTC price goes down

What if that ~$18mm in daily sell pressure vanished - what would that do to BTC’s price?

Wouldn’t it naturally drift up with each marginal new buyer vs being constantly weighed down by daily sell pressure?

This is exactly what is going to happen to ETH after the Merge

Today, ETH has a similar story: 14,250 ETH issued to miners (+ validators) daily. That’s ~$21mm in potential daily sell pressure

(Technically less as validator block rewards can’t be sold yet, but let’s ignore)

*Post merge, the ~$21mm in daily sell pressure goes to $0*

Read 8 tweets
Jul 10
The Ethereum Merge is one of the most powerful catalysts in crypto history, and it is quickly approaching

As we reach the endgame for ETH under the proof of work regime, let's address 10 important characteristics of post-Merge, proof of stake ETH:

1. Post Merge, ETH L1 fees will NOT come down

The purpose of the Merge is to deprecate Ethereum's PoW consensus mechanism and replace it with PoS. Fees are a function of blockspace demand, NOT consensus mechanism. For lower fees, use the L2s (already live) for execution

2. For a 6-12 month window post Merge, there will be no structural sell pressure from ETH issuance

Staked ETH and issuance/block rewards to validators cannot be withdrawn until withdrawals are enabled. However, fee tips (basefee is burned) and MEV can be withdrawn

Read 12 tweets
Dec 30, 2021
2021 was won by alt L1s b/c rollup scaling on ETH moved too slowly

Web3 went mainstream with NFTs, gaming, DeFi 2.0

Blockspace supply on ETH remained scarce while demand blossomed. Excess demand went to alt L1s

But 2022 belongs to ETH and its rollup ecosystem:

While alt L1s made blockchains cheaper and more accessible in 2021, they took shortcuts to scale and will hit structural limits

Optimistic rollups are ready for the mainstream spotlight, and the ZK rollup cavalry is on the way (Polygon, Starknet, zkSync, and others)

There are two catalysts for ETH to go parabolic in 2022:

1) Rollups launch tokens.

Tokens represent incentives and community upside. Alt L1s won marketshare in 2021 because of tokens that went up. Rollups will follow the same playbook and bring users back to Ethereum

Read 10 tweets

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