The upcoming Ethereum [ETH] Merge has been extremely anticipated and to date all of the check runs have been profitable. Though this implies that the Merge may end up easy, Grayscale highlighted an space of concern that traders ought to take into account.
Grayscale expressed considerations over the potential affect on the Merge, particularly on tokens that run natively on Ethereum. The crypto funding agency believes that the Merge might result in a fork that may have surprising and unfavorable outcomes.
7. A PoW fork of the present Ethereum community would convey duplicate situations of all of this and extra, which may current significant challenges to builders and market contributors, and an existential threat to DeFi on the brand new chain.
— Grayscale (@Grayscale) August 16, 2022
Blockchain community laborious forks have traditionally yielded two networks, with every having its personal native token. There are a selection of ERC-20 tokens that function inside the Ethereum community, which signifies that a fork would probably have an effect on them too. This contains the USDT stablecoin.
Grayscale’s concern is that the Merge may create a state of affairs the place stablecoins and tokens locked in sensible contracts won’t be redeemable.
The crypto funding agency additionally notes that token and stablecoin holders may panic and begin liquidating their holdings. Such an final result would create a considerable quantity of promote strain.
8. Take into account an ERC-20 token backed by one other asset. Which token is redeemable for the underlying asset after the fork?
— Grayscale (@Grayscale) August 16, 2022
Are these professional considerations?
Grayscale’s argument holds advantage with regard to earlier laborious forks and their outcomes. There have additionally been rumors that the Ethereum POW chain will stay energetic after the Merge, maybe even working parallel to the brand new community.
That is the primary time {that a} community is transitioning from one consensus to a different, therefore there are a number of unknowns. Such considerations may clarify why the full worth of ETH locked in DeFi dropped considerably within the final six months.
Many ETH holders may need determined to maneuver their cash in anticipation of the potential disruptions that may be related to the Merge.
Moreover, a considerable amount of ETH shift into ETH 2.0 staking swimming pools was additionally witnessed throughout the identical interval.
In the meantime, the quantity of ETH flowing into ETH 2.0 staking amenities elevated drastically over the past six months.
The above outcomes verify that many ETH holders have taken measures to guard their pursuits as soon as the Merge takes place.
The place does ETH stand then?
Whereas Grayscale’s considerations are professional, Ethereum builders have probably taken such considerations into consideration.
The Merge will probably carry over knowledge from the PoW Ethereum and act as a handover.
Be aware {that a} parallel chain would definitely result in duplication.
Nonetheless, the technique and measures for addressing such considerations stay to be seen.