Grayscale Shares Opinion on New Ethereum PoW (ETHW) Chain: Will It Succeed?

Ethereum (ETH) The blockchain network is set to undergo the much anticipated Merge upgrade in September.

However, some ETH miners who want to continue the Proof of Work system are defending the ETHW Blockchain.

Grayscale, the world’s largest asset manager, believes there are multiple reasons why the ETHW version may not be successful. Grayscale compared the latest developments to the 2016 ETH hardfork that led to the creation of Ethereum Classic (ETC).

Grayscale Believes Ethereum PoW Will Not Succeed

But there is a big difference between the ETH network in 2016 and the Ethereum network today. Over the past six years, ETH has developed a robust user ecosystem, decentralized applications (dApps), smart contracts, decentralized finance (DeFi) and much more.

In its detailed report, Grayscale explains:

“With the creation of a PoW fork of the existing ETH network, copies of all these features and tokens in the entire ETH ecosystem will be created. This will present significant challenges to developers and all market participants.

In fact, the complexity of DeFi and the number of tokens locked in DeFi protocols pose a devastating risk to the ETHW price due to the on-chain positions that will attempt to be liquidated.”

In 2016, the DeFi ecosystem did not actually exist. As of today, the Ethereum Blockchain hosts approximately 530 DeFi protocols with more than $40 billion locked in smart contracts.

In the event that the ETH PoW fork goes live, users will liquidate their leveraged legacy tokens on this protocol in exchange for ETHW tokens.

After that, these ETH holders will want to sell their ETHW tokens for ETH. Grayscale says this will lead to “disproportionate selling pressure” on ETHW.

*Not investment advice.