Thread 🧵: Why is Vitalik in the ring with Justin Sun?
ETHPoS vs ETHPoW and a potential profit opportunity from the Merge
Why are @justinsuntron, @Poloniex, @ChandlerGuo, and @HuobiGlobal (the ETHPoW party) tag teaming @VitalikButerin (the ETHPoS party)?
Why is there a pushback from miners against ETHPoS?
Here's a thread that explains ETHPoW and a potential profit opportunity from the Merge:
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• WHAT IS ETHPoW?
After the merge, #Ethereum will use a Proof of Stake consensus model where validators will have to stake $ETH in order to create new blocks
This is in contrast to the present model (PoW), in which miners use expensive GPUs to mine a new block
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The Problem:
There is an estimated $5B in mining equipment on the market, which becomes useless following the Merge
As a result, the #Ethereum mining community wants a hard fork of #Ethereum as a PoW chain
A significant leader of this community is @ChandlerGuo
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@ChandlerGuo was a key participant in the 2016 fork of #Ethereum, which resulted in the creation of $ETC (Ethereum Classic)
If the fork is successful, two chains of Ethereum will be created:
1. The PoS chain led by the #Ethereum core validators
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2. The PoW chain led by the old Ethereum miners
A new cryptocurrency, perhaps called $ETHPoW, will exist for the forked ETHPoW chain
However, after the Merge, most dApps, stablecoins, and developers will switch to Ethereum's PoS version
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As a result, there should be little to no demand for the ETHPoW chain since the chain itself doesn't have any utility
To increase mining profitability, ETHPoW will need to create a lot of demand on its own from scratch, which is unlikely in these market conditions
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Hence, the ETHPoW token will also lose value due to the lack of demand for the underlying ETHPoW chain
• WHAT ARE THE POTENTIAL RISKS BEFORE THE MERGE?
1. Currently, there is around 13.2 million $ETH staked on the beacon chain
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These tokens are worthless on the ETHPoW chain and will be lost forever if the fork is canceled
2. When stablecoin issuers switch to ETH2, major stablecoins like $USDC and $USDT will also become worthless on ETHPoW
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As everyone tries to exchange their stablecoins, stablecoin liquidity pools in the ETHPoW network will get depleted immediately after the hard fork
This will apply not only to stablecoins but to all tokens on the ETH network
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3. People will rush to exchange their tokens for ETHPoW coins causing massive hyperinflation in all the liquidity pools
Thus, all of the tokens will be worthless in the ETHPoW network, essentially killing off all of DeFiPoW after the Merge
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• HOW YOU CAN POSSIBLY PROFIT FROM THE MERGE?
1. Exchange all your tokens, including stablecoins, for ETHPoW coins from the liquidity pools on the ETHPoW chain
2. Since ETHPoW is a new token, it takes quite some time for centralized exchanges to list ETHPoW
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3. Sell your ETHPoW on the centralized exchanges for a profit
But here's the catch!
The MEV bots will front run all the transactions in just a matter of seconds
They will drain the liquidity pools before you even log into your Metamask wallet
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Some MEV bots can also access miners to give their transactions priority over those submitted by regular users
The value of ETHPoW coins will practically be zero by the time your transaction is completed
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Additionally, @0xfoobar makes a strong argument by stating that "ETHPoW and ETH will share the same chainId"
He claims that dumping your tokens on the ETHPoW network will cause them to disappear from the canonical chain
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In order to establish the trade, you must be an expert at MEV bots or run a separate Ethereum node to publish your transaction before anyone else
Ultimately the trade is accomplished by the fastest transactions that convert the worthless tokens into ETHPoW tokens