Hours after Ethereum successfully transitioned to the proof-of-stake model, rebuffed proof-of-work (PoW) miners came together to launch ETHPoW, the post-merge fork that would let them rely on their existing mining infrastructure and continue to earn ETH.
It is led by a group of 60 developers based out of China.
The merge is set to reduce global electricity consumption by about 0.2%, just as it will slash Ethereum’s own energy usage, previously estimated at a massive 83.89 TWh, by 99.95%.
At launch, the new network’s native coin reached as high as $63.29, before freefalling about 60% when systemic issues related to its chain ID in use began cropping up. Right now, it is trading at $12.93.
However, the fork has managed to generate considerable momentum and approval for itself among prominent mining pools. This comes in the wake of Ethermine, the world’s largest ETH mining pool, which held a 28.28% share among the pre-merge ETH miners, shutting shops. Notably, the total share of these pools combined is enough to surpass Ethermine’s stake.
Currently, BTC continues to dominate the PoW space, with memecoin DOGE inching closer to grab the second spot. The third place is held by ETH Classic, another blockchain that emerged out of ETH’s hard fork in 2016.
GROUND TO COVER
Both for miners and investors, ETHPoW has a lot of ground to cover. Previously, one major reason to mine ETH was its lucrativeness, given the underlying market value of the second-biggest crypto in the world. For ETHPoW to serve its utility, it will have to present a similar degree of financial viability.
Moreover, a PoW, a hard-forked version of ETH, namely ETH Classic, already exists. Currently the 18th largest crypto coin by market cap, it is trading at $34.27.
These are nascent, tumultuous times for ETHPoW, making it susceptible to hacks and financial crimes, also known as replay attacks. This happens usually when a network upgrades or is amid a fork. Cybercriminals hack into the original data from the main chain and use it to carry out the same transactions multiple times across the systems.
TAX IMPACT
Then, there are tax implications. Says Punit Agarwal, founder and CEO, of KoinX: “All wallet holders who have shifted to the Ethereum Proof of Stake chain will also hold 1:1 Ethers on the PoW chain. This event may be treated as an airdrop and will incur income tax on the new tokens received. Also, when the wallet holder disposes of the tokens received, it will incur a capital gain tax.”
India already has in place a harsh crypto taxation regime. In addition to a 30% tax slab, investors will also be subject to 1% TDS.
However, it could benefit long-term investors, given that staking rewards might potentially rise 50% in the wake of ETH shifting its entire workings on locked ETH. Daily ETH issuance, too, will drop drastically.
Dileep Seinberg, founder and CEO, MuffinPay, Bill Payment & Utility Crypto, disagrees. “There would be no direct impact on the taxation of investors. This is not a financial upgrade, but something on the technological side. It is not a prudent approach to mix the merge with taxation as the merge is a worldwide event and taxation on crypto assets varies across the globe.”
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