What cryptocurrencies can win and lose from Ethereum hard fork

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6 min.

A change in consensus in Ethereum is a unique event that can change the entire market. How will it affect other cryptocurrencies and tokens?

Today there was a successful merger in the third andthe latest testnet, which means the transition to the main network in September is increasingly likely. What will happen next? Ethereum developers are merging chains and continue to improve the new blockchain. Users are exploring new features and enjoying instant flights of transactions. Especially DeFi traders who are tired of liquidity mining. And traditional miners are figuring out which way to go.

It would seem that the transition toPoS is nothing more than an internal matter of the Ethereum community. But, as usual, there is a nuance here. It is not the ETH cryptocurrency that is trying on a more fashionable and environmentally friendly consensus, but today’s most popular ecosystem of decentralized applications with many add-ons. A lot of projects, people and money depend on how successful the transition will be and whether the miners’ revolt will take place. This means that other cryptocurrencies cannot stand aside, not to mention tokens directly traded on Ethereum or second-level sidechains.

If you do not plunge into the technical jungle, there are three possible ways of development of events:

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The transition will fail or be delayed indefinitely.
The transition will be successful, but miners will not carry out a hard fork.
Both the transition and the hard fork will take place. Two independent blockchains are formed. ETC will be the third.

Below I have outlined my vision of how threemajor scenarios may affect the prices of ETH and its main competitors, as well as the tokens of some dependent projects. This opinion is purely personal and should not be considered an investment recommendation.

Ethereum will not switch to PoS this year

“The incredible can happen” - for some reason, the almost ready merger of ETH1 and the ETH2 signal chain will not take place. Or it will be postponed again seriously and for a long time.

In this case, the main losing partyEthereum itself will suffer a sensitive reputational blow. All prospects for scaling will be at risk, and stakers in the Beacon Chain will not be able to realize profits for a very long time.

Miners will continue to mine ETH, and the difficulty bomb will be turned on again. Ethereum Classic, which recently soared on support from Antpool, will again fall into oblivion.

However, from the troubles of the “big brother”Ethereum's many competitors will benefit: BNB Chain, Solana, Tron, Cardano and others. Projects expecting improved functionality will consider changing the underlying blockchain. And for most of the ecosystem, everything will remain the same until the situation becomes clearer.

The merger will succeed without a hard fork

As before, miners may turn out to be a weakly organized force, and the initiative to preserve the chain on PoW will naturally wither. Or they won't be able to pull off a credible hard fork.

In this case, the main beneficiary will beEthereum. Vitalik Buterin's team will continue to work according to plan, and competing platforms will have an even stronger opponent. Ethereum will remain the main platform for decentralized applications, getting rid of its main disadvantages - expensive transactions and weak throughput.

The demand for second-layer protocols, such as Polygon, Optimism and others, will drop significantly. The main blockchain will handle their functions, even if there is a delay of months.

Ethereum Classic will receive most of the ETH miners' power and will become more reliable, and therefore more attractive to investors.

Decentralized exchanges and related onesapplications for traders will become faster and more user-friendly. Perhaps they will even be able to take aim at competing with centralized sites. When counting on this scenario, it is worth taking a closer look at DEX tokens, especially with the possibility of margin transactions and derivatives trading. It is on them that PoW has the most “inhibiting” effect, not to mention frauds with liquidity mining.

The second divorce in Ethereum. Another copy of the blockchain will appear

This is the most likely and most controversialscenario. Large miners have too much to lose and are unlikely to give up without a fight. A trinity is formed from Ethereum, Ethereum Classic and ETHPoW. And if the prospects of the first look almost cloudless, the remaining two will have to fight for existence. For example, the operators of the two largest stablecoins have already stated that they will only support the PoS chain. But the issuers of other stablecoins have not yet made a final decision, and there is nothing stopping Circle and Tether from changing it.

The winners and losers will not be determined immediately. The community and investors will be watching developments. But if ETHPoW survives, we can already make assumptions.

Competing smart contract platformsI'll have to be even more upset. Instead of one Ethereum, they will get two, each with a set of already running applications, even if most of the projects remain on only one blockchain.

Second-layer protocols will become the mainETHPoW's hope to survive the competition. Moreover, the number of applications on them continues to grow. If in the last weeks before the merger miners show determination to carry out a hard fork, it is worth at least maintaining their share in the portfolio. DEXs won't lose out from the doubling either, although most of them will probably prefer Ethereum 2.0.

The oracles andquote providers - they will be in demand in any case on both blockchains. Therefore, for example, the Chainlink token may well overtake the market. The NEAR project, which provides operations with wrapped ERC-20 tokens on its own blockchain, can be viewed similarly, with some reservations. It will be possible to continue trading tokens on it even during a hard fork.

But the prospects for Ethereum Classic are herelook joyless. If Chandler Guo manages to organize a competent development team, ETC will have a younger and stronger competitor. However, they can agree on interaction and even some form of unification.

Everything else depends on the developers andusers of specific projects. Each team will have to determine its position independently. Some DeFi platforms and stablecoins will likely want to maintain a presence on both blockchains, and most exchanges will not refuse additional trading pairs.

Bitcoin is a spectator from beyond the barrier

Although some investors soundassumptions that Bitcoin will benefit from Ethereum's transition to PoS, the two largest blockchains remain competitors only in the capitalization table. Unrest among decentralized application users will not have a significant impact on Bitcoin.

“Digital gold” is rarely considered anymoreAs a currency, its exchange rate depends on the general situation in global financial markets. Like a true flagship, Bitcoin is the first to start or end any major movement. But its range of movements is also more modest than that of altcoins.

Now Bitcoin can be considered as a hedgefor those who do not want to sit out in stablecoins. Other cryptocurrencies may indeed face a shakeup depending on how the Ethereum chain merger goes. And Bitcoin will remain the safest haven in the sea of cryptocurrencies.