13 Sep 2022

ETHPOW hard fork struggling to maintain its momentum

As the Ethereum merge approaches, the proof of work-based Ethereum hard fork seems to be losing interest while Ethereum Classic maintains its strength.
Source: Coinmetrics, Tradingview (Bitfinex)
Ethereum Classic has had a rock solid year, outperforming most of the market. ETC started the year with a market cap size of approximately 1% the size of Ethereum's but has, over the last nine months, seen its market cap relative to ETH grow to 2.5%. The strength of Ethereum Classic is most likely driven by the ETH miner narrative. Once the merge finalizes and Ethereum mining becomes obsolete, ETH miners have very few viable alternative chains to migrate to. Nevertheless, while the price action has been strong, and the security on ETC will strengthen with growing hashrate, it’s worthwhile assessing the actual usage of ETC. As of writing, Ethereum Classic has shallow economic activity. Per DeFiLlama, Ethereum Classic has a total value locked of less than $1m and is the 120th largest layer-1 measured by TVL. ETC could thus face difficulty garnering any meaningful economic activity after the merge. Most of the strength in recent months seems to rather relate to Ethereum Classic representing an important ideological bastion for some investors following the infamous DAO hack and ETC being one of few alternative chains for Ethereum miners to migrate to.Thus, in order to potentially reap the benefits of some of the infrastructure and usage of Ethereum’s vibrant DeFi ecosystem, a group of miners has attempted to push for a hard fork at the merge, which would lead to a chain-split at the merge, as we’ve previously explained. Nevertheless, as of writing, ETHW and ETHPOW, which are derivatives based on the potential hard fork, have seen dwindling activity. On Bitfinex, ETHW has seen a substantial decline. ETHW is priced at 1.14% of the value of ETH, while it traded at 3% of the price of ETH at launch. This is well below the ETC price relative to ETH, and it might suggest that the old dame ETC is currently viewed as the more appealing continuation case for proof-of-work based Ethereum activity.
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