3 Reasons Why Ethereum Hardfork Tokens Won’t Gain Traction

3 Reasons Why Ethereum Hardfork Tokens Won’t Gain Traction

Ethereum News
September 19, 2022 by Diana Ambolis
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By market capitalization, Ethereum (ETH) is the second-largest cryptocurrency, dominating deposits for decentralized applications. When the average transaction cost topped $50 in November 2021, the network saw a price increase due to its success. The Merge is a crucial step in implementing a fully functional scaling solution. The primary catalyst for the surge toward $2,000
3 Reasons Why Ethereum Hardfork Tokens Won't Gain Traction

By market capitalization, Ethereum (ETH) is the second-largest cryptocurrency, dominating deposits for decentralized applications. When the average transaction cost topped $50 in November 2021, the network saw a price increase due to its success. The Merge is a crucial step in implementing a fully functional scaling solution. The primary catalyst for the surge toward $2,000 on August 15 was confirming a switch to a proof-of-stake (PoS) consensus.

In addition to the likelihood of a shift to a deflationary scenario and the reduced issuing schedule, investors were also anticipating upcoming forks. Hardforked tokens may therefore be distributed to Ether holders on several blockchains. There is, however, no guarantee that they will gain adoption or have enough liquidity.

The forked chain will start with the same state as the original Ethereum network, meaning each address will hold the same contents in terms of tokens and transaction history. However, there is also the allure of free money and even bonus non-fungible tokens (NFTs).

However, there is also a feeling of disappointment following Ether’s excruciating 29% correction, which occurred after the $2,000 resistance proved harder to overcome than anticipated. The euphoric expectation of free money probably diminished as investors realized that the forks’ utility would be considerably lower than expected, and reality set in.

For the time being, ETHPoW is a potential new chain supported by proof-of-work (PoW) miners. Some exchanges have started offering futures contracts for ETHW, the native asset of the fork chain. Since the contract is currently trading at Poloniex and Gate.io below $55, the markets appear to have voiced their opinion.

Also Read: Discover The Power Of Ethereum With Consensys

3 Reasons Why Ethereum Hardfork Tokens Won’t Gain Traction

Forked stablecoins lack backing and oracle support.

The two most popular stablecoins, USD Coin (USDC) and Tether (USDT), have formally declared their commitment to support only the Merge chain, supported by the Ethereum Foundation. Given the dominance of the two stablecoins, Cointelegraph has stated that the issuers’ backing “should result in a peaceful transition for Ethereum.” To preserve user assets following the hard split, the core team behind EthereumPoW (ETHW) announced they will temporarily freeze tokens in specific liquidity pools of DeFi applications.

Many people didn’t like freezing consumers’ assets without their permission. The EthereumPoW Twitter account has been referred to as a fraud by certain users because the community has approved no such update. Because DApps interact with external data and demand off-chain processing, which is where blockchain oracle technology comes into play, they go beyond simply facilitating transactions.

By tying smart contracts to data, events, and transactions from the real world, Chainlink improves them. The protocol stated that its services would stay on the Ethereum PoS blockchain, sponsored by the Ethereum Foundation, in an official release on August 8.

The best DApps will encourage users to stop using forked tokens.

Aave (AAVE) owners were prompted to vote on August 16 to “commit” to Ethereum’s PoS consensus, giving a body the authority to halt any Aave deployments on any other Ethereum forks. Aave was initially intended to only run on Ethereum. Still, it has evolved to become an interchain and has official versions supported by Avalanche, Arbitrum, Optimism, Polygon, Fantom, and Harmony.

Investors are beginning to understand that because stablecoins and DApps do not support forked chains, “free” tokens and NFTs are less likely to be accepted in major DeFi applications and marketplaces. The usefulness of the PoS network backed by the Ethereum Foundation vastly outweighs the utility of rival chains, regardless of the ETHPoW token value.

Ethereum Classic never took off.

The argument that a competing chain won’t drive down the price of Ether (ETH) is supported by the pre-existing example of Ethereum Classic (ETC). Despite having a market price of $4.5 billion, the DApps on this competing proof-of-work (PoW) chain never gained traction. The initial hardfork tokens sought to undo a $60 million exploit and came after a 2016 consensus modification.

According to the most recent data, Ether traders should ignore the impending forks and concentrate on the network’s scalability roadmap and whether or not it keeps its position as the leader by total value locked. Every trading and investing decision has some risk. When selecting a choice, you should do your study.