Ethereum has undergone major changes since its first release, but nothing quite as big as when Ethereum moved from a proof-of-work to a proof-of-stake consensus mechanism. That’s when the Ethereum development team introduced significant changes to the network, including lowering the amount of ETH required to create new blocks, a steep increase in daily block creation, and a substantial decrease in average block time.
But what exactly is ETHW? Why is this change necessary? And how will it affect your holdings and transactions?
In this article, we'll tell you everything you need to know about what ETHW is and how it differs from Ethereum Classic (ETC), Ethereum (ETH), and Ether tokens.
Forks in a blockchain network are splits that divide the network into two. Blockchain networks run on open-source software, with readily available source codes; this means that anybody may add modifications to the code. The flexibility to experiment with open-source software is essential for cryptocurrencies and allows blockchain software upgrades.
Forks happen when separate miners' software becomes misaligned and decides that something fundamental about a coin has to change. This can result from a massive hack, as with Ethereum, or a fundamental dispute among the community, as with Bitcoin and Bitcoin Cash.
It is up to miners to pick which blockchain to use in the future. Two copies of the blockchain may be created if a resolution cannot be reached unanimously. Price volatility may spike in the aftermath of such incidents. On the other hand, the vast majority of bitcoin splits are done on purpose. They arise when engineers edit the source code to add new features, repair vulnerabilities, or change the basic laws of network functioning.
Typically, the forked code is identical to the original but with significant changes that are permanent and necessitate network users upgrading their software to the most recent version. Intentional forks can result in the creation of a new protocol, digital asset, or even community. Cryptocurrency forks happen in various forms, though, regardless of their nature, they have a common parent protocol and share the transaction history before the split.
Understanding The Ethereum Hard Forks
Ethereum has a history of hard forks, which has resulted in the Ethereum Classic, ETC, and now Ethereum Proof-of-Work, ETHW.
Ethereum Classic (ETC) was a significant historical hard fork related to the decentralized autonomous organization (DAO) founded on the Ethereum network in 2016. The DAO was hacked shortly after its introduction for $60 million in ETH from 11,000 investors. Because Ethereum was trading below $10, around 14% of all circulating Ether was invested in the DAO, and the breach significantly damaged network confidence.
A dispute erupted within the Ethereum community as everyone rushed to figure out how to respond to the assault, leading to the proposal of a hard fork. The hard fork was eventually implemented, resetting the Ethereum network's history before the DAO attack and reallocating stolen crypto to a smart contract where investors could withdraw their funds. Those who disliked this move rejected the hard fork and supported an earlier version of the network, now known as Ethereum Classic (ETC).
What Is ETHW
In September 2022, the Ethereum blockchain shifted from a proof-of-work (PoW) consensus mechanism to a proof-of-stake (PoS). Along with this change, ETHPoW, a unique PoW blockchain split from Ethereum's Merge (essentially the old pre-Merge Ethereum), went online. This forked version of Ethereum aims to keep the proof-of-work mining mechanism for ETH miners.
Any miner may contribute a block to the PoW network, with the explicit requirement that the first valid block released be correct. However, due to the slowness of data propagation, the network occasionally discovers more than one legal block, resulting in several branches of the blockchain, known as a fork.
"The Merge" Ethereum update decreased the need for miners. Instead of utilizing expensive and energy-intensive equipment to safeguard the network, it replaced them with validators who stake Ether, dramatically enhancing the cryptocurrency's energy efficiency. However, before the Merge, a hard fork of the Ethereum network dubbed ETHW, which still implements the PoW consensus process, was created.
ETHW miners will continue to tackle arbitrary mathematical tasks to validate transactions and mine new tokens. In exchange, they will receive ETHW, the native asset of the ETHPoW chain.
What ETHW Means For Ethereum
The Ethereum network was split into two versions following the Merge: ETH, which utilizes the PoS consensus process, and ETHW, which uses the older PoW algorithm. While old Ethereum validators must stake ETH to generate money, ETHW miners earn new tokens as mining rewards.
Hence, existing miners with equipment on the Ethereum network are drawn to ETHW because, in the absence of a proof-of-work consensus mechanism, they risk becoming bankrupt when new tokens are issued to the blockchain through the staking process.
It is important to note that ETH 2.0 isn't a hard fork; instead, it combines the execution (mainnet) and consensus (Beacon chain) layers, dubbed the "merge." Although several exchanges and applications have supported Ethereum's split version (ETHW), its low price has made mining challenging for miners. ETHW has dropped around 83% in the last week, while ETH has dropped approximately 24%.