There’s been a bunch of chatter over the last few weeks around a possible Ethereum Proof of Work fork at time of The Merge. Putting aside the fact that this is an obvious money grab attempt, I think walking through the potential implications is an interesting thought experiment. I’ve even come up with a term for this - ‘The ETH Milkshake Theory’.

sassal.eth 🦇🔊🐼 @sassal0x

"ETH milkshake theory" In the event of a PoW fork at time of merge, everyone sells their PoW-tokens for PoW-ETH (at whatever price they can get) and they then offload this PoW-ETH for real ETH on any CEX that has liquidity. Result: ETH giga moons

August 1st 2022

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The ‘ETH Milkshake Theory’ that I talk about above is not something that I’m going to claim will play out but I still think it’s fun to talk about. I mean logically it makes sense that if there is a fork, people would sell off their PoW-tokens for PoW-ETH and then sell that PoW-ETH for real ETH (if they can find liquidity). Though given that this fork is purely speculative and there’s not much new money coming in at the moment due to the wider bear market, I’m not sure if there’s going to be enough demand to offset the extreme sell pressure.

The above also isn’t taking into account all of the nuances around an Ethereum Proof of Work fork such as all of DeFi imploding pretty much instantly. There will almost certainly be no oracle support and no infrastructure support for the chain and then you can couple this with the fact that every DeFi protocol is going to suffer extreme volatility because none of the centralized stablecoins will be worth anything (the issuers will follow the PoS chain). There really will be a race from people to trade any forked tokens they have for PoW-ETH and then hope an exchange has liquidity for PoW-ETH so they can offload it for real ETH or stablecoins.

There’s also the risk of what is called a ‘replay attack’ where transactions you submit on the forked PoW chain could, in theory, be ‘replayed’ on the main PoS chain. From my understanding, this would only happen if the Ethereum PoW chain decided to keep the same chainID as the PoS Ethereum chain - though I’m not an expert on this particular attack vector. Regardless, I still think it’s worth ensuring that you’re aware of any risks associated with interacting with any possible fork of Ethereum so that you don’t put yourself in harms way.

All in all I do think there will be a PoW fork of Ethereum after The Merge, but I think it will be a very short-lived chain that will fade into irrelevancy within a matter of days. The fork isn’t driven by some ideological motivation (like Ethereum Classic or Bitcoin Cash) - it is purely driven by greed. Maybe it would be a more successful venture in a bull market where money is easy to come by - but in a bear market where the only players left are the experienced ones, it will quickly become a race of everyone trying to get out through the one small exit door.

Have a great day everyone,
Anthony Sassano

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All information presented above is for educational purposes only and should not be taken as investment advice.