The crypto market has somewhat recovered in July, although as always, it has had its ups and downs. On Thursday, the price of Ethereum Classic, which some had pronounced dead, has nearly tripled on speculation that the miners who have been mining ether will switch to Ethereum Classic after the so-called “Merge.”
CoinDesk noted that Ethereum Classic wasn’t the only out-of-favor altcoin to rally this week. Polygon’s Matic has roughly doubled this week, while Uni, the product of decentralized exchange Uniswap, has climbed 86%. Analysts told CoinDesk that coin-specific factors are driving these altcoins’ prices, adding onto the effects of the rising risk appetite across the rest of the financial markets.
What Is The Merge?
The widely anticipated Merge isn't expected to happen until Sept. 19, but crypto enthusiasts have been so excited about it that they're already factoring it into their crypto trades. The Merge is Ethereum's upcoming shift from the proof-of-work blockchain it currently operates on to a proof-of-stake blockchain.
The Beacon Chain, which will be the backbone of Ethereum's new proof-of-stake network, has been running since December 2020 to prepare for the Merge. After the Merge, the Ethereum blockchain will require users, referred to as validators, to hold or "stake" at least a certain number of coins so that they can receive rewards in exchange for confirming transactions. That's how a proof-of-stake network works.
Since its inception, Ethereum has operated on a proof-of-work system, which is widely considered to be inferior to a proof-of-stake network. Bitcoin, the original blockchain, also operates on a proof-of-work network, which requires miners to solve complex math problems to verify transactions.
Why Is The Merge Important For Ethereum Classic?
Analysts told CoinDesk that the Merge will require miners currently mining ether to find another cryptocurrency to mine. Most crypto owners expect those miners to switch to mining Ethereum classic, which is said to be the only other chain that's compatible with the equipment used to mine Ethereum.
In a recent report, Sami Kasab of Messari said Ethereum's mining network consists of two types of hardware, which are ASICs and GPUs. He explained that ASICs can't be repurposed for other applications aside from mining ether. Additionally, Ethereum Classic is the only other proof-of-work coin miner can mine using an ETH ASIC because its hashing algorithm is compatible with ether's algorithm.
Ethereum Classic resulted from a hard fork of Ethereum following a hack of The Dao smart contract on the Ethereum blockchain in 2016. AntPool, a mining pool affiliated with Bitmain, recently invested $10 million in the Ethereum Classic ecosystem.