The long-awaited merging of Ethereum, which will transform the top network for dapps and NFTs into a more energy-efficient one, is just days away. Although it has been years in the making, many users are beginning to question what might go wrong and whether anything will change with their owned assets as the mid-September objective approaches.
The NFT market has experienced a meteoric rise in recent years, and this is particularly true given the tens of millions of profile images, collectibles, and works of art that are currently running on Ethereum. Some of these items have commanded eye-popping prices. After the merger, what happens to your NFTs?
The short answer is probably nothing. They’ll still be in your wallet and should continue to work normally in dapps and on marketplaces. However, the overall situation is more complicated than that, especially because it is anticipated that community-led forks of Ethereum would appear after the merger. As a result, duplicate NFTs will surface, potentially leading to confusion and scams.
What should you know about Ethereum NFTs before the integration and what can occur as a result? When asked what to expect as the multi-billion dollar NFT sector prepares for some anticipated twists and turns, Decrypt consulted with Ethereum experts.
On the merged chain
According to the Ethereum Foundation, the merger will cause Ethereum to switch from its current proof-of-work mining model, which needs a lot of decentralized power to process transactions, to a proof-of-stake consensus mechanism, which is predicted to use over 99% less energy. That completely disproves one of the main arguments of NFTs, which is a tremendous step forward for Ethereum in general.
The merger will cause Ethereum to switch from its current proof-of-work mining model, which needs a lot of decentralized power to process transactions, to a proof-of-stake consensus mechanism, which is predicted to use over 99% less energy.
The integration has been planned for years, as previously indicated, and Ethereum’s core developers have rigorously tested each step and worked around any hiccups. Although there is no assurance that the change will go smoothly, most developers and creators anticipate a rather smooth process.
However, if all goes as planned, the newly enhanced mainnet for Ethereum should be able to support Ethereum NFTs without any issues. You need not take any action in front of the merge because they will continue to be stored in your wallet(s) and continue to function normally on marketplaces. In order to facilitate a smooth transition, all of that is being handled on the developer side of things.
Split considerations
There are significant opponents, despite the fact that the majority of the Ethereum community seems to support the merger and its potential advantages. Due to the security advantages of the energy-intensive procedure or the incentives gained by miners who operate the computer rigs, some proponents of Ethereum don’t want the chain to move away from proof-of-work mining.
Due to the security advantages of the energy-intensive procedure or the incentives gained by miners who operate the computer rigs, some proponents of Ethereum don’t want the chain to move away from proof-of-work mining.
Because of this, some developers in the Ethereum community intend to split the blockchain and build a spinoff chain that maintains the present proof-of-work architecture. ETHPOW, led by renowned Chinese miner Chandler Guo, is the most well-known example to date.
The merged mainnet of Ethereum will be different from ETHPOW. It will be something akin to how Ethereum itself forked off its main chain in 2016 to deal with the consequences from The DAO breach, and some users continued to support the main chain under the new name, Ethereum Classic. However, a lot has changed since then, and a tonne more assets exist now, including NFTs.
Duplicate versions of Ethereum’s NFTs will be produced as ETHPOW and any other forks split off from the Ethereum mainnet. A blockchain token known as an NFT can serve as a title to digital goods like artwork and collectibles. As a result, a split Ethereum chain will contain multiple deeds that refer to the same piece of artwork or material.
What does this indicate? You might find both versions of the token displayed if an NFT marketplace supports both the merged mainnet for Ethereum and the disputed proof-of-work fork. This is bound to cause confusion, and scammers may try to sell copied versions of popular NFTs, such as Bored Apes and Beeples, to inexperienced crypto consumers.
Replay attacks, what about those?
There has been significant discussion about the possibility of a “replay attack” in the lead-up to the merging, which would mean that a transaction made on the proof-of-work fork may later be “replayed” on the proof-of-stake Ethereum mainnet.
A Bored Ape Yacht Club NFT owner might sell the duplicated copy on the proof-of-work chain, but if the identical transaction were to be “replayed” by an evildoer on the merged proof-of-stake chain, the seller might also lose the original copy on that chain. Some NFT collectors would find it to be a very expensive lesson to learn.
“There will be no problem with replay attacks,” Van Der Wijden added, noting that ETHPOW will have its own unique chain ID.
At least with ETHPOW, the most visible proof-of-work fork on the horizon, none of that is likely to occur. Ethereum core engineer Marius Van Der Wijden told Decrypt that replay attacks are only conceivable if the blockchains share the same chain ID; Guo also independently assured Decrypt that ETHPOW will use a different chain ID.
“There will be no problem with replay attacks,” Van Der Wijden added, noting that ETHPOW will have its own unique chain ID.
However, with any additional proof-of-work chains forking from Ethereum, that might not be the case, which creates the possibility of cross-chain chaos. Powell provided easy recommendations for NFT collectors to follow in order to prevent problems, but doing so means missing out on the possible cash-in from selling duplicated assets.
Platforms and Projects decide
Anyhow, the ETHPOW chain and other hypothetical forks will result in duplicate NFTs, and there may be some uncertainty as to which assets are “official” or “legitimate.” However, a feeding frenzy could occur for these copies as NFT owners try to sell the proof-of-work versions of their precious tokens.
This window might only last a short while. Few people in the Ethereum community anticipate that any proof-of-work fork of the blockchain will be a long-term project with considerable user support.
There is also the broader, blockchain-level social consensus that is apparently developing around the combined proof-of-stake chain as the “official” home of Ethereum NFTs. Beyond that, however, marketplace operators and project developers are also indicating that they will only accept Ethereum’s unified mainnet as valid, and that forked copies will remain unofficial copies.
Only those who have their NFTs on the combined Ethereum proof-of-stake chain would be eligible for advantages within Yuga’s communities, according to Yuga Labs, the company that founded the Bored Ape Yacht Club is currently the owner of the CryptoPunks IP. This was confirmed two weeks ago. Similarly, only those owners are permitted to monetize their photographs for derivative artwork and projects.
In a statement to Decrypt, Proof, the startup behind the members-only Proof Collective and the valuable Moonbirds NFT project, stated a similar stance.
And it’s not just about projects. OpenSea, a prominent marketplace that controls a significant portion of the Ethereum NFT market, likewise declared that it will only support the proof-of-stake chain. It may help a sizeable portion of collectors avoid misunderstanding and scams surrounding fake NFTs by refusing to list NFT assets on forked Ethereum proof-of-work chains.
Only those who have their NFTs on the combined Ethereum proof-of-stake chain would be eligible for advantages within Yuga’s communities, according to Yuga Labs, the company that founded the Bored Ape Yacht Club is currently the owner of the CryptoPunks IP.
To put it another way, Ethereum developers think that after the merge, NFTs will continue to operate normally, that any momentum surrounding duplicate NFTs on forked chains would be fleeting, and that big marketplaces and authors won’t even acknowledge official copies on such forked networks.
Granted, that is no guarantee that everything will proceed as planned. It’s possible that the merge will experience technical difficulties or that there will be a lot of interest in duplicate NFTs, which could cause confusion and fraud. In the coming weeks, staying informed, steering clear of potentially dangerous contacts, and waiting for any problems to be rectified may be the best strategy for NFT collectors.