Following the upgrade, Grayscale, the world’s largest digital asset manager, planned to review and decide whether to sell the former PoW system tokens. But in a recent report, the company noted that it is extending its review.
In September 2022, the Ethereum blockchain network moved from its former Proof-of-Work system to the current Proof-of-Stake consensus mechanism. The move was necessary as the PoS consensus protocol is not energy-intensive but more secure and valuable for deploying new scaling solutions.
According to Grayscale’s announcement, the review extension will last 180 days. This will give the company ample time to decide the manner, the time, and the possibility of selling ETHPoW – the asset after the network’s Merge in September 2022.
The asset manager cited the environmental concerns surrounding PoW, which is high energy consumption levels to validate transactions, as a critical motivator for the review. Moreover, the firm is also concerned about the uncertainty of trading venues and crypto asset custodians. It noted in the announcement that the trading venues are still not established for the EthereumPoW tokens.
Based on the report, the price of the ETHPoW may fluctuate if the crypto asset custodians support the tokens or if there’s a notable development in the trading markets.
Meanwhile, Grayscale’s review is a crucial step in adopting PoS, as the asset manager holds a significant amount of Ethereum in its Grayscale Ethereum Trust. It’s possible that through the review of ETHPoW, other major institutions will also reconsider their stance on the proof-of-work system.
Ethereum Forks Into Two Blockchains
The Ethereum network completed its Merge in September 2022, a significant upgrade. Following the Merge, the network now operates on a PoS consensus algorithm, with notable differences from the former PoW.
However, some of the community members seemed to prefer the mining system of the PoW model. This resulted in the network forking into two blockchains – EthereumPoW and the major Proof-of-Stake network.
While the ETHW may benefit community members who prefer to mine through the system, it’s also challenging for digital asset companies that offer exposure to only Ethereum. This is particularly true as some investors might desire exposure to EthereumPoW.
Meanwhile, some companies are already contributing to the challenge by planning to provide a new ETP (exchange-traded product) to facilitate investors’ exposure to EthereumW. However, given the uncertainty of its sustainability, the new ETP will serve as a backbone for the ETHW.
Meanwhile, the extension of Grayscale’s review is considered a positive step for ETH and the cryptocurrency industry as a whole. As the network continues to develop on its PoS system, the adoption of this consensus mechanism by significant institutions such as Grayscale will likely increase over time.
Featured image from Pixabay and chart from Tradingview.com
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Eli brings an eclectic point of view to market analysis. He was previously a brokerage director and online trading educator. Currently, he acts as a commentator across various asset classes, including Crypto, Stocks and FX, whilst also a startup founder.