After 'Merge Upgrade,' Proof-of-Work Ethereum Classic Also Declines

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Lee Jung-yoon] Following the Merge upgrade and Ethereum's transition to Proof of Stake (PoS), its price has been on a downward trend, and Ethereum Classic, which maintains the original Proof of Work (PoW) method, is also experiencing a decline.

According to the global cryptocurrency market tracking site CoinMarketCap, as of 10:33 AM on the 27th, the price of Ethereum Classic was recorded at $28.85 (approximately 41,120 KRW). Earlier this month, it was $32.94, and before the Merge upgrade on the 15th, it surged to $39.33 but has since declined.

Ethereum Classic can be obtained through mining, which involves Proof of Work and computer computational processing to participate in the blockchain, but miner participation is decreasing. According to data from the cryptocurrency mining information site CoinWarz, as of midnight on the 16th, the day after the Merge upgrade was completed, Ethereum Classic's hashrate rose to 225.43 terahashes per second (TH/s). Compared to 60.49 TH/s recorded the day before, this is about a 3.73-fold increase. However, after the upgrade, the hashrate has steadily declined to 135.50 TH/s as of the previous day. The hashrate indicates the speed at which mining occurs; when miner competition decreases, it falls. As the hashrate decreases, mining becomes relatively easier, increasing the likelihood of a price drop.

Ethereum's price is also weak. Ethereum, which was trading in the $1,500 range earlier this month, dropped to the $1,300 range on this day. Although the Merge upgrade transitioned Ethereum to a Proof of Stake system, where holders stake their cryptocurrency to participate in validation and earn coins as rewards, thereby reducing carbon emissions, the price remains weak.

Ethereum Classic originally emerged as a coin opposing Ethereum. After the Ethereum network's "The DAO" hacking incident, developers decided to move to a new blockchain through a hard fork. The newly created blockchain became Ethereum, and Ethereum Classic maintained the original method in opposition. Therefore, when Ethereum transitioned to Proof of Stake due to the Merge upgrade, investors and miners supporting Proof of Work focused their attention on Ethereum Classic. Ethereum founder Vitalik Buterin even stated, "If you prefer Proof of Stake, you should consider moving to Ethereum Classic."

However, with both Ethereum and Ethereum Classic showing simultaneous price weakness after the Merge upgrade and having different blockchain systems, analysis suggests that factors surrounding the coin market, such as interest rate hikes and inflation, are strongly influencing the situation. Professor Hong Ki-hoon of Hongik University's Department of Business Administration explained, "It is more likely that the prices of Ethereum and Ethereum Classic fell together due to poor market conditions rather than issues with Proof of Stake or Proof of Work."