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The Ethereum Merge to proof-of-stake finally completes: What does this mean for ETH hodlers?

By Daniela Ešnerová

15:22, 15 September 2022

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ETH/USD
Ethereum / USD
1276.61 USD
12.26 +0.970%
BTC/USD
Bitcoin / USD
17103.25 USD
115.15 +0.680%

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Illustration of the ETH icon along with the words Ethereum and The Merge
Forked token handout, potential tax implications and window of opportunity for attackers are among the things to keep in mind for ETH holders – Photo: Shutterstock

On 15 September 2022, the Ethereum network finalised its much-delayed migration from proof-of-work (PoW) to a proof-of-stake (PoS) consensus mechanism.

The final PoW block was mined, which was immediately followed by Ethereum’s original PoW chain merging with its PoS chain, dubbed the Beacon Chain, almost two years after Beacon was launched – and more than six years after Ethereum (ETH) developers first revealed the world’s second biggest blockchain's intention to move to PoS.

But what does the successful switch mean for ETH hodlers? 

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ETH to US dollar

Forked token ETHW airdrop

The Merge was seen as a historic event. But will it have any implications for those holding the biggest altcoin?

ETH holders will be eligible for a newly-dropped forked token, but if they choose to claim it, they should keep potential tax implications in mind. 

“The Merge combines the old ETH1 chain (execution chain) with the new ETH2 chain (Beacon Chain). The Beacon Chain has replaced the miners, but the execution chain remains the same, hence ETH holders do not have to do anything as their ETH still operates in the exact same way,” said Marc Arjoon, research associate at CoinShares.
 
“However, miners no longer have a chain to sell hash power to, so a portion of the mining community has signaled support for a PoW fork. This fork is a copy of the original Ethereum chain right before The Merge.

BTC/USD

17,103.25 Price
+0.680% 1D Chg, %
Long position overnight fee -0.0500%
Short position overnight fee 0.0140%
Overnight fee time 22:00 (UTC)
Spread 66.00

DOGE/USD

0.10 Price
+2.300% 1D Chg, %
Long position overnight fee -0.0500%
Short position overnight fee 0.0140%
Overnight fee time 22:00 (UTC)
Spread 0.0015775

LUNC/USD

0.00 Price
-2.830% 1D Chg, %
Long position overnight fee -0.0500%
Short position overnight fee -0.0500%
Overnight fee time 22:00 (UTC)
Spread 0.00000722

XRP/USD

0.39 Price
-0.340% 1D Chg, %
Long position overnight fee -0.0500%
Short position overnight fee 0.0140%
Overnight fee time 22:00 (UTC)
Spread 0.00321

Every ETH holder will be entitled to an equivalent amount of the new PoW ETH token (ETHW), said Arjoon,  adding that ETH holders can claim their ETHW coins once the PoW chain is live.

Should holders who are also US taxpayers choose to claim the new coin, they should watch out for potential tax implications as the Internal Revenue Service may treat the new coins as taxable income.

BTC to US dollar

Window of opportunity for attackers

The new consensus mechanism comes with a possible opportunity for attackers, Arjoon also warned. But he added bad actors will not have an easy job.

He said: “Unlike PoW, under Ethereum’s PoS, the next block creator is known ahead of time. This opens a window for an attacker to spam the upcoming validator to prevent them from completing the task. However, this is a difficult attack to successfully execute and there are numerous defence mechanisms against it.
 
“Furthermore, PoS is a relatively new concept that adds additional layers of complexity above and beyond PoW. The health of the network will be determined by how many validators are online and whether the blocks are finalising (unable to be removed from the chain).”

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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