Bitfinex Preps for Merge Eventualities, Offering Ethereum ‘Chain Split Tokens’

Ethereum’s transition from a proof-of-work consensus (PoW) protocol to the 99.95% greener and more scalable proof-of-stake (PoS) protocol is almost here, but there are still unanswered questions about what will happen next.

The most notable of which asks: Will Ethereum’s current miners fork the network onto a separate blockchain that continues to use PoW?

Crypto exchange Bitfinex is prepared for all eventualities.

Today, it announced the launch of the so-called Ethereum Chain Split Tokens (CST). The new CST tokens are named ETHW (representing Ethereum on a PoW Ethereum blockchain) and ETHS (representing Ethereum on PoS). 

The CST tokens expire on December 31, 2022. Until then, though, customers can generate them via Bitfinex’s token manager. Once CSTs have been generated, ETH gets debited from the user’s wallet and an equivalent of both ETHS and ETHW gets credited to their derivatives wallet in a fully reversible process. 

Bitfinex has identified three possible eventualities post-merge.

Either it doesn’t happen, in which case ETHS expires and ETH will be given to every ETHW holder; Ethereum becomes a PoS network with no fork, in which case the reverse will happen; or both merge and fork happen, in which case users will be credited with their ETHW and ETHS tokens. 

Forking the Ethereum merge

Twelve days ago, Ethereum finished the “final dress rehearsal” for the merge when Goerli, the network’s third and final testnet, successfully switched over to a PoS consensus algorithm.

Now, with the grand event supposedly less than a month away, the possibility of Ethereum PoW miners creating a fork is getting more apparent. 

On Tuesday last week, Singaporean exchange Bitrue announced its own ETHW token to support any PoW version Ethereum that “merge resistors” will create by forking the Ethereum blockchain at the time of the merge. Bitrue will also create an ETHS token representing the new post-merge PoS Ethereum. 

In recent weeks, other crypto exchanges—including Justin Sun’s Poloniex, Huobi, and BitMEX—have all launched ETHW-affiliated financial products. Binance, the world’s largest cryptocurrency exchange by volume, hasn’t ruled out supporting ETHW. 

Other major crypto companies, however, including Circle and Tether (providers of the two largest stablecoins, USDC and USDT, respectively), have stated their refusal to back ETHW in any form. 

Poloniex’s ETHW token attracted a bit of buzz when it was released at the beginning of the month, although it has since lost more than 62% of its value.

It currently trades for about $51, a 6% increase in the last 24 hours. By comparison, Ethereum is down 13% this week.