Qredo, The Merge, and the Spectre of ETHPow

Fellow Qredonians,

The Merge is expected to take place in mid-September 2022,  and will be the biggest milestone yet in Ethereum's short history.

This post explains what the event is, how we plan to support Qredo users, and the risks of interacting with potential forked chains such as ETHPoW.

What is the Merge?

The Merge is Ethereum's transition from proof-of-work to proof-of-stake. Specifically, it is the joining of the existing execution layer of Ethereum (the Mainnet we use today) with its new proof-of-stake consensus layer, the Beacon Chain. This transition will eliminate hash-based mining and reduce the network's energy consumption by approximately 99%. It is also expected to reduce the Ether issuance rate by 85%.

Will the Merge impact Qredo? 

The Qredo team will be on heightened alert in the period up to and including the Merge, and we have been coordinating with our infrastructure providers to ensure services are not negatively impacted. Both Ropsten and Goerli testnets were successfully merged without any disruption or downtime.

What is ETHPoW?

There has been speculation about a proposed Ethereum PoW fork which, post-Merge, will continue to use the legacy proof of work consensus to validate transactions. Some exchanges have already added support for the token ETHPow as an IOU.

WIll Qredo support ETHPoW?

Qredo will not be adding Layer 2 support for ETHPoW or ETHPoW-enabled tokens for the time being. This is mainly to protect users from the heightened risk of scams and technical vulnerabilities.

Nevertheless, as ETHPoW will be an EVM-compatible chain, Qredo users will still be able to interact with it through MetaMask Institutional (and the WalletConnect beta). 

We strongly advise that users who are not familiar with the advanced features of Metamask do not interact with ETHPoW. But if you do choose to interact with with the forked ETHPow network, please be aware of several key risks that Qredo cannot shield users from:

1. The code for ETHPoW is not public or verified and infrastructure support is limited.

   Proponents of the ETHPow network are (as of 11/08/2022) still yet to provide software for a node client that will validate transactions according to the ETHPoW network rules. Furthermore, there are no 'blockchain-as-a-service' providers supporting the fork and hence no API access for MetaMask or Block Explorers.

2. Transacting on ETHPoW exposes your address to replay attacks

   Attack scenario: Alice has 1000ETH at address 0xAAAA at the point at which the Ethereum network transitions to PoS and the ETHPow fork begins. Alice now has 1000ETH and 1000ETHPoW.

   Alice decides to sell her ETHPow. She creates a transaction to deposit 1000 ETHPow to exchange address 0xBBBB, signs and broadcasts it to the ETHPow network.

   Charlie sees Alice's transaction in the ETHPow mempool and immediately broadcasts it to the (real) Ethereum network. Both transactions are valid and will be confirmed. Alice has now lost control of her 1000ETH, which has also been sent to 0xBBBB on the Ethereum network.

   Qredo MPC cannot protect your assets against replay attacks. If you choose to transact on the ETHPoW network without taking the necessary 'replay protection' steps, you risk losing your assets on the Ethereum mainnet. As discussed here, there are steps that you can take to mitigate the risk of your transactions being replayed.

3. No major backed stablecoin projects (such as USDC) intend to support ETHPoW

   Without stablecoins, it is unlikely that ETHPoW will be able to sustain a DeFi ecosystem.

For more information on Qredo and the impact of the Ethereum Merge, speak to a Qredo Specialist.