NFT holder may receive duplicates that are not only less valuable, but also dilute the worth of the original assets
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What Happened
Leading smart contract platform Ethereum underwent its biggest upgrade yet, as The Merge was successfully executed on the morning of September 15th. Often analogized as “changing the engine of an airplane mid-flight”, the platform switched out its energy-intensive proof-of-work consensus mechanism for an environmentally-friendly proof-of-stake alternative.
Although this transition will not immediately impact Ethereum’s performance, it is a necessary first step towards subsequent upgrades that will improve its throughput and efficiency. Once these stages are complete, Ethereum will be capable of handling thousands of complex platforms and applications that utilize NFTs.
However, that does not mean that NFT holders, especially those that are based on Ethereum, do not have important decisions to make today. For instance, a widely anticipated Ethereum fork, i.e. a derivative that is sticking with proof-of-work, could lead to NFT holders holding duplicates that have wildly different values. In addition, NFT prices have declined in the days since The Merge as part of an overall market selloff.
Broader Context
Ethereum is the dominant home of NFT activity and trading, making up 76% of all NFT volume. This is followed by Axie Infinity’s sidechain Ronin with 11% share of trading volume, Solana with 7%, Flow with 3%, and Polygon with 1%. The successful Merge, along with subsequent updates planned in the coming months and years dubbed Surge, Verge, Purge, and Splurge, should help the network protect its head start against competitors that offer cheaper and faster transactions.
However, that does not mean that The Merge did not leave loose ends. Upset by the upgrade cutting them out of the network, a group of Ethereum miners have banded together and launched a forked version of the Ethereum chain that retains proof-of-work, the new chain being called EthereumPoW (ETHW). For NFT holders this means that they may now own duplicates of their assets, but their value will depend on the level of exchange support and overall adoption of this forked network.
The largest NFT marketplace, OpenSea, announced that it would only support NFTs on the upgraded Ethereum PoS chain. Similarly, creators of the Bored Ape Yacht Club collection, Yuga Labs, announced that they intend to only recognize licensing and copyright of the collection for owners of the NFTs on the upgraded PoS chain.
On the contrary, competing NFT marketplace Rarible took the opposite stance. Rarible stated it will recognize any copies of NFTs resulting from a fork created in the same wallet address when they were held on Ethereum. Duplicate NFTs may also cause confusion, opening the door to new scams and rug pulls, in a space already rife with bad actors and malicious activity. More companies and projects are expected to make similar decisions as the…
Read More: www.forbes.com