NFT: Bored Ape (BAYC) Owners And Other Cryptopunks Are Risking Big After Ethereum Merger, Here’s Why

News hardware NFT: Bored Ape (BAYC) Owners And Other Cryptopunks Are Risking Big After Ethereum Merger, Here’s Why

In addition to ETH miners, Ethereum’s merge update is also expected to affect NFT holders. The evolution of the second largest cryptocurrency could have a major impact on collections of non-replaceable tokens such as Bored Ape Yacht Club (BAYC) or Cryptopunks.

The Ethereum merge update

Since 2015, the Ethereum community has been patiently waiting for the update that will move the network from the second largest cryptocurrency to proof-of-stake (PoS). For a few months now, we know that this update, often delayed, should arrive in September. This innovation should disrupt the use of Ethereum.

Ethereum, like other cryptos, uses a proof-of-work system to secure its network. This consensus, known as proof-of-work (PoW), uses computing power (graphics cards, ASICs, etc.) to secure the network. By participating in the smooth functioning of the network, the participants who have used their machines are rewarded in ether.

This validation method, which is considered polluting, will be replaced by proof-of-stake or proof-of-stake in English (PoS). The alternative changes the mechanic based on computing power into another, based on the active use of his treasure chest. Therefore, it allows holders of the asset in question (in this case Ethereum) to use their capital instead of a graphics card for block validation.

NFTs are largely on Ethereum

Ethereum smart contracts are the origin of the “CryptoArt” universe with NFTs. Indeed, cryptocurrency and its network are at the root of the NFT phenomenon we know today with the arrival of a first collection called CryptoPunks in 2017. Each of the tokens built on Ethereum has a unique value and therefore cannot be used. replaced by another token, as opposed to a cryptocurrency.

In addition to the changes it brings for Ethereum miners, this famous update could affect the entire NFT sector. When The Merge takes place, NFT owners will also have to adapt to how cryptocurrency works.

Forks: Ethereum Clones

While a majority of the members of the Ethereum ecosystem are eagerly awaiting these changes, for reasons of efficiency, speed and durability, others are more attached to the PoW version of Ethereum.

In this context, the cryptocurrency will see an explosion of its “hard forks” to satisfy the majority of users.

A fork, literally meaning “branch”, occurs when there is a difference of common rules within a blockchain (network of a cryptocurrency). Specifically, this event results in a split of part of the network when the users do not agree with the current version. In short, this separation allows users of the fork to enjoy a similar network before an update comes out. For example, some prefer world of warcraft classic over the current version. There are already several hard forks of Ethereum such as ETHPoW or Ethereum Classic.

Copies of NFTs on multiple blockchains

With the arrival of the new Ethereum PoS update, NFTs are likely to appear on both chains. In the update process, Ethereum is expected to replicate its tokens to its new network. Thus, the original NFTs should exist on the initial PoW chain and on the new PoS.

In this perspective, the biggest studios behind the collections have already taken the lead. Yuga Labs, owner of Bored Ape Yacht Club of Cryptopunks, has clarified that it will only consider NFTs from the new Ethereum PoS chain.

This change is sure to leave digital license owners wondering which NFT has the most value: the one on the initial blockchain or the one on the new version?

Aside from questions about the “authenticity” of the new NFT, this update could have real implications for uninformed token holders.

A mistake that can be expensive

Adam McBride, an NFT “archaeologist” explained the potential risks to NFT owners as a result of the merger.

In a Twitter thread, McBride specifically highlighted the possibility of a “replay attack”. Replay attack is a phenomenon where an action is repeated on both chains at the same time.

Imagine you sell your NFT Bored Ape registered on the first PoW chain for a paltry sum as it only has value on the new Ethereum PoS chain. In itself, the idea seems interesting, as some want to obtain these tokens that are considered “original”, so why reap the benefits of your token one last time by reclaiming some ether.

Only, once sold, the second owner could do the same transaction again, and this time on the new version of Ethereum. In this case, if you sold your Bored Ape for 1st on the old chain, it could leave for the same price on the PoS chiane, while being worth 70 times more.

While the theory is correct, in practice this is unlikely to happen. To do this, most NFT platforms should have integrated forks of Ethereum PoW, but this is not in the projects of industry leaders like Opensea.

The upcoming changes around NFTs after the Merge update involve thinking about non-functioning tokens and their new use on Ethereum 2.0. Major differences as NFTs are one of the engines of Ethereum and are a major contributor to the income of network participants. In addition to these questions, this update offers more than positives for NFTs, namely more convenience and speed during trades.

About NFTs

What is an NFT?

An NFT is the abbreviation of Non Fungible Token or non-fungible token in French. NFTs are cryptographic tokens issued on a blockchain.

By leveraging this technology in the creation of cryptocurrencies, NFTs enroll inviolable properties in this virtual registry. As a result, NFTs are real proofs of digital ownership.

Is an NFT necessarily an image?

A distinction must be made between an NFT and the associated object. After all, the non-fungible token is primarily a virtual certificate of ownership and not the digital file as such. An NFT is usually associated with a photo or video, but it can also take the form of text, music, or any other digital or physical format.

What is an NFT used for?

NFTs are generally used to assert proprietary rights online. For example, the owner of a token of a virtual work can collect royalties, ensure respect for the intellectual property of his digital object, etc.

In particular, this feature has enabled the NFT to shine in art by creating value and rarity in digital images available on the Internet. In addition to art, this technology also offers multiple applications in different sectors such as in video games, the traceability of a product, etc.

How is the value of an NFT defined?

These tokens are non-functioning i.e. they have a unique value unlike cryptos, which are fungible (1 bitcoin = 1 bitcoin).

The price of an NFT is therefore arbitrarily determined by the owner of the token. This price is usually in cryptocurrency, usually in Ether (ETH).

How to buy and sell NFTs?

NFTs are generally bought or resold on trading platforms such as Opensea or Foundation.

What is an NFT Coin?

The “Mint”, or strike in French, is the first process of selling a token. To be a permanent part of the blockchain ledger, these new tokens must be mint. Through this action, the user comes to complete a transaction with his fees to see his token appear first hand on the blockchain.

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