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Binance – the world’s largest crypto exchange – has released a statement explaining how it will ensure a smooth transition to a proof of stake (POS) Ethereum next month.
In particular, it covered how it will compensate users in the event of an Ethereum fork, during which two different blockchains and versions of ETH could emerge.
Binance’s Merge Plan
Per the company’s statement on Thursday, there are “two likely scenarios” that could occur during the merge that may impact how Binance reacts to protect its users.
On one hand, there could be no new fork, and no new token will emerge. This will be the simplest scenario for Ethereum users, as it will allow them to deposit and withdraw their ETH / ERC-20 tokens as early as possible.
On the other hand, if Ethereum splits into “two competing chains,” Binance will grant the Ethereum POS chain the existing ETH ticker. Meanwhile, the company will credit the accounts of ETH holders with units from the minority fork, at a 1:1 ratio based on a chain snapshot right before the Paris upgrade.
Withdrawals for the forked token will be made available at this time. However, Binance will not list the token for trade until it finishes a listing review process, as is done with other coins.
“Binance reserves the right to update the treatment of the chain split in a further announcement,” noted the firm.
Binance, similar to Coinbase, will be required to temporarily suspend such activity during Ethereum’s consensus layer upgrade (Bellatrix) on September 6th, and during its execution layer upgrade (Paris) on September 15th. Spot and margin trading at the exchange will remain unaffected.
“Please ensure that you leave sufficient time for your ETH and ERC-20 tokens transfers to be fully processed prior to the above time,” warned Binance. “We will handle all technical requirements for users holding ETH and ERC-20 tokens on Binance.”
A Possible POW Fork
A consortium of Chinese Ethereum miners, including Chandler Guo, have been orchestrating an Ethereum hard fork that will retain Ethereum’s proof of work mechanism after the merge. Without proof of work, existing Ethereum miners will be left out of a job.
BitMEX has already enabled leveraged exposure to the speculative “ETHPOW” fork, should it actually launch. However, such forks may have trouble gaining traction without support from other organizations within the Ethereum ecosystem.
For example, both Tether and Circle – the largest stablecoin providers – have confirmed that they will exclusively support redemptions on the Ethereum POS chain after the merge.
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