The upcoming Ethereum merge has sparked widespread speculation, particularly around the potential for a proof-of-work (PoW) fork. With rumors swirling about "free money" from duplicated assets, many investors are tempted to act. But Robert Leshner, founder of the decentralized lending protocol Compound, is sounding the alarm: don’t be reckless.
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In a widely shared warning, Leshner urges both newcomers and experienced users to exercise extreme caution when dealing with forked chains—especially when it comes to signing transactions or trading supposedly “worthless” stablecoins like USDC on a PoW Ethereum chain.
What You Need to Know Before the Merge
As the Ethereum network transitions from proof-of-work to proof-of-stake, uncertainty abounds. While most of the ecosystem supports the merge, there remains a possibility of a minority-led PoW fork. This scenario creates technical and financial risks that every holder should understand before taking action.
Here’s what Robert Leshner recommends every investor consider:
- Avoid scams at all costs. Periods of high volatility and technological change attract malicious actors. Phishing sites, fake wallets, and fraudulent airdrop schemes often surge during major upgrades. Always verify URLs, avoid clicking unsolicited links, and never share your seed phrase.
- Limit leverage and risk exposure. Now is not the time to overextend your portfolio. The market could swing sharply in either direction around the merge window. Preserve capital rather than chasing speculative gains.
- Secure your assets properly. Whether you choose a trusted custodial exchange or a self-hosted hardware wallet, ensure your private keys are protected. If you're interacting with any forked chain, use a separate wallet to minimize cross-chain exposure.
These principles apply universally—but they become even more critical if a PoW fork materializes.
The Reality of PoW Forks: No Free Lunch
A common misconception is that a blockchain fork automatically doubles your holdings. For example, if you own 1 ETH pre-fork, you might assume you’ll have 1 ETH on the new proof-of-stake chain and 1 PoW ETH on the forked chain.
But here's the catch: not all assets will retain value—especially stablecoins like USDC.
Leshner emphasizes that in the event of a fork, the entire state of Ethereum does not automatically carry over to the new chain. Stablecoins such as USDC depend on real-world reserves and issuer support. If Circle—the company behind USDC—does not recognize the forked chain, then USDC on that chain becomes worthless.
This means:
- There are no actual dollars backing USDC on an unsupported fork.
- DeFi protocols relying on USDC may collapse instantly due to broken pegs and liquidity shortages.
- Any trades made using these assets are based on false premises.
Why Selling "Worthless" USDC Is Still Dangerous
One of the most dangerous behaviors Leshner warns against is attempting to trade "useless" USDC for PoW ETH on the forked chain.
At first glance, this might seem harmless: “I’m just swapping something worthless for something potentially valuable.”
But here’s where things get risky—replay attacks.
Understanding Replay Attacks in Blockchain Forks
A replay attack occurs when a transaction valid on one blockchain is maliciously or fraudulently repeated on another. Since both chains share the same transaction history before the fork, your private key works on both networks.
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That means:
- A transaction you sign on the PoW fork could be copied and executed on the main Ethereum chain.
- You might unknowingly send funds twice—once legitimately, once via replay.
- Even if you think you're only spending “junk” tokens, you could accidentally drain your real ETH balance.
While many past hard forks (like Ethereum Classic) implemented replay protection mechanisms, there’s no guarantee a PoW Ethereum fork would do the same—or that users would follow best practices.
"Be extremely careful about signing transactions on a fork chain; you have one private key that works on both chains, and a miner could potentially replay a transaction on Ethereum."
— Robert Leshner (@rleshner), August 17, 2022
This isn’t theoretical. Replay attacks have occurred in previous forks, leading to significant losses for uninformed participants.
Frequently Asked Questions (FAQ)
Q: Will I get free ETH from the PoW fork?
A: Technically, yes—you may receive a balance of PoW ETH if a fork occurs. However, its market value depends on exchange listings, miner support, and community adoption. Many such forks fail quickly and become illiquid or worthless.
Q: Is USDC on the PoW fork still backed by dollars?
A: Almost certainly not. Circle has stated it will not support or maintain USDC on any proof-of-work fork of Ethereum. Without backing, those tokens have no intrinsic value.
Q: Can I lose real ETH by interacting with the PoW chain?
A: Yes—if replay protection isn’t in place and you sign transactions using the same private key. Always use a dedicated wallet for experimental chains.
Q: Should I sell my ETH before the merge?
A: There’s no consensus among experts. Some anticipate volatility; others see long-term benefits from reduced issuance and improved efficiency. Make decisions based on your risk tolerance, not hype.
Q: How can I safely explore the PoW fork if I want to?
A: Use a fresh wallet with no mainnet funds. Never reuse keys. Only interact with trusted interfaces. Treat everything on the fork as experimental and high-risk.
Q: What happens to DeFi apps on a PoW fork?
A: Most will likely fail or operate incorrectly. Oracles may break, prices can go haywire, and stablecoins lose their pegs. Liquidity providers could face massive impermanent loss or total fund loss.
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Final Thoughts: Prioritize Safety Over Speculation
The allure of profiting from a blockchain fork is understandable—but so are the dangers.
As Robert Leshner wisely cautions: don’t trade your secure position for speculative scraps. Selling “worthless” USDC for PoW ETH isn’t a clever arbitrage—it’s a gamble with hidden risks that could cost you real assets.
Instead:
- Stay informed through credible sources.
- Use isolated wallets for testing forks.
- Avoid signing transactions unless you fully understand replay risks.
- Remember: If it sounds too good to be true, it probably is.
The Ethereum merge represents a pivotal moment in crypto history—not just technologically, but also in how users approach risk, security, and decentralization.
By staying cautious, educated, and proactive, you can navigate this transition safely—and come out stronger on the other side.