The Merge and NFTs - Separating Fact From Fiction

5 min read
NFTs

Listen to this article Playing article

With the Ethereum Foundation gearing up for the upcoming merge, there has been a lot of speculation (and misinformation) about exactly what happens to your NFTs once this process is complete. With this in mind, let’s take some time to go over what The Merge actually is, what it means for your NFTs, and how you can prepare for when this monumental step in the Ethereum Ecosystem’s evolution finally takes place…

The Merge Is Near

The Merge is an update to the Ethereum blockchain that is scheduled to take place some time between September 13th and 15th. This upgrade will see a 99% reduction in energy usage for the chain as they move from a Proof-of-Work (PoW) consensus mechanism and adopt the far more efficient Proof-of-Stake (PoS) consensus. Now this doesn’t equate to lower fees on the Ethereum network, but it does pave the way for future updates which may lead to lower fees and faster transactions.

That being said, there are miners and individuals who have stated that they are not planning to switch over to PoS and will likely create a fork from the PoW chain. This is where the confusion about what to do with your precious JPEGs and other NFTs stems from.

Post-merge, these PoW forks will contain copies of the same assets you hold on the new PoS chain. Yes, that also means copies of your NFTs. Let’s go over some important points so that you’re better prepared for what’s coming!

Steps After The Merge

Will you need to do anything after the merge to claim any tokens or NFTs? No. Post-merge, your balance and assets will remain exactly the same. Therefore, do not interact with any sites or links asking you to claim “ETH2” tokens or activate your NFTs on the new chain. Prior to and immediately after The Merge there will be a lot of bad actors looking to exploit individuals who are not aware of what is actually going on.

OpenSea and Other Marketplaces

OpenSea and other NFT marketplaces will be supporting the new PoS chain. OpenSea has also stated that any NFTs on any PoW forks will not be reflected within their marketplace.

OpenSea will not be supporting NFTs on any Ethereum PoW forks

As rule of thumb, you should also ensure that you don’t have any old listings or even go as far as to remove any listings you may have prior to the fork. The chances of any issues arising from old and new listings is rare, but it’s better to be safe than sorry.

Wallet Security

If you’re still living on the edge and haven’t committed to moving your NFTs to a cold storage wallet such as a Ledger , you may want to consider doing that now.

With the number of hacks and phishing attempts being made in this space on a daily basis, even the most careful individuals can quickly find themselves on the wrong end of a scam. This would be a good opportunity to revoke any approvals or move your NFTs to a new cold wallet altogether.

Should I Flip PoW NFTs for Profit?

While it’s possible that you’ll have duplicate NFTs on any POW forks that may arise post-merge, you should be careful if you plan to interact with them.

Firstly, many projects have already come out and stated that they will only be supporting and recognizing the utility of the NFTs on the new PoS chain.

Yuga Labs made a statement regarding the merge back in August

Secondly, while you may be able to flip some NFTs on a PoW fork for some PoW ETH, you should know the risks involved and the high possibility that a replay attack can then execute the same tx on the main PoS chain.

What’s a Replay Attack?

A replay attack occurs when a malicious actor takes a transaction from one chain and replicates it on another. This comes down to both chains possessing the same chain ID. The individuals behind the main ETH PoW fork have still not instituted a change that would effectively modify the chain ID.

Let’s take a look at a simple example to better illustrate what could happen in the event of a replay attack:

John has a Bored Ape NFT and, post-merge, he also sees that he has one on the PoW chain. While the PoW NFT is less valuable than his NFT on the new PoS chain, John thinks he can make some quick money by flipping the PoW NFT.

John then proceeds to list the NFT for 5 PoW ETH. The NFT sells and a bad actor is able to take that signing/transaction and replay it on the PoS chain. Therefore, John has inadvertently sold both his NFTs and is “down horribly” as a result of a replay attack.

At the time of writing, developers responsible for the main PoW fork have still not added any changes that would circumvent this problem. They were recently pressured by Coinbase as well on the same point.

You can see the relevant comment here on an open PR here:

On behalf of Coinbase and others preparing for the Ethereum merge, we request the team behind EthereumPoW clarify important but currently underspecified aspects of their fork chain and its activation. At the time of this writing, this EthereumPoW GitHub repo leaves chainID unchanged.

While a code comment suggests an intent to change chainID, we are unaware of any concrete communications around how the change will be implemented and ultimately activated. As the team must know, using the same chainID as the PoS Ethereum chain post-merge will allow transactions from one chain to be replayed on the other. These replay attacks place funds at serious risk, and many users will not have the time or expertise to protect themselves.

You can read the full PR here .

Coinbase is also taking active steps to prepare for The Merge

Moving Forward

The best recommendation we can make when it comes to the PoW forks and your NFTs is to be extremely cautious. And, when in doubt, don’t interact with the chain! There’s really no need to take unnecessary risks, and while it may be tempting to try maximize your profits, there are better, safer ways of doing so. We obviously can’t stop you from doing as you wish, but at the very least, you’re now well aware of the risks you may face by doing anything with the PoW forks post-merge.

So with that, be sure to stay safe and take the time to secure your NFTs!

If you buy something through our posts, MSQ may get a share of the sale. For more details, read here.
Ray doesn't believe the metaverse will be viable until we can engage in hand to hand combat via haptic suits.

Join Newsletter

Share: