The Ethereum merger is expected to be one of the biggest events in the cryptocurrency industry, which could affect many companies and related services, and Ethereum-based exchange-traded products (ETPs) are no exception.
ETC Group, a major European cryptocurrency ETP issuer, has decided to expand its current Ethereum ETP offering by launching one more Ethereum investment product.. The new ETP is based on ETHW, a new token that will run on the Ethereum proof-of-work (PoW) blockchain after the hard fork.
The new ZETW ETP will launch in addition to the currently offered Physical Ethereum ETP (ZETH) which was listed on Deutsche Boerse Xetra in March 2021. ZETW is planned to go live shortly after the Ethereum hard fork takes place, which is wait that occurs within 24 hours of the Fusion or Merge.
The Merger refers to the transition of Ethereum from the maligned mining-based PoW consensus mechanism to a green proof-of-stake (PoS) system.
As some Ethereum users are keen to continue using the PoW model, the merger is likely to split Ethereum into two separate blockchains. Among them is the main PoS-based Ethereum blockchain, commonly known as ETHPOS and associated with the original token Ether (ETH). Another Ethereum network would be based on the PoW system, called ETHPOW, with the new ETHW token.
Scheduled for September 15, The merger has an impact on Ethereum-based ETPs: The underlying asset in physical Ethereum ETPs by default will no longer be PoW-based, but some ETH ETP investors might want to have exposure to that asset.
According to ETC Group co-CEO and founder Bradley Duke, the launch of the new ETP would allow the firm to ensure the most transparent and fair approach to investors. With the new ETP, current ZETH holders will get ZETW token automatically as ZETH top-up in 1:1 ratio on brokerage accounts.
“We just want to ensure that investors in our products have the same opportunity as direct holders of any cryptocurrency in the event of a fork,” Duke said.
“If enough people support a fork for whatever reason, we think the free market will decide what should live and what shouldn’t. […] We’re not in the business of predicting whether or not the fork will be a success.”
According to Duke, the upcoming merger will be the first time that the ETC Group has managed a hard fork as part of its cryptocurrency ETP offering. Since launching its first centrally cleared Bitcoin ETP in June 2020, the ETC Group has listed a total of 14 cryptocurrency ETPs on Xetra.
Duke noted that the launch of a new ETP is not the only option for distributing hard fork proceeds for investors, as the firm could also simply sell ETHW tokens after it. However, launching the new ETP appears to be a better option for ETC Group because some investors might not want to sell it right away, he said.
“The new ETP looks better because we don’t know what will happen if ETHW will be successful or not. We think this approach is the fairest”Duke declared.
While the ETC Group is moving forward with two separate Ethereum ETPs due to the merger, some issuers decided to simply keep their ETPs running on PoS-enabled Ethereum.
Cryptocurrency investment firm 21.co told Cointelegraph that its flagship Ethereum ETP, 21Shares, will mirror the PoS fork of Ethereum, which is “expected to be the dominant version of the network after the Merger.”
“If a hard fork were to airdrop, 21Shares would likely sell and reinvest profits in the respective products to align with the index”said 21.co research director Eliézer Ndinga. The executive added that there may be “unknown and unforeseen factors,” such as lock-up periods, and that custodians may take time to fully process the new forked asset, among other issues.
“Once the launch is announced and details are known, 21Shares will provide an update,” Ndinga added.
Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
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