Following the induction of Ethereum’s Proof-of-Stake (PoS) Merge on the mainnet, some Proof-of-Work (PoW) supporters picked up tokens from PoW chains, which analysts claimed could be harmful.
Ethereum on PoW Users Are Prone to Attack Post Merge
The Kyber Network (KNC) team, an experienced Ethereum-based DeFi hub, posted a Twitter thread on replay attacks. The team intends to share the common forms of attacks on crypto wallets after a major upgrade.
1/ Be aware of Replay Attacks before using #EthereumPoW! Post @Ethereum #Merge, some users may become victims to Replay Attacks and lose their assets. What exactly is a Replay Attack, how does it happen and how can you avoid it? A thread 🧵 pic.twitter.com/L2q9PZ5sbz
— Kyber Network (@KyberNetwork) September 16, 2022
According to the team, following the fork, there is a possibility that hackers can exploit a transaction on a chain or another. The team gave an example of what might transpire after a major fork upgrade.
They revealed that:
“Funds transferred on PoS Ethereum (the post-Merge protocol) can be reproduced on a PoW hard fork chain. This can happen without the user’s permission.”
Similarly, replay attacks can target fungible (ERC-20) and non-fungible (NFT) tokens on the same blockchain. As a result, Kyber Network experts suggest using different wallets when using ETH and ETH tokens.
The experts added that avoiding Ethereum on PoW (ETHW) and minor PoW versions of Ethereum (ETH) may also be a wise bet. This is advisable, at least during the post-Merge ecstasy.
However, contributors on Ethereum on PoW (ETHW) disagreed with the Kyber Network team. The contributors stressed that the ETHW has robust security to protect it against such hacking. They added that ETHW has a built-in replay attack mechanism in place.
ETHW Plunges as Trading Begins
As per Bloomberg, the Ethereum on PoW (ETHW) price has plummeted by more than 60% since the start of trading. The ETHW began its debut trading on Thursday, September 15, after the Merge became live.
However, the new token faced extreme market turbulence as it began life on the main Ethereum network.
On the other hand, the original Ethereum token is also down after the Merge, selling at a $1,445 price level. The drop was triggered by “selling the news” sentiments after traders began to dump their tokens in droves.
In another development, the U.S. Securities and Exchange Commission (SEC) chairman revealed that PoS tokens are securities. Gary Gensler made the statement hours after the completion of the Merge.
By switching to the PoS protocol, Gensler noted that this would effectively place ETH as security under the Howey Test. This is because people stake their tokens and wait for others to put in the effort to generate profit.
However, Gensler noted that his remarks are not directed at Ether or any other token. Still, industry players see it as a signal for further regulations.
The U.S. Treasury has called on the SEC and the Commodity Futures Trading Commission (CFTC) to crack down on crypto exchanges not complying with the guidelines.
Furthermore, the Treasury calls for increased monitoring of the crypto space to combat money laundering.
On the whole, the SEC is at a crossroads with the crypto community, as many want the CFTC to become the sole regulator instead of the commission.