Getting ready for an upcoming Ethereum PoW fork

Hi all,

As many of you know we are heading rapidly towards The Merge and PoS shift.

A PoW fork is almost guaranteed at this point, which means Nexus’ funds will be duplicated on another chain (unclear if it will be worth significant value). The optimal thing to do (other side of the argument welcome) would be to sell these duplicated funds.

I’d like this post to be a starting point for the discussion :

1 - Should we sell the funds on the other chain?

2 - How do we proceed? Has the mutual the ability to sell or should we send to a trusted 3rd party that will sell for us?

3 - Do we distribute the value to the community? How?
- use proceeds to buyback?
- keep proceeds in the Capital Pool as DAI/ETH?
- send proceeds to the Community Fund to fund future contributions?

I think it’s important we discuss this and agree on something before The Merge so we can act with the governance process behind us.

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Assuming there is liquidity and real value to be had selling these assets, go for it. I have a feeling we will be selling worthless ETHPoW DAI for worthless ETHPoW ETH. If a PoW fork happens and the market values PoWETH as as lets say 1/10th the real value of PoS ETH, PoWMaker will liquidate mostly all the PoWDAI positions? Would Chainlink even work in this scenario? I don’t know how DeFi (on PoW chain) doesn’t break if we keep a PoW fork going after the merge. How will we bridge value off of ETHPoW into ETHPoS without a centralized exchange supporting the ETHPoW fork assets?

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Yeah basically I think we should consider everything worthless except ETH.

So DAI & stETH on the PoW chain we’ll most likely be unable to do anything with it.

However PoW ETH -which is the main component of our capital pool- will be worth something.

Since all of DeFi will be broken, I think we have to trust a 3rd party to sell on exchanges and return the funds. There may be other options but imo this is the most reliable one.

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Makes sense, got it. I agree, the PoW eth will have some value and it’s worth attempting to get what we can from it.

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@Gauthier thanks for raising this! I missed it earlier. To confirm my point of view after we discussed on the community call.

The mutual can only operate on 1 chain, so we should assume the PoW chain is the non-viable fork and therefore look to liquidate any assets mutual members are entitled to.

As there will be no bridges and DEX’s will likely break, assets will need to be sold on a CEX and exited to PoS Ethereum in a trusted fashion. stETH and DAI will likely have no value, so any action should primarily focus on ETH first, but also be more general to accommodate other assets as we simply don’t know how this will play out.

Also worth noting that there will likely be a lot of chaos during the fork and we won’t have time to respond with further governance actions.

As such, I suggest we preemptively grant the Advisory Board authority to perform smart upgrades on the PoW chain to extract all assets to a trusted individual or group (eg Advisory Board) to liquidate assets via a CEX into another asset (TBD - USDC/ETH/wNXM) and send to the ETH PoS chain to either the Capital Pool or the Community Fund.

If this makes sense then we need to decide:

  1. Who will we trust to complete this action? Needs to be capable of having an account on eg Binance
  2. Which asset will we liquidate assets into? (DAI/USDC/ETH/wNXM)
  3. Where will the assets be sent? (Capital Pool or Community Fund)

From a risk perspective we would benefit from having stables in both the capital pool and community fund as this will give us the most resiliency. From a value perspective, buying back wNXM at current market rates is probably the highest RoI. I lean towards splitting it 50/50 in stables between capital pool and community fund given where we’re at in the market cycle.

For context, while it’s very hard to tell, if there is a PoW fork the ETH could be worth $3m-$10m or more.

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No worries, thanks for you answer :grin:

Agree that’s why I think it’s a conversation the community must have now

Imo it can be the AB. As for the specific member I’d say the one that max(trust, security best practices)?
If he agrees, it could also be Richard Chen since he handled the buyback earlier this year.

DAI or ETH if sent to Capital Pool
USDC or wNXM if sent to Community Fund ?

I personnally lean towards wNXM because of ROI and the current snapshot vote allowing the Investment Committee to manage the CF treasury. It means we can easily convert to stables in the future.

I don’t have a strong opinion on where the funds should go (although after the current snapshot votes -if accepted- the CF will be low on funds ), so I’d support a mix between CF and Capital Pool too.

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Ditto. I have zero expectations and frankly I think what’s likely to happen will be a similar confusing shitshow to BCH / BTC in 2017. No one who has any real intention to build long term and realize the vision of Ethereum, will support ETHPoW.

So… if we can sell some useless ETHPoW to restore capital to the Mutual, given some of our losses from recent claims and the Bancor token deficit, let’s do it. But the only way to do this will likely be via a CEX.

So this will likely need to happen through a trusted party who moves the ETHPoW off the new forked chain, to Binance or Coinbase, sells for fiat → sells fiat for ETH and then transfers to our wallet. I would volunteer myself but have a minor hesitation it’ll trigger a taxable event for me in the US.

Hoping someone trustworthy can step up!

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So above I mentioned being in favor of selling ETHPoW and having to trust someone to sell on a CEX like Binance.

However, I like the added benefit here of buying back a mix of WNXM + DAI (50/50 or 75/25) or 100% WNXM.

So, yes let’s buy back WNXM vs simply swapping ETHPoW for ETH and whoever does the liquidating send to the Community Fund and then the Community Fund can potentially send to the Capital Pool. I would like to see funds eventually end up in the Capital Pool but I’m open to reasons for holding it in the Community Fund.

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I went to discord to ask about this and I’m happy to see that you are already taking the right steps :slight_smile:

It’s a no brainer to take this opportunity, and I think it will be very positive for the mutual. Bitcoin Cash at one point had a value of 0.5 bitcoin, so there’s a lot of potential here. I just want to remind everybody that the maximum at the BCH/BTC exchange rate happened a few weeks after the fork, so I think we shouldn’t rush too much to exchange the tokens as soon as possible. I expect that a few weeks after the merge, ETHPoW will have its moment, regardless of its long term prospects.

In any case the strategy should always be to liquidate as many funds as posible from the PoW chain and send them to the PoS chain.

About what to do with the funds, I think there’s just no bad options here. Personally I think that holding ETH2 in the capital pool would be the most profitable option long term but I also think that having wNXM trading so much below book value has been really hurting the mutual for a long time and fixing that via a buyback may be the best use of the funds right now. But there’s no use of these funds that I would oppose to.

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While I am skeptical of the amount of value PoW ETH will hold, anything at all would likely be worthwhile at the scale of the capital pool.

However be aware the potential PoW fork is likely to have the same chain ID as the PoS chain, some care & due diligence are required to ensure assets on the canonical chain are not put at risk due to a malicious replay attack.

Gauthier has put up a temperature check on Snapshot to gauge member sentiment on this proposal.

Should we grant a 3rd party the ability to sell our PoW ETH on a CEX post-merge?

This temperature check will be open for voting until Friday, 12 August 2022 at 4pm EST / 8pm UTC.

This vote is only to gauge community sentiment about pursuing this plan of action, as outlined on the forum.

Process

  1. Signalling Vote (this vote)
  2. Discussion around a finalized plan on the forum
  3. Formal on-chain governance for approval and execution after the merge
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