By now, it's clear that Ethereum's (ETH 1.97%) upcoming Merge inspires a lot of investor enthusiasm. Since hitting a cycle low of $897 on June 18, Ethereum has rallied by 38%, outgaining Bitcoin in the process, as investors look forward to the upgrade which will see Ethereum transition from a proof-of-work mechanism to a proof-of-stake mechanism.
The benefits of The Merge for the Ethereum network and its participants are well documented, but several other cryptocurrencies are already enjoying significant gains as a result of it. Here are two hidden beneficiaries of The Merge.
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Ethereum Classic
CRYPTO: ETC
Key Data Points
Ethereum Classic (ETC 2.66%) dates back to the Ethereum DAO hack of 2016, when what we know as Ethereum today forked from what is now known as Ethereum Classic. While it shares Ethereum's code and many of its characteristics, it is totally separate and independent. As such, it will remain a proof-of-work token after The Merge, and has no intention of implementing proof of stake. Ethereum founder Vitalik Buterin recently gave Ethereum Classic his blessing, saying that people who prefer proof of work should use it.
Ethereum Classic has nearly tripled in price since June 18. Here's why -- Ethereum miners, who apply their rigs to processing transactions and securing the Ethereum blockchain, are being left out in the cold by its move to a proof-of-stake protocol, and Ethereum Classic is one of the few blockchains that they can switch to where it's worth putting their equipment to work. Ethereum Classic can be mined using both GPU (graphic processing unit) and ASIC (application-specific integrated circuit) mining equipment. Antpool, a large Bitcoin mining pool supported by Chinese mining equipment manufacturer Bitmain, recently invested $10 million into developing projects on the Ethereum Classic blockchain in an effort to spur growth and attract new projects to its network.
Ethereum miners can't mine for Bitcoin (BTC 0.38%), due to the radically different mathematical processes the two systems use. However, they can mine for Ethereum Classic, which is now the third-largest proof-of-work crypto by market cap after Bitcoin and Dogecoin (DOGE 0.09%). Ethereum miners are beginning to flock to Ethereum Classic, and the network's hash rate, which measures the computational power being used to process transactions, is surging. This is seen as a positive sign by crypto participants, as it means the network is healthy and secure.
While some Ethereum miners, led by Tron's (TRX 0.59%) Justin Sun and Chandler Guo (one of the key figures behind the Ethereum Classic fork), are pushing for a new Ethereum proof-of-work fork called "ETHPOW," it is more likely that Ethereum miners will migrate to Ethereum Classic, which already has a value of about $5 billion and established infrastructure and community around it, as opposed to ETHPOW, which would be starting from scratch.
While mining Ethereum Classic does not look like it will be as profitable as mining for Ethereum, at least in the near future, it at least gives miners a way to prolong the useful life of their equipment and generate some income. Over the long run, it will be interesting to see if Ethereum Classic can turn this short-term momentum into long-term growth of the network.
Ravencoin
CRYPTO: RVN
Key Data Points
Outside of Ethereum Classic, Ravencoin (RVN 1.62%) is one of the other remaining destinations that Ethereum miners can migrate to. Ravencoin is the 70th-largest cryptocurrency by market cap, and it is modeled after Bitcoin in that the total supply of Ravencoin that can ever exist is 21 billion tokens. Its price has surged by more than 250% since its cyclical nadir on June 18, and it's up by nearly 75% over the past month alone.
Ethereum miners who use GPU (graphic processing unit) mining rigs can move right over to the Ravencoin network and find a welcoming home there. Ravencoin is ASIC-resistant, meaning that its mining algorithm prevents expensive, purpose-built ASIC miners from dominating mining rewards. This allows more everyday users and miners to reap the rewards of mining it. The hash rate on the Ravencoin network is surging, and recently hit a high not seen since early 2022 as Ethereum miners begin to set up shop there.
In addition to its status as a new home for displaced Ethereum miners, Ravencoin has plenty of long-term potential as well. It was created to be a blockchain for issuing assets. For example, users can burn Ravencoin to create new tokens and tokenize assets such as real estate. This is an interesting use case for Ravencoin as the tokenization of a real estate investment would make an investment in real estate more liquid and more accessible to a wider pool of investors.
With a robust community of miners that is widely accessible and some interesting potential if tokenization takes off, Ravencoin is both an immediate beneficiary of The Merge and a project with plenty of long-term potential of its own.
Both Ravencoin and Ethereum Classic have been massive unintended beneficiaries of The Merge over the last few months. Looking ahead, both should continue to benefit as displaced Ethereum miners continue to migrate to the remaining proof-of-work blockchains. Investing in cryptocurrency is both risky and volatile, but for risk-tolerant investors, both of these tokens are worthy of a small allocation. Of the two, I like Ravencoin better thanks to the long-term potential of tokenizing assets on its blockchain.
