The Ethereum Merge presented numerous risk-free arbitrage opportunities. One scientific team claimed profits of nearly 10,000 ETHW (approximately $200,000) by leveraging valueless tokens like USDC to extract valuable assets from liquidity pools. Their shared method sparked widespread discussion.
OKLink’s on-chain security team analyzed these arbitrage strategies and data, revealing that arbitrageurs collectively gained over 217,129 ETHW. Interestingly, the team controlling address 0xefe09d0c045096661df2092a8dd9845d8cc0c947 ranked only third in profit, while the top address earned nearly three times more.
Let’s explore which addresses profited the most, their methods, the vulnerabilities exploited, the duration of the arbitrage window, and tools to detect such risks early.
Why Was USDC Considered "Worthless" on ETHW?
EthereumPoW (ETHW) emerged when some miners, unwilling to abandon Proof-of-Work profits, continued the original consensus mechanism after Ethereum’s transition to Proof-of-Stake.
Fork Dynamics
Blockchain forks replicate all existing functionalities, wallet balances, assets, and smart contracts. This means all assets on Ethereum also exist on EthereumPoW. However, due to low community recognition of ETHW’s value, many forked tokens became speculative assets.
Centralized stablecoin issuers (like USDT and USDC) stated they would not recognize stablecoin assets on any Ethereum chain other than the main POS chain. The reason: the U.S. dollars backing these stablecoins don’t “fork.” Thus, centralized exchanges did not provide deposit addresses for ETHW-based USDT or USDC.
The Arbitrage Opportunity
While USDT on ETHW was valueless, ETH(W) remained a valuable asset. Arbitrageurs targeted liquidity pools (LPs) where ETH or WETH had not been withdrawn, using valueless tokens like USDT/USDC to "buy" these valuable assets. Ultimately, they transferred ETHW to exchanges to cash out.
In summary, this involved using worthless tokens to extract valuable ones from LPs.
Who Profited the Most?
We analyzed eight high-liquidity pools on Uniswap V2/V3 and Sushiswap, including USDT-WETH, USDC-WETH, and WBTC-WETH pairs.
The address mentioned in the "zero-cost $200K" article ( 0xefe) gained 9,779.3 ETHW, ranking third. The top address ( 0x3dc) earned 26,541.8 ETHW—2.7 times more—truly profiting quietly.
*Note: Addresses No. 4 and No. 10 used the same arbitrage contract.
Data covers September 15–25, as most ETH in the six pools was extracted by then. Profits are stated before gas fees (paid in ETHW).*
Arbitrage Methods Explained
Two primary methods were used:
- Interacting with DEX Router addresses (via front-end interfaces) to extract ETH(W) using shadow assets.
- Deploying arbitrage contracts funded with valueless shadow assets (e.g., USDC), which executed multiple LP arbitrages. The contract collected WETH, converted it to ETH via the Router, and transferred profits to designated addresses.
Both methods involved two steps: preparing shadow assets → depositing into pools to extract ETHW.
Case Study: Top Address (0x3dc)
a. Preparing Shadow Assets
Addresses 0x041 and 0xb00 authorized the arbitrage contract (0xb98) to withdraw USDC. They also borrowed stETH and USDC for 0xb98’s use.
b. Executing Arbitrage
On September 15, 22:16, address 0xf6a created the arbitrage contract 0xb98 via transaction 0xd6a. Key actions:
- Transferred 9,290 stETH to 0xb98, swapped for 8,980 ETH via Curve’s stETH/ETH pool.
Received 13,235 USDC from addresses 0x041 and 0xb00, plus 20,000 USDC from lenders 0x236 and 0xf6b. The contract split the 33,235 USDC:
- 5,017 USDC → converted to USDT → swapped for 2,815 WETH on Uniswap V3 USDT/WETH pool.
- 3,345 USDC → converted to 160 WBTC → swapped for 1,784 WETH on WBTC/WETH pool.
- 25,087 USDC → swapped for 12,255 WETH on USDC/WETH pool.
- Converted 16,855.8 WETH to ETH(W) and transferred to 0x3dc.
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Case Study: Third-Ranked Address (0xefe)
This address prepared shadow assets from September 14, withdrawing 7.58 BTC, 2,099,990 USDC, and 42,996 USDT from OKX and other exchanges.
In its most profitable single transaction (926 ETHW, hash 0xc357), it interacted with Uniswap V3’s Router address—likely via a custom front-end. It converted USDC to WBTC, then extracted WETH from the WBTC/WETH pool, finally swapping for ETHW.
Arbitrage Window
Most ETH in the eight observed pools was extracted on September 15–16. Top arbitrageurs started within minutes of ETHW’s first block (September 15, 22:11). The window lasted ~9 days, ending around September 23.
Monitoring Risky Tokens
This "worthless token for valuable token" tactic isn’t new; it’s also used by projects before rug pulls. OKLink’s Token Scanner monitors on-chain data, tracking top profit addresses via its unique [Profit Address] metric.
This tool helps liquidity providers monitor DEX pools, allowing quick withdrawal if liquidity drops rapidly, preventing asset drainage.
Beyond LP and profit data, the risky token page provides market maker, buyer, and seller insights. Concentrated market making may indicate malicious manipulation.
The token classifier tags Rugpull tokens, helping users identify risks. Overall, Token Scanner is a powerful tool with three core features: risk analysis, token classification, and security scoring. It currently supports 9 chains and 13 DEXs, having scanned 4.18 million tokens and identified 161,940 risky ones.
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Frequently Asked Questions
What is ETHW?
ETHW is the Ethereum Proof-of-Work fork created by miners after the Merge to continue PoW mining. It replicates Ethereum’s state but lacks support for centralized stablecoins.
How did arbitrageurs profit?
They used valueless stablecoins (e.g., USDC on ETHW) to extract valuable ETH(W) from liquidity pools, then cashed out on exchanges.
Could liquidity providers prevent this?
Yes. By monitoring pool liquidity and withdrawing assets promptly when anomalies occur, LPs can avoid losses. Tools like OKLink’s Token Scanner provide early warnings.
Is this arbitrage still possible?
The window has closed for ETHW, but similar opportunities may arise in future forks. Early detection and action are key.
What chains does OKLink’s Token Scanner support?
It currently supports 9 chains, including ETH and BSC, with more in development. The interface displays ETH and BSC data first.
How accurate is the risk detection?
The tool uses on-chain data and risk event databases, having identified over 160,000 risky tokens. It’s updated regularly with new findings.