What is Ethereum Classic (ETC)?
- Real Vision
- September 23, 2022
- 4:16 PM
Ethereum Classic (ETC) is a hard fork of Ethereum (ETH) that emerged due to the DAO hack in 2016. Today, Ethereum Classic still exists, but developer and user interest are much lower than that of Ethereum. It’s only recently, with Ethereum having shifted from a Proof-of-Work (PoW) consensus mechanism to Proof-of-Stake (PoS), that some interest has reverted to Ethereum Classic. For starters, ETC is Ethereum Classic’s base money and transactional unit.
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The History of Ethereum Classic
Ethereum was launched in 2015. An early Ethereum blockchain application called The DAO was hacked in 2016, resulting in the theft of about 3.6 million ether, worth approximately $50 million at the time. There was 72 million ETH in circulation then, which means the hackers stole about 5% of all the ether in existence.
The Ethereum community entered into a heated debate on the best way to respond to the hack. The most popular solution was to reverse the hack and return the stolen ether to the victims, thereby creating a hard fork. Implementing this solution would affect the transaction history as well as the immutability of Ethereum, and a new ledger would be created. However, anyone that decided to keep running the original ledger, where the immutability of the blockchain would not be tampered with, would be left using a separate and most likely worthless blockchain.
Ethereum developers executed the solution, and for a few days, it seemed as if a split could be avoided. However, a new group of developers started maintaining the original Ethereum code, encouraging miners to secure the blockchain and collect the newly minted cryptocurrency. This led to the emergence of Ethereum Classic. The new ledger — the hard-forked Ethereum blockchain — remained as the Ethereum mainchain. As such, it can be argued that Ethereum Classic actually is the original Ethereum blockchain.
Ethereum Versus Ethereum Classic
The advocates of Ethereum Classic argued that reversing the hack went against the very thing the blockchain is meant to hinder: subjective human manipulation or interference. They believed that the immutability element of blockchain technology shouldn’t be undermined, whether the reasons to do so are well-intentioned or not. From their perspective, Ethereum developers broke the “code is law” philosophy made possible by the blockchain when they altered transactions already added to the chain by reversing the hack. Immutability is a prime selling point for blockchain technology, and how it sets itself apart from the traditional financial system, where the threat of mutability of rules, law, and behavior is constantly brewing.
So today, on the one hand, there is the Ethereum mainchain (ETH), a distributed blockchain that erased a successful hack while on the other hand, there is Ethereum Classic (ETC), which has maintained the original record of the entire transaction history from the original Ethereum project, including the cyber theft from 2016.
That said, Ethereum is the more popular of the two blockchains and remains way ahead in terms of developer and user interest and is also associated with more prominent figures such as its co-founders, Vitalik Buterin or Joseph Lubin.
Similarities and Differences
Ethereum Classic is essentially a continuation of the original Ethereum. Ergo, it can support smart contracts and decentralized applications (DApps) just like the main Ethereum. The two blockchains are similar up to block 1,920,000, when the attack was carried out. Beyond this point, they are two different blockchains. Hence the new upgrades to the Ethereum protocol, including the ETH Merge update, don’t appear on the Ethereum Classic protocol. Popular Ethereum applications are also not present on Ethereum Classic. Ethereum enjoys more developer and user activity than Ethereum Classic and has added considerably more functionalities over time.
Ethereum Classic has a fixed monetary policy because it has capped the total ETC supply at 210,700,000. Ethereum ETH doesn’t have a cap. The Ethereum Foundation supports the development of Ethereum, while ETC Labs seeks to accelerate the development of the Ethereum Classic protocol. The blockchain projects are headed in two very different directions, especially now that Ethereum has shifted to PoS. On the contrary, Ethereum Classic is indefinitely committed to PoW. Ethereum and Ethereum Classic also differ as far as prices go. At the time of writing, the ETC price was about 50 times that of ETH.
The philosophy “code is law” is Ethereum Classic’s guiding principle. It states, “If a contract is poorly written or has a mistake, it is not the responsibility of the wider network to ‘make whole’ parties who have been affected badly and are thus not happy with a given outcome. In short, there are no do-overs, bailouts, or refunds, unless pre-programmed.” Ethereum, on the other hand, doesn’t appear to follow this ideology based on the fact that it erased the DAO hack. In all fairness, it is important to point out that the blockchain rollback in response to the DAO hack has been the only time Ethereum has done something like this.
Is There a Future for Ethereum Classic (ETC)?
ETC is less known than Ethereum because it hasn’t gained as much ground over the years in terms of developer activity and user adoption. Additionally, ETC faced some setbacks in the past when it was hit by a 51% attack in 2019 and several more in 2020. This type of attack occurs when attackers acquire control of more than 50% of a network’s hash rate.
The regular occurrence of such attacks spells bad news for a cryptocurrency like Ethereum Classic, which could be delisted on exchanges. Case in point, OKX said it was considering delisting ETC following the first two 51% attacks in 2019. Also, Coinbase extended withdrawal and deposit confirmation times to about two weeks in the same year. These actions could discourage user activity and affect adoption.
That said, Ethereum Classic is seeing some renewed interest now that Ethereum has moved to PoS. Some Ethereum community members are hence debating whether another fork should take place to preserve Ethereum’s PoW consensus algorithm or whether existing Ethereum miners should just move over to Ethereum Classic to preserve their business.
The new interest in Ethereum Classic has resulted in positive price action ETC. Ethereum Classic also recently received a $10 million investment from AntPool to support its developers. If anything, then, now is certainly an interesting time to potentially look at ETC.
Want to learn how to buy and secure ETC? Read our guide here.