What is Ethereum Classic? If that’s your question, it’s getting answered in the next few minutes. In this article, we discuss how and why it exists, what are its similarities and differences as compared to ETH and its future potential.
We will also discuss technicalities such as POW vs. POS, centralization, and so much more. Let’s not waste time and get started then?
Table of Contents
What is Ethereum Classic?
The story of how Ethereum Classic, or Ethereum came to be is nothing short of a movie script.
Back in 2016, a hack led to the loss of about USD $50 million Ethereum. Founders of what’s now called Ethereum (ETH) came up with a solution. It was to introduce a soft fork to blacklist the hacker and make the stolen funds unmovable.
An interesting twist here is, the hack was more like a loophole exploitation. Hence, the hacker actually posted publicly that any such fork attempts would invite legal action against Ether. According to the hacker, the funds were obtained legally.
So now, there were two groups in the Ether camp. One that supported the proposed fork, and the other opposing it.
The soft fork discussions fell through. This led to a hard fork which became known as Ethereum while the original classic Ethereum stayed on its original blockchain. The newer fork (ETH) returned the stolen funds to their rightful owners.
So, contrary to popular belief, ETH is actually the newer, second version of Ether that was formed after the split of the Ethereum community.
Do note that the funds were returned not by “getting them back” from the hacker. Rather, new tokens were created and distributed to the owners. The original, stolen DOA tokens still remained with the hacker. It was more like they were rendered useless on the new (ETH) blockchain. The stolen tokens still hold value on the ETC network although it’s about 100x lesser due to ETC’s current price which is about 100 times less than ETH.
What Are the Main Features of Ethereum Classic (ETC)?
Like any other Cryptocurrency, a core set of features give ETC its reason for existence. Well, here are the primary ones:
- Immutability: It simply means “inability to reverse transactions”. Like most cryptocurrencies, ETC transactions can not be reversed once confirmed.
- Limited supply: The basics of supply & demand suggest that anything that’s limited has more value than something that’s unlimited. Well, ETC is capped at a maximum supply of 210 million.
- Decentralized and community-driven: No one party, or even a small group of party controls ETC. It’s almost entirely controlled by the community which makes it a happy democracy.
How Is Ethereum Classic (ETC) Different from Ethereum (ETH)?
Despite sharing a common origin, both ETC and ETH have stark differences on various fronts. In fact, these differences in opinion and principles is what birthed the newer fork anyway. Let’s discuss these briefly before you decide to buy ETH or ETC.
Code Immutability vs. Code Intervention
Code Immutability as explained earlier is a core feature of ETC. They do not believe in altering the existing code no matter what happens, not even a $50 million hack! Ethereum, while still agrees on not changing the code every week or month, doesn’t strictly adhere to immutability. Meaning, if the situation demands, ETH may alter the code for the betterment of the project and investors.
Proof-of-Work (POW) Consensus vs. Proof-of-Stake (POS)
Both the POW and POS are mechanisms used to validate a transaction’s authenticity in the crypto space.
ETC uses the more traditional POW validation. It’s a (not so) simple mechanism of solving puzzles. Every miner competes to solve a puzzle. The fastest miner gets the reward. Now, the speed and probability of solving the puzzle depends on the miners’ computational powers. Hence, better hardware increases their chances which also means they use more electricity (to support this better hardware). On the plus side, it has a longer history of being used and is more decentralised.
ETH on the other hand uses POS validation. Miners aren’t required to solve puzzles in a POS battle. Rather, you simply need to hold/stake your coins. The more coins you stake, the higher your chances of validating the block. This massively reduces the energy consumption as you don’t need complex hardware to be a miner. POS isn’t perfect though and has some centralization issues as we discuss in the next section.
Decentralized Governance vs Centralised Governance
ETC stayed on the core chain which was primarily a decentralised chain. Hence, as explained earlier, ETC is almost a fully decentralised cryptocurrency. Owned and operated by its own investors, developers, community members and everyone else.
ETH too is decentralised but not to the level ETC is. ETH, as explained earlier, uses POS for block validation. This means, if a small group of people gain a large fraction of stacked ETH, they could potentially influence the token. Do note that it’s a theory on paper and the actual amount, manpower and cooperation required to do that is next to impossible. Moreover, because POS is still evolving this potential flaw could soon be fixed.
Limited vs. Unlimited supply
As mentioned earlier, Ethereum Classic (ETC) is capped at 210 million tokens. This of course drives up demand and creates scarcity, at least on paper and in theory. ETH on the other hand doesn’t have any maximum limit. However, it does have an annual cap. Meaning, the number of ETH tokens that can be mined per year is limited.
Does Ethereum Classic (ETC) Have a Future?
An absolute answer to that is impossible (or I’d be a billionaire). However, ETC is the 23rd cryptocurrency by market cap. Its current price, despite being nearly 100x lower than ETH’s, still has a 108% growth in the last 6 months! This proves the token is being adopted and isn’t dead.
Moreover, ETC has a few benefits fighting on its side such as the more energy-efficient POW, immutability, and a more decentralised environment. While not guaranteed, these sure are factors that may pave a green chart for ETC in the near future.
Do note that even the ETH price prediction suggests ETH could even break into 5-figure numbers proving the battle doesn’t have a winner yet.
Conclusion
If you’ve read thus far, I believe you’ve got a decent idea as far as ETC’s birth, features, and future potential goes. When compared, both the tokens have their pros and cons. The adoption and value will primarily depend on multiple factors including the adopter’s personal goals/needs, govt. regulations etc.
Do note that nothing in this article is financial advice. It’s purely for educational and research purposes. Do your own research before investing.
