Ethereum Classic is one of two currencies that use the Ethereum blockchain, with Ethereum or Ether (ETH) being the other one. Find out what you need to know about Ethereum Classic today.
What Is Ethereum Classic?
Ethereum Classic is an open-source, public, blockchain-based distributed computing platform.
The currency emerged after the original Ethereum platform forked into two versions, including Ethereum Classic (ETC) and Ethereum (ETH). ETC was officially released after The DAO hard fork in 2016, which occurred one year after the launch of Ethereum.
Like Ethereum, Ethereum Classic provides a decentralized, Turing-complete virtual machine, the Ethereum Virtual Machine (EVM) as well as smart contract functionality.
Today, you can buy Ethereum Classic (ETC), known as “classic Ether” on most cryptocurrency exchanges. You can store that cryptocurrency in a wallet just like you would hold Ethereum and other currencies.
ETC uses gas, an internal transaction pricing mechanism, to prevent spam on the network and allocate resources proportionally to the incentive offered by the request.
Why Was Ethereum Classic Created?
Prior to the fork, there was one version of Ethereum. It was called Ethereum. Then, there was a disagreement on how to handle the situation created by The DAO.
In May 2016, The DAO, a venture capital fund, was built on Ethereum and raised an enormous amount of money. The DAO raised $168 million to invest in smart contract development. Investors recognized the potential of smart contracts, and believed The DAO – which stands for “decentralized autonomous organization” – was one of the best chances for smart contracts to reach their full potential.
That same month, a paper was released explaining security vulnerabilities in The DAO. Those security vulnerabilities could allow the money in The DAO to be stolen.
Just one month later, in June, a hacker stole 3.6 million Ether (about $50 million at the time) from The DAO. The money was taken from The DAO’s accounts and moved to another account without the owners’ consent – which was one of the notable vulnerabilities mentioned in the May 2016 paper.
Nevertheless, the hacker’s $50 million fund wasn’t immediately withdrawn. It was still sitting in the child DAO. The hacker couldn’t access the funds because The DAO’s smart contract stated that any invested money was unable to be removed for 28 days.
The DAO had lost nearly one third of its investments. The community and investors talked about how to proceed. There were two approaches:
- Part of the Ethereum community wanted to “roll back” the blockchain, move the Ether taken in the exploit to a new smart contract, and allow the Ether to be restored to the owners from whom it had been taken. This would effectively roll back the Ethereum blockchain through a soft fork, which meant that investors could keep their stolen funds.
- Another part of the Ethereum community believed in the immutability of the blockchain; rolling back the blockchain was a fundamental violation of that immutability. Members of the Ethereum community rejected the proposed soft fork based on this principle.
The second group – the group that believed in immutability – rejected the hard fork and continued to use the unforked version of Ethereum. This unforked version of Ethereum became known as Ethereum Classic, while the hard fork version of Ethereum is known simply as Ethereum today.
The Ethereum Soft Fork Versus The Hard Fork
Meanwhile, the majority of Ethereum users agreed that a soft fork was the best way to proceed. A soft fork is like a backwards-compatible software update. Users weren’t forced to upgrade. Updated users could still interact with non-updated users.
However, a soft fork has a major problem: implementing a soft fork would have resulted in a Denial of Service (DoS) attack vector. Typically, Ethereum’s network is protected from DoS attacks (which essentially involve flooding the network) due to the presence of Gas as a transaction cost. The moment a soft fork gets implemented, the attacker could flood the network with transactions with no gas cost. That meant a soft fork was not the right solution – which is why we eventually got a hard fork.
A hard fork, unlike a soft fork, is not backwards compatible. Once a hard fork is used, there’s no going back. Anybody who isn’t using the upgraded version of the blockchain will not be able to access new updates or interact with new users on the system. For all intents and purposes, it’s like you’re using two different currencies – they just happen to be built on the same original blockchain.
Ultimately, all of Ethereum’s major players – including founders Vitalik Buterin and Gavin Wood – moved onto the new chain. However, Ethereum Classic continues to have support – mostly from those who believe in the immutability of blockchain technology above all else. One of ETC’s biggest supporters is Barry Silbert, the CEO of Grayscale.
Problems With Ethereum Classic
The main problem with Ethereum Classic is that it’s not backwards compatible with the Ethereum hard fork. All of Ethereum’s main developers and founding team have moved onto the forked version of Ethereum. That team continues to develop updates and lead marketing for Ethereum (ETH), which leaves ETC out of the loop.
One of the best examples of this issue is when Ethereum (ETH) moved from a proof of work (PoW) to a proof of stake (PoS) algorithm – something that ETC has not done.
There’s also a subset of the internet that considers Ethereum Classic to be a scam. They claim that Ethereum Classic didn’t really have any support after the initial hard fork, but its support was fabricated by supporters of other currencies – like bitcoin maximalists, for example.
Ultimately, neither ETH nor ETC are perfect currencies. However, ETH has far greater support – and a much larger market cap.
Ethereum Classic Today
The price of Ethereum Classic has fluctuated over the years. At launch, after the hard fork, the price of Ethereum Classic fluctuated between $0.75 and $3 per token before dropping to a range of $1 to $2 for the remainder of 2016 and early 2017.
In June 2017, as the crypto market was peaking, Ethereum Classic reached a high of around $23 per ETC. As of October 2017, that price has dropped to around $12 per ETC.
The coin has a market cap of around $1.5 billion, making it one of the top 5 or 10 largest cryptocurrencies in the world.
ETC is still in active development. In October 2016, ETC underwent a technical hard fork to adjust the internal pricing for running op codes on Ethereum’s Virtual Machine (EVM) – similar to the hard fork Ethereum went through one week earlier.
In early 2017, Ethereum Classic went through another hard fork – the “difficulty bomb” hard fork, or “Die Hard” fork designed to increase the difficulty of mining. This had been added to Ethereum’s code in September 2015.
The next major Ethereum Classic update will be a monetary policy change that will change unlimited token emission to a fixed cap monetary policy – similar to bitcoin’s limit of 21 million tokens – giving Ethereum Classic a hard cap of around 210 million.
Ethereum Classic Conclusion
Ultimately, Ethereum Classic is the original, unforked version of Ethereum. It comes with many of the same features and benefits as Ethereum, and it continues to be actively developed to this day. you can learn more about Ethereum Classic at the platform’s official Github page here.