What is Ethereum Classic? (ETC)
The Beginner’s Guide
Ethereum Classic (ETC) quickly emerged as an unprecedented entry in cryptocurrency history, challenging ideas about how blockchains could be launched, altered and upgraded.
- Check the Ethereum classic price page for more details on the current ETC value, trends, and price history.
That’s because, prior to Ethereum Classic’s 2016 launch, developers typically released new cryptocurrencies either by copying and modifying an existing cryptocurrency software (usually Bitcoin) or writing a new software from scratch. Ethereum Classic did neither.
Rather, Ethereum Classic was created when a group of users of the Ethereum (ETH) blockchain elected not to upgrade to new code recommended by project developers.
At issue was that the code would edit Ethereum’s transaction history, returning ether to individuals who had lost funds when a popular application (The DAO) was compromised.
The majority of Ethereum users would upgrade their software (a development that helped ensure this new blockchain retained the Ethereum name).
However, a minority of users continued to maintain the older Ethereum software with the record of the theft. By continuing to run this code, the users effectively created a new cryptocurrency.
This version of the Ethereum software now lives on as Ethereum Classic.
Who created Ethereum Classic?
It’s hard to say exactly who created Ethereum Classic (ETC).
The developer most associated with the decision to continue maintaining the original Ethereum is the anonymous Arvicco who credited a larger group of users with the idea.
However, since much of the Ethereum Classic code is the product of the original Ethereum development team, that project’s founder, Russian-Canadian Vitalik Buterin, and his colleagues, can be said to be responsible for many of Ethereum Classic’s technical innovations.
With Ethereum, Buterin’s goal was to expand the possible use cases for cryptocurrencies to applications beyond money.
Ethereum allows developers to create new cryptocurrencies and decentralized applications running on top of its blockchain. Ethereum Classic seeks to continue this vision. However, its developers have since elected to pursue it by making different technical decisions.
Why did Ethereum Classic fork?
The simplest answer is that the Ethereum Classic fork occurred over an ideological dispute among Ethereum users.
One of the core features of blockchains is their “immutability,” or the inability of any user to alter transactions that have been added to the blockchain’s history.
Ethereum Classic users saw the code proposed by Ethereum’s developers in the wake of The DAO as violating an essential guarantee of the software. Project developers tended to view the code as a one-time fix for a beta software.
What was the DAO?
The DAO was a decentralized application meant to serve as a funding vehicle for emerging projects on Ethereum.
Unlike traditional funding vehicles, The DAO was composed solely of code. It had no leaders, replacing corporate controls with open voting. Those that invested ether in The DAO could vote on which projects to support and contribute ETH to be distributed to those projects.
When an interested person wanted to invest in The DAO, they were able to exchange ETH for The DAO’s cryptocurrency (DAO). They could also recall their funding at any time, a feature unique to decentralized funding applications over their established industry counterparts.
The DAO attack
In June 2016, The DAO publicly recognized a security flaw that could threaten the roughly $150 million in ether it had so far collected. Despite reassurances that funds were safe, they were eventually drained from its accounts.
The individual or group that confiscated the funds is unknown, and their motives are still a subject of debate among Ethereum and Ethereum Classic users.
This is because the attacker exploited a bug in the code that would allow them to continuously recall their DAO tokens, allowing them to retrieve infinitely more than they originally invested. However, due to the specifics of the code, the developers had essentially enabled any user the ability to perform such an action.
This eventually resulted in the removal of roughly one-third of The DAO’s collected funds and a heated community debate about how (or if) Ethereum’s developers should respond.
How did Ethereum Classic fork?
Faced with a difficult choice, Ethereum’s developers sought to ask users how the project should proceed in light of The DAO attack.
This meant Ethereum’s developers would eventually code an alternative software with a patch designed to revert the loss of funds. By publishing the code, Ethereum’s developers believed they were effectively asking the public to make a decision, as users could reject the patch.
Since the code directly impacted Ethereum’s transaction history, anyone who decided to continue running the old software would be left transacting on a separate blockchain.
For a few days, it seemed like such a split would be avoided. Then, a new group of developers began maintaining the old ethereum code, a development that encouraged miners to devote computing power to secure the blockchain and collect the new cryptocurrency created.
What’s the difference between Ethereum and Ethereum Classic?
Ethereum and Ethereum Classic were initially based on the same code, but Ethereum Classic has since differentiated its technology.
Perhaps the biggest difference is the Ethereum Classic community has vowed to continue using proof-of-work mining (the system pioneered by Bitcoin) to secure its blockchain.
As of 2020, Ethereum uses proof-of-work as well, but its developers are pursuing a roadmap that will eventually find the software switching to a different model.
Also of note is that Ethereum Classic has adopted a fixed monetary policy. The total amount of ETC that can be created is capped at 230 million ETC, meaning scarcity factors into its value.
Why use Ethereum Classic?
With its fixed monetary policy, Ethereum Classic supporters believe their cryptocurrency, classic ether can serve as a store of value (like bitcoin). This may prove of interest to investors, who can count on ETC tokens becoming more rare over time.
The network itself can, like Ethereum, be used to develop and run decentralized applications. At this time, there’s just a small number of available dapps, but that number could grow.
Given that Ethereum Classic is so compatible with Ethereum, there are also prominent voices in the community that envision a kind of symbiotic collaboration between the two blockchains.