What Is Ethereum Classic (ETC)?
Ethereum Classic (ETC) is an open-source, decentralized, blockchain-based distributed cryptocurrency platform that runs smart contracts. Ethereum Classic was formed in 2016 as a result of a hack of The DAO, a decentralized autonomous organization that used smart contracts operating on the Ethereum blockchain. The original blockchain was split in two, with the majority of users choosing to reverse the hack and return the stolen funds.
The split revealed philosophical divisions within the Ethereum community. Based on the principle that “Code is Law,” a small number of developers and miners believed that The DAO’s investors should suffer the consequences of investing in a flawed project. However, the majority of the Ethereum community decided to roll back the blockchain, effectively creating a bailout for The DAO’s investors.
Key Takeaways
- Ethereum Classic (ETC) is an open-source, decentralized, blockchain-based distributed cryptocurrency platform that runs smart contracts.
- Ethereum Classic was originally known as Ethereum. It was conceived by Vitalik Buterin and the Ethereum Foundation and launched in 2015.
- Ethereum Classic was created after The DAO hack in 2016.
- A dispute caused a split in the Ethereum community, with the majority choosing to reverse the hack. Ethereum Classic is the name of the original, smaller blockchain.
Understanding Ethereum Classic (ETC)
Ethereum is a blockchain platform similar to Bitcoin, with one key difference: in addition to recording transactions of value, it can also be used as a distributed computer to run self-executing smart contracts.
Ethereum Classic facilitates smart contracts, which automate actions via the blockchain. For example, if one party agreed to sell an item for a specific price to another, the smart contract would automate the payment and transfer of ownership, removing the need to trust that either party would fulfill its obligation.
History of Ethereum Classic
Ethereum was conceived by Vitalik Buterin and the Ethereum Foundation and launched in 2015. Initially, the Ethereum blockchain was established as a single network where transactions were facilitated using its native token ether (ETH). The new network quickly became popular for initial coin offerings, as different teams used the platform to launch their own tokens.
One of the most successful ICOs was The DAO, a decentralized venture fund where investors would vote on assets to invest in. The DAO quickly accumulated more than 11 million ETH from over 18,000 investors before unknown hackers discovered a smart contract bug allowing them to withdraw about a third of The DAO’s accumulated ether.
Due to the scale of the hack, many investors proposed reversing the Ethereum blockchain to rescue the affected investors, while others argued that doing so would set the precedent for future bailouts. After a hastily-arranged poll, 85% of the miners on the network switched to the hard fork.
As a result, the Ethereum blockchain split into two separate networks. The newer network inherited the name Ethereum and the native token ether. The older one, renamed Ethereum Classic, also uses ether, but it has a different symbol, ETC.
Concerns About Ethereum Classic
Although both Ethereum and Ethereum Classic offer smart contracts and are after the same market, Ethereum remains the more popular of the two networks. Also, Ethereum’s ETH is second only to Bitcoin as the most valuable cryptocurrency network in the world.
One of Ethereum Classic’s chief concerns is its potential limitations regarding scalability. Typically, the network can handle between 10 and 20 transactions per second, but that number is far less than that of payment networks. Although Ethereum Classic has undergone many software upgrades, the scalability of its payment systems remains one of its biggest challenges.
Regulations of the cryptocurrency market continue to develop, which may or may not change how Ethereum Classic—and other networks—operate.
Future of Ethereum Classic
The future of Ethereum Classic looks less bright than that of Ethereum since Ethereum remains the more popular of the two networks.
The blockchain and cryptocurrency have failed to gain traction in the market, losing market share to other cryptocurrencies. However, ETC continues to be traded on exchanges and mined by its community. The blockchain and cryptocurrency continue to hang on to a seemingly solid base of traders and fans.
Like Ethereum, Ethereum Classic has an improvement proposal process. Since its hard fork, it has undergone several upgrades, such as developing compatibility with Ethereum’s latest changes.
The network experienced a migration of miners after Ethereum integrated proof-of-stake in 2022, and developers have created several apps using its virtual machine.
It seems that there is still demand for Ethereum Classic, so it is possible that the blockchain and cryptocurrency will remain competitors in the space.
How Is Ethereum Classic Different From Ethereum?
One of the most significant differences from Ethereum is that Ethereum Classic retained its proof-of-work mechanism and the competitive reward system Ethereum used pre-merge. Thus, Ethereum Classic’s token can be mined, whereas Ethereum’s cannot.
Another difference is that Ethereum does not have a limit on the number of tokens that can be issued. Ethereum Classic has a limit of 210 million coins that will ever be introduced. Every 5 million blocks, the Ethereum Classic blockchain undergoes a “fifthening,” an event similar to Bitcoin’s halving, where the block rewards are reduced by 20% about every two years. The last fifthening occurred in 2022, bringing the reward to 2.56 ETC. The next fifthening is expected in May or June 2024, and the reward will be dropped to 2.048 ETC.
This reduction of rewards every two years is expected to continue. Ninety-nine percent of ETC will mined by 2059.
Goals of Ethereum Classic
Since the split, there have been many upgrades and improvements to the Ethereum Classic project. The goal of the project continues to be working toward becoming a global payment network using smart contracts that can function without centralized governance.
As with other cryptocurrencies, Ethereum Classic will likely continue to strive to be a digital store of value, meaning it can be saved and exchanged while retaining its value.
Does Ethereum Classic Have a Future?
Ethereum Classic has weathered ups and downs since it forked from Ethereum. It continues to be developed and has a consistent base of traders, investors, and users. Whether it has a future depends on its ability to maintain its position as an attractive cryptocurrency and blockchain.
Can Ethereum Classic Reach $10,000?
It’s difficult to predict what will happen to cryptocurrency prices. It is possible that ETC will reach $10,000, but it’s just as likely it will collapse and be worthless.
Is Ethereum Classic a Good Buy?
It depends on your outlook, proferences, and risk tolerance.
The Bottom Line
Ethereum Classic is a blockchain that forked from Ethereum in 2016. It maintains the blockchain that existed before the community voted to roll back the Ethereum blockchain state after thieves stole millions from investors.
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