What is Ethereum Classic (ETC)?
To understand how Ethereum Classic came into being, we have to go back to the early days of Ethereum – which was, of course, originally authored by Vitalik Buterin and Gavin Wood. Shortly after the initial release of the project’s mainnet on 30 July 2015, an associated third-party project (DAO – an Ethereum based hedge fund) got hacked, losing tens of millions of dollars worth. In response, the Ethereum Foundation created a new version of the mainnet.
However, this necessitated an irregular state change to erase the DAO theft from Ethereum’s blockchain – something not everyone in the Ethereum project felt comfortable with. So, even though the Ethereum Foundation and most of the community forged ahead with the new, altered Ethereum (ETH), an unaltered version of the blockchain was maintained and pressed ahead as Ethereum Classic (ETC).
| Did you know? Poloniex became the first major crypto exchange to list ETC on July 23, 2016. Source: EthereumClassic.org |
Ethereum Classic (ETC) Basics
Although Ethereum Classic was essentially the same as Ethereum at the point of the hard fork, which was at block 1,920,000, the two projects have since diverged significantly.
ETC Blockchain
In September 2022, Ethereum transitioned from proof-of-work to proof-of-stake in an event known as the Merge. This had been planned for years. Indeed, during the Ice Age upgrade (block 200,000), Ethereum added a mechanism known as the Difficulty Bomb. This exponentially increased the difficulty of mining in order to push the network to adopt proof-of-stake sometime in the future.
With the ETC community divided between those who wanted to follow Ethereum and eventually transition to proof-of-stake, and those who wanted to remain on proof-of-work. So, to buy time, Ethereum Classic opted to slow down the Difficulty Bomb with a network update called Die Hard at block 3,000,000. Later, the ETC community settled on sticking to proof-of-work, and at block 5,900,000 an upgrade defused the Difficulty Bomb once and for all.
Thanks to further Ethereum Classic upgrades and activation of the Phoenix protocol, applications are now cross-compatible between Ethereum Classic and Ethereum.
Ethereum Classic Supply
ETC is limited to a total supply of 210,700,000. According to CoinMarketCap, as of late November 2022, there were just over 138 million ETC in circulation.
Ethereum Classic Adoption & Usability
Whilst there’s no doubt that Ethereum (ETH) is by far and away more successful than Ethereum Classic, courtesy of numerous upgrades, ETC is still a flexible and useful network. As a cryptocurrency, ETC is nowhere near as widely accepted as ETH, and its market capitalisation is much lower. Illustrating this, according to CoinGecko, as of November 21 2022, ETC market cap was around $2.5B, compared to ETH’s $137.3B.
Ethereum Classic Network Fees & Speed
At the time of writing, both Ethereum Classic and Ethereum were comparable in terms of speed, although fees on ETC were considerably lower. However, once all of the planned upgrades to Ethereum have been completed, and it finally transitions to Ethereum 2.0, it will leave ETC in the dust. For example, the planned sharding capability will allow ETH to perform around 100,000 transactions per second, as opposed to ETC’s 19 per second.
| Did you know? In October 2018, Ethereum Classic Labs launched an incubator program, committing to work with up to 24 Ethereum Classic-based startups annually. Source: EthereumClassic.org |
Ethereum Classic Security and Safety
When it comes to security, many would argue that Ethereum Classic’s proof-of-work consensus mechanism is, in some respects, fundamentally more secure than Ethereum’s proof-of-stake. And, that might be true by some measures. But, because the Ethereum Classic network is so much smaller than Ethereum, it is more vulnerable to 51% attacks – when a bad actor acquires control of more than half of the network’s power. Indeed, ETC has suffered several such attacks in the past.
Security and safety tips:
- Don’t leave your ETC on exchanges for longer than necessary. Always transfer your crypto to a local wallet for short-term storage.
- For long-term storage, keep your crypto in a hard wallet.
- Always keep your wallet keys in multiple safe places – they cannot be recovered.
- Never tell anyone about your crypto holdings. No matter how secure your storage is, if you or your loved ones are physically threatened, you’ll probably hand over your personal keys.
Ethereum Classic Volatility
As with other cryptos, ETC has experienced significant price volatility since launching. For example, on July 25, 2016, ETC was worth just $0.62, but by May 6, 2021, had reached a high of $167.09. However, at the time of writing in late November 2022, ETC was trading at just under $18 (CoinGecko data).
Final Word on Ethereum Classic
Judging Ethereum Classic is difficult. Because it is the true, unadulterated Ethereum chain, it has a lot of passionate support from crypto purists who respect the Code is Law ethos. It also has the advantage of good foundations and a recognisable name. And, in terms of sheer usability, given its less congested network and lower fees, it can be quite attractive.
Many in the crypto community are also concerned about the way in which Ethereum’s switch to proof-of-stake may make it more vulnerable to censorship. This can be a risk when certain parties have a large stake in the network, and could take the form of self-censorship or government-imposed censorship. Proof-of-work, as used by Ethereum Classic and Bitcoin, ensures networks are immune from this kind of risk.
However, competition is a lot stiffer now than a few years ago, and with the Ethereum Foundation steadily progressing towards Ethereum 2.0, and public/political hostility towards ‘wasteful’ proof-of-work mounting, the long-term outlook for ETC is uncertain.