What is Ethereum Classic (ETC)?
Ethereum Classic (ETC) is a distributed, decentralized, open-source, blockchain-based cryptocurrency platform that executes smart contracts. Ethereum Classic was formed in 2016 as a result of the hack of The DAO, a decentralized autonomous organization that used smart contracts running on the Ethereum blockchain. The original blockchain was split into two parts, and most users decided to undo the hack and return the stolen funds.
The split exposed philosophical differences within the Ethereum community. Based on the “code is law” principle, a small number of developers and miners believed that DAO investors should suffer the consequences of investing in a flawed project.
Understanding Ethereum Classic (ETC)
Ethereum is a blockchain platform similar to Bitcoin, with one key difference: in addition to recording valuable transactions, it can also be used as a distributed computer to execute self-executing smart contracts.
Ethereum Classic supports smart contracts that automate actions via the blockchain. For example, if one party agrees to sell an item to another at a certain price, a smart contract automates payment and transfer of ownership, eliminating the need to trust either party to fulfill its obligations.
History of Ethereum Classic:
The Ethereum blockchain was originally created as a single network where transactions were carried out using its native ETH token (ETH). The new network quickly became popular with 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 in which investors voted on which assets to invest in. The DAO quickly accumulated over 11 million ETH from over 18,000 investors before unknown hackers discovered a bug in the smart contract that allowed them to withdraw approximately one-third of the DAO’s accumulated ether.
Due to the scale of the hack, many investors suggested rolling back the Ethereum blockchain to save affected investors, while others argued that it would set a precedent for future rescue measures. After a hastily organized survey, 85% of the network’s miners switched to the hard fork.
The new network inherited the name Ethereum and its own ether token. The oldest, renamed Ethereum Classic, also uses ether, but has a different symbol – ETC.
Concerns about Ethereum Classic:
Although both Ethereum and Ethereum Classic offer smart contracts and target the same market, Ethereum remains the more popular of the two networks. Additionally, Ethereum’s ETH is second only to Bitcoin as the most valuable cryptocurrency network in the world.3
One of the main problems with Ethereum Classic is possible scalability limitations. Typically the network can process 10 to 20 transactions per second, but this number is much lower than payment networks. Although Ethereum Classic has undergone many software updates, the scalability of its payment systems remains one of its biggest challenges.
Cryptocurrency market regulations continue to evolve, which may or may not change the way Ethereum Classic and other networks operate.
The Future of Ethereum Classic:
The future of Ethereum Classic appears less bright than that of Ethereum, as Ethereum remains the more popular of the two networks.
Blockchain and cryptocurrencies have failed to gain traction in the market, losing market share to other cryptocurrencies. However, ETC continues to be traded on exchanges and operated by the community. Blockchain and cryptocurrencies continue to maintain a seemingly strong base of traders and fans.
Like Ethereum, Ethereum Classic has a process for suggesting improvements. Since its fork, it has undergone several updates, such as making it compatible with the latest Ethereum changes.
The network saw a migration of miners after Ethereum integrated proof of stake in 2022, and developers created several applications using its virtual machine.
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 competitive reward system that Ethereum used before the merger. Thus, the Ethereum Classic token can be mined, but the Ethereum token cannot.
Another difference is that Ethereum has no limit on the number of tokens it can issue. Ethereum Classic has a limit of 210 million coins that will ever be released. Every 5 million blocks, the Ethereum Classic blockchain undergoes a “fifth” event, similar to the Bitcoin halving, where the block reward decreases by 20% approximately every two years. The last fifth occurred in 2022, causing the reward to rise to 2.56 ETC. The next fifth is expected in May or June 2024, and the reward will be reduced to 2048 ETC.
These compensation reductions are expected to continue every two years. By 2059, ninety-nine percent of ETC will be mined.
Ethereum Classic Goals
Since the split, the Ethereum Classic project has seen many updates and improvements. The goal of the project remains to work on creating a global payment network using smart contracts, which can function without centralized management.
Like other cryptocurrencies, Ethereum Classic will likely continue to strive to become a digital store of value, meaning it can be stored and exchanged while retaining its value.