Ethereum Classic (ETC) 101 - Complete Guide
Ethereum Classic is a computing platform built from the original Ethereum code. On the other hand, Ethereum is an open-source blockchain platform that pioneered smart contracts, but its protocol was changed in 2016 after a hack made away with $50 million worth of ether (ETH). Ethereum Classic also executes smart contracts, and its native cryptocurrency is Ethereum Classic (ETC).
We will be examining the history of ETC, why it was created, and the potential areas where the developers of ETC hope to leverage its technology. Most importantly, we will highlight the significance of ETC as an investment vehicle.
What Is Ethereum Classic and Why Was (ETC) Created?
We have already discussed how Ethereum Classic came about, but we did not mention the events that triggered its formation. Here we go! Before 2016, Ethereum and Ethereum Classic were one entity. This blockchain platform was responsible for introducing smart contracts in cryptoverse.
Ethereum (ETH) is the brainchild of Vitalik Buterin, and a host of other developers altogether called the Ethereum Foundation. In 2015, this foundation built a Turing-complete smart contract platform based on blockchain technology and called it Ethereum (ETH).
Same way as we have contracts between parties in the real world, the relevant parties also sign contracts in blockchain, and the details are captured in a software called a smart contract. The software also includes conditions that must be satisfied before it self-executes.
In 2016, Ethereum developers proposed and implemented a complex smart contract called the Decentralised Autonomous Organisation (DAO). DAO would facilitate the development of decentralised applications (dApps) on the Ethereum blockchain. Less than two months after DAO launched, a hacker siphoned $50 million worth of funds from it.
In the aftermath of the attack, the Ethereum Foundation, which is the governing council of the Ethereum community, met and decided on three possible alternatives of the way forward, do nothing, implement a soft fork or implement a hard fork.
A fork is simply an update to a piece of software. A soft fork is an update that allows the protocol of the updated software to be compatible with the old software. However, some features present in the updated software will be inaccessible to the old software users. Conversely, a hard fork results in a new software completely incompatible with the old one. Hence, users of the two platforms cannot interact at all.
A section of the community argued that Ethereum should continue with the old protocol without any fork because ‘code is law’. However, the Ethereum Foundation went the other way; they decided that a hard fork was necessary, and that is what they did. The developers, users and miners who remained with the original Ethereum protocol renamed it to Ethereum Classic.
How Does Ethereum Classic Work?
The Ethereum Classic developers describe the platform as the ‘purest decentralised project’ in the cryptoverse. One of the reasons for this claim is its untampered protocol since its creation. The blockchain works as a smart contract engine, meaning it supports the creation and implementation of smart contracts.
Miners validate transactions over the network through a system called Proof of Work (PoW). For each transaction successfully validated, the miners earn ETC and the information belonging to the transaction is stored in a new block. Each new block comes after the previous one and special cryptography algorithms link and secure the blocks into a single chain of blocks.
Ethereum Classic operates via state transitions. To understand this concept, one should know that Ethereum Classic’s ledger comprises of accounts and balances. There are two different states of the ledger, one showing all current balances, along with all the accounts created on the platform, and another showing extra data. A state does not appear on the blockchain until an ether transaction is complete.
Several projects have created decentralised applications (dApps) on the Ethereum Classic network including GitCoin, ONEX Network, and Cryptwerk.
Key 3 Selling Points of Ethereum Classic (ETC)
Backwards compatibility with the original Ethereum
Many developers and miners were disadvantaged by Ethereum’s sudden abandonment of the original Ethereum protocol. However, ETC still supports compatibility with the protocol (in what is called backwards compatibility). As such, many developers were able to carry on with their projects seamlessly.
Deflationary monetary system
The original Ethereum implemented a monetary system where the amount of digital currency created is limitless. ETH still uses this system. ETC abandoned it in favour of a system where it limits the ETC that miners can create. This, according to the community, takes care of both the long-term and short-term interests of ETC holders by ensuring that inflation does not depreciate the value of the wealth that ETC stores.
Predictable emission schedule
In crypto-lore, emission schedule refers to the rate at which a blockchain network creates new cryptocurrencies. Since ETC has a set maximum supply of ETC tokens (at 210 million ETC), the platform implements a regular schedule that dictates the production of new coins. For this reason, ETC displays better stability than ETH.
Is Ethereum Classic Worth the Investment?
Ethereum Classic is more flexible than Ethereum. Also, buying ETC is cheaper than ETH. For this reason, Ethereum Classic has become a serious contender for the default platform for dApps. Why is this important?
dApps are leading the way in decentralised finance (DeFi). Besides being a movement that leverages blockchain to transform legacy financial products, DeFi is probably the face of new finance that we are likely to experience in the future. DeFi projects cover a broad range of sectors where they seek to take out intermediaries from financial transactions. According to DeFi Pulse, the total value locked in DeFi at the time of writing was $13.03 billion, and it is growing really fast.
Since Ethereum Classic is vying for the default platform for dApps focusing on DeFi, we are likely to witness a massive shift of attention to ETC. If the shift happens, ETC could become an industry standard and hence, the most valuable digital currency in crypto markets.
Frequently Asked Questions
Yes, although not fundamentally. Both networks power smart contracts and their native cryptocurrency is Ether, ETC for Ethereum Classic and ETH for Ethereum. The major difference is how the networks operate, where Ethereum uses the irregular state change framework, which erased DAO while Ethereum Classic uses the state transitions system as it was in the original Ethereum network.
Bitcoin was created to run Bitcoin and BTC alone. Contrariwise, Ethereum Classic supports the creation of decentralised applications with unique solutions.
Gas is a unit, more like currency, that one requires to accomplish tasks on the Ethereum Classic blockchain. For example, a user is required to burn gas to install a new smart contract.
dApps are applications created on decentralised platforms such as Ethereum Classic that function just like regular applications built on centralised platforms. The term ‘decentralised’ is simply for distinguishing purposes.
Investors and enthusiasts can own ether via two methods. First, one can become a miner on the Ethereum Classic platform where one validates transactions in exchange for ether. Alternatively, one can purchase ether from cryptocurrency exchanges.
Proof of Work is a system through which miners create new ether tokens. It entails doing computations whose difficulty increases with the growth of blocks. The purpose of the increasing difficulty is to limit the emission rate of ETC and secure Ethereum Classic blockchain against bad actors.
This guide has provided information about ETC in great detail. We have discussed the significance of the project in the cryptoverse as well as its growth potential. However, this information is insufficient to support good investment decisions. Therefore, you need to expand your understanding of the cryptocurrency through further research before making the jump.