Most of us know what Ethereum is. But what is Ethereum Classic and what are the ETC vs ETH differences?
ETC and ETH blockchains are very similar. In fact, Ethrereum classic is an older version of the Ethereum blockchain. However, there are also important differences.
To see the whole picture we will need to look at the history of Ethereum.
Ethereum is a blockchain-based smart contract platform. Vitalik Buterin developed Ethereum in 2013 to create a successor to Bitcoin. The idea behind Ethereum was creating a supercomputer to power a decentralized internet. Ethreuem is also a cryptocurrency native to the ETH blockchain.
Buterin wanted to create a self-governing environment where “code is the law“. As such, the ideology behind Ethereum suggests that no single human influence can change the governance dictated by the code.
Try to remember the “code is law” promise, as it will be important to us later on.
DAO was an important step in the development of Ethereum.
The Decentralized Autonomous Organization or the DAO was a unique venture fund where developers could obtain funding for their blockchain apps. The Ethereum community members created this organization in 2016 to fund the development of decentralized applications.
DAO was one of a kind project where token holders could decide which projects to back by voting. Since DAO didn’t have employees it was a completely decentralized organization governed by the community.
To become a part of DAO anybody could buy DAO tokens for Ethereum and use them for voting.
So, how did it all work?
Dapp developers could submit their applications and request funding. Authority figures in the community called curators had the power to “whitelist” these apps. Whitelisted projects were then voted by token holders. If a project got a 20% approval rating, it received requested funding.
At the time the idea was unprecedented. It offered revolutionary transparency and the community liked it so much that DAO collected 150 million USD during the crowdsale.
So, DAO was a decentralized venture fund governed by the community. Can you see a problem with the model?
What if you didn’t like an app despite it getting a high approval rating? How could you exit?
Well, you could use a “Split Function” to exit the organization and the DAO would even return your investment in Ethereum. You could even create Child DAOs with independent venture funds and communities from the main organization.
The only condition was that if you use the “Split Function” you won’t be able to spend your ETH for 28 days.
When this function was announced a lot of community members voiced the concern that the function can become a vulnerability. However, the creators reassured of the safety, promising that there won’t be any problems.
Unfortunately, they were wrong.
In 2016 an unknown individual or individuals exploited the “Split Function” with a very simple trick.
The attackers created a function that commanded the DAO to execute an exit, but before Ethereum could register the transaction the function would execute again, creating another exit.
This cycle kept happening until attackers managed to retrieve 50 million dollars worth of ETH from the system.
Obviously, losing one-third of all funds could not have been taken lightly by the community. But not everything was lost yet.
Remember the rule that an investor who performed an exit can’t access his funds for 28 days? The hacker was in possession of the money but he couldn’t cash out for another month.
This gave the community options. Two main ones were:
Now, it is important to understand that DAO is not the Ethereum blockchain. DAO is an application just like a mobile game for a phone. Consider this: if somebody hacks a mobile game it does not mean that they hacked the phone OS.
So, although the trust of the community wasn’t in the best shape, they still could continue supporting the original Blockchain.
A hard fork, however, meant that the community had to disregard their own stance “code is law” and forcefully make alterations to the system. This wouldn’t be a self-regulating environment anymore.
In essence, the would create a new Ethereum blockchain where the transaction didn’t happen. This blockchain could disregard the history and protocols of the original Ethereum.
In the end, most influential figures, including Vitalik Buterin and the majority of the community members chose the hard fork and created a split in the community. As a result, those who supported the hard fork got their money back.
However, while most community members supported the decision in favor of the hard fork, some remarked that creating a new version of the blockchain to medicate the actions of a single person means departing from the “code is law” philosophy.
This created an ideological split in the community and some people decided to keep supporting the pre-fork version, living with the consequences of the DAO attack.
That is how Ethereum Classic was born.
As such, Ethereum Classic is similar to Ethereum as it uses the same programming language for smart contracts and has a tradable coin (ETC) that you can buy on exchanges. Essentially, they used to be the same blockchain.
Right after the hard fork, the differences between blockchains were minor and the community was split purely because of ideology. However, with time more and more differences accrued in the code and structure of the chains.
With time the economy of Ethereum Classic became more similar to Bitcoin. For example, ETC introduced a supply limit, setting the total available maximum of ETC coins to be around 230 million.
Also, ETC miners need to know that after reaching block 5,000,000 the mining reward for each block will be reduced by 20% and every next 5,000,000 blocks we can expect another reduction by 20%.
Of course, looking back we know that Eterehum is much more popular than Classic among project developers. According to statistics, by the end of 2018, some 20,000 tokens were using the ERC20 standard, which is a standard implemented by Ethereum.
Ethereum was also the second crypto after Bitcoin to cost over $1000 at one point. Of course, at the time of writing this article, the price is much more modest at $149. By comparison, ETC costs only $3.86 at the time of wiring.
Finally, let’s take a look at the key differences between each blockchain.
Want to learn more about cryptocurrencies? Read our Stellar vs Ripple guide.
If you are looking to invest in any of these coins, the decision which one to back is largely an ideological one. Both of these blockchains have a similar goal and a similar design but because of a larger and stronger community, Ethereum has taken the core idea much further.
We can even argue that the ICO boom of 2017 could not have happened without ETH because of how easy it is to issue tokens on this blockchain.
Regardless of your stance in the matter, we hope that after reading this article you have a batter understanding of the difference between ETC vs ETH.