Ethereum Classic (ETC) is not a new cryptocurrency. Rather, it is one that resulted from the split of an existing cryptocurrency, Ethereum. Just like Ethereum, ETC is a secure, censor-proof, reliable, public, trustless, and decentralized platform for running applications and smart contracts. Ethereum Classic has its own token, ETC, that works as the network’s “fuel”.
Supporters of ETC tend to be purists who argue it’s the “true” Ethereum while detractors claim it’s a less important or inferior version of the protocol. Both blockchains were identical in every way up until block 1920000.
But after that everything changed.
In 2016, a smart contract on Ethereum was hacked. This event split community opinion and resulted in one of the most significant schisms within the blockchain community to date. This division was over the practicalities of how to address the theft of funds that took place during the incident (more on this below). But ultimately it took on some deeper philosophical and ethical shades as well.
To really understand ETC, how it differs from Ethereum, and why this matters, we need to retrace a little bit of its history.
This controversy all began with the DAO.
The Ethereum ecosystem works as a foundation for smart contracts. In a simplified sense, smart contracts are automated protocols that can carry out and enforce various transactions autonomously. The DAO was a complicated smart contract whose aim was to create a decentralized venture fund that would distribute money to various dapp development projects.
The code of the DAO was designed to eliminate the need to trust humans. But in the end, humans were not so easy to remove.
Understanding the DAO is not hard. If you wanted to influence the direction development took, you had to purchase DAO tokens with ETH. In order for funding to proceed, a dapp needed to get 20% of the vote from all of those DAO holders. The more DAO tokens you had, the more weight you held at the voting table.
This idea struck a chord, and investors rushed to buy tokens, investing over $150 million worth during a public sale. But no sooner had that happened than the DAO was attacked, hacked, or otherwise compromised (what exactly happened is debated).
On June 17, 2016, someone took advantage of a known oversight in the DAO code (to be clear, this has nothing to do with Ethereum itself) and siphoned away nearly 1/3 of the funds. At the time, this was around a staggering $50 million.
As can be expected, chaos ensued in the Ethereum community (and the cryptocurrency market as a whole felt the brunt as well). There was a lot of hand-wringing, eulogizing, and arguing, but ultimately the community voted on what to do moving forward.
After the vote, the consensus turned out to be that most people wanted to erase the transaction history to get the funds back to investors – and away from the attacker. Those who felt this way included Ethereum founder Vitalik Buterin and most other prominent figures in the community.
This required a hard fork, a “radical change to the protocol that makes previously invalid blocks/transactions valid (or vice-versa)”.
The only issue with this vote was that consensus was not 100%. There was a small group of dissenters who disagreed with the majority. They believed that “code is law” and that blockchains shouldn’t be altered, even if the majority is in favor of doing so.
This group took their own action.
When Ethereum rolled back its history, the dissenters continued to mine and develop the original blockchain. They took a position that claimed to be for everything cryptocurrencies should be. Since this group lacked the majority, this original chain became known as Ethereum Classic. To quote their website, “the classic version is preserving untampered history; free from external interference and subjective tampering of transactions”.
The group behind Ethereum Classic quickly organized and published their declaration of independence. In this document, they stated their opinion that the Ethereum Foundation’s handling of the DAO hack was reprehensible and also projected a vision for the future.
It should be noted that keeping this version of Ethereum running was no small undertaking. A community hub was needed, supporters had to rally together, dedicated ETC mining pools had to be created, and there was a need for exchanges to pick up ETC.
But in the end, all of these things were accomplished. As we enter 2018, the team that survived this tumultuous history has an aggressive roadmap before them.
Some of the key projects in the pipeline are as follows:
(Source)
If you already understand how Ethereum works, you’re well on your way to understanding ETC. For those who wish to skip ahead, there is a great article on the differences between Ethereum and Ethereum Classic. Or just take a look at our cheat sheet below.
Ethereum Classic runs on the blockchain, a decentralized spreadsheet or ledger. The beauty of the blockchain is that it’s a distributed system with no single point of failure or control. Blockchains are trustless and censorship-free, and have (so far) proven largely immune to hacking or manipulation.
Every transaction or smart contract on the ETC network is packaged into blocks. These blocks are recorded in the “amber” of the blockchain, and the entire network must agree on which transactions are correct or incorrect, thus arriving at “consensus”. In this way, the system is always reconciling itself so users know they can trust its accuracy. ETC uses the same Proof-of-Work (PoW) algorithm as Bitcoin does for reaching consensus.
“Proof-of-Work”, as its name hints, requires that participants (miners) validate these blocks of data, showing that they have invested significant computing power in doing so. They must prove their work by racing to solve complex mathematical problems. The winner of this race (having proven their work) is rewarded with some ETC. Once a block has been mined, it’s added to the blockchain.
Ethereum is currently moving away from PoW for a number of reasons (centralization of mining power, energy consumption, etc.) but Ethereum Classic is sticking with PoW for now. The line given is that PoS implementation seems overly complex and they’d rather not risk the network with untested tech.
When you start drilling down, it doesn’t take long to see that smart contracts are the primary feature of ETC. As we mentioned above, smart contracts are computer programs that directly control the transfer of digital currencies or assets between parties, if certain conditions are met. The make contracts enforceable in computer code. They are, in part, why Ethereum (and by extension ETC) exists in the first place.
The Ethereum Classic network functions as “software that hosts other software”. ETC provides a place for people to build and run smart contracts – a blank canvas or a back-end, if you will, for developers to implement all manner of smart contracts and dapps. One of the key innovations here is ETC as a platform that allows for the easy scripting and creation of dapps for all types of use-cases.
There are quite a few applications running on Ethereum Classic, and more are being developed. Here are a few notable projects that are already operational.
The ETC token functions as a method of paying for things within the ecosystem, an incentive to build good code, and, for some people, an investment vehicle. Ethereum, and by extension ETC, was created with the idea that there should not be a maximum limit on the number of tokens. This is largely because of the intention behind the token (meant more as “fuel” than a true currency). But this approach brings with it some obvious problems, namely that an unlimited supply of coins means their price would always be going down.
ETC addressed this in their ECIP 1017 monetary policy change. This change mandates (among other things) that on December 12, 2017, the block reward (remember the miners’ reward from above?) will drop from 5 to 4 ETC. This downward trend will continue until eventually the block reward is zero. What this means is that the token will remain inflationary until about 2025, at which point there should be in the vicinity of 200 million ETC. After that, it will become a deflationary currency. For those who view ETC as an investment vehicle this is likely good news. A capped or deflating supply of tokens tends to drive demand and thus prices (in general terms).
In the aftermath of the DAO debacle, a number of different people stepped up to support ETC, but none of these people were/are particularly famous. There is no Roger Ver leading the Ethereum Classic team, which in a way, is intentional.
According to one Redditor, “We try very hard to not stick to specific people as founders/leaders, otherwise, we run the risk of centralizing around specific people. We’re essentially trying to follow the Bitcoin model of creating a blockchain that is agnostic to any particular set of users and open to all.”
At one point, the entire ETCDEV team was rumored to be /u/splix (who provided much of the initial code), and then you have bitnovosti which founded the ETC community. There are also two other dev groups: IOHK and Ethereum Commonwealth working on the protocol.
As time has passed, the primary ETCDEV group has grown into a thriving independent team of engineers and professionals in software development, who are working full-time on the project. There are currently a handful of engineers:
(select ETC devs)
and a handful of advisors:
(select ETC advisors)
The full team roster is here and it continues to grow. The operators of ETC forums, Discord, Twitter handles, and subreddits are all handled by community volunteers.
According to ETC community manager Anthony, “Getting started was tough. We went from having the Ethereum Foundation and a sizable community to no leadership or structure. Luckily, we had Bitnovosti and many others to help us create a path.” Simply surviving the DAO incident was arguably the biggest challenge (and success) ETC has had to date.
ETC also faces the contentious nature of its split with Ethereum and the continuing struggle therein. Although most of the community do not consider themselves “anti-Ethereum”, and the level of infighting is nowhere near Bitcoin/Bitcoin Cash levels, issues remain. Some in the Ethereum community consider ETC an attack on Ethereum. Others charge that ETC is nothing more than a combination of immutable blockchain loyalists, ETH antagonists, and general market speculators – not the most flattering depiction.
Any other smart contract platform can be considered a competitor of ETC. This includes Ethereum, Lisk, NEO, and QTUM to name just a few. But the community remains less focused on other technologies coming in direct competition with ETC and more on partnerships and complementary solutions.
As Anthony puts it, “I really want to get away from focusing on competition and move towards a more interoperable network of blockchains. There’s not going to be any one winner in this. You even see this now, where the Cardano (ADA) wallet has added support for Ethereum Classic and I look forward to more interoperability in the future.”
Buying ETC is as easy as following three simple steps.
The vast majority of crypto supporters have chosen to favor Ethereum, there is no denying that, but, as some would argue, they’ve compromised their principles to do so. ETC exists for the blockchain purists and maximalists. One great thing about this smart contract platform is that identity politics and “toeing the party line” don’t matter in the way they do within some other crypto factions.
In terms of true decentralization, not too many blockchains can compare with Ethereum Classic.
Whether or not Ethereum Classic can take its highly principled and decentralized technology and continue to thrive is yet to be seen. In a winner-take-all scenario it’s hard to see the road forward, but in a world of greater nuance and complementary solutions, ETC may flourish well into the future. Ethereum Classic often doesn’t get the credit it deserves, but for now the key is continuing to get more users and developers involved.
Want the latest news? Check out the ClassicIsComing Twitter, the Ethereum Classic Twitter, and ETC.Today. Want to read an in-depth analysis of ETC investment potential? Give this a look. Want to join the ETC discussion? Most of this happens on Discord.
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