Monica Vierveijzer, 5 months ago

Ethereum Classic explained: Why does ETC exist?

As Ethereum is going to a lot of changes, all the time. While most changes in Ethereum are supported by the vast majority of the community, Ethereum Classic was born during troublesome times in the year 2016. What is Ethereum Classic and why is there a classic version in the first place? Today we will take a closer look at Ethereum’s little rebel sister.

The DAO Hack

In 2016, Ethereum was still a very young and ambitious project. The developers came up with an idea called “The DAO”. While “The DAO“ was a typical decentralized autonomous organisation as you know it from other examples that exist today, the idea and the concept of a DAO itself was pretty new at that time.

The DAO collected 150 million US-Dollars during a token sale. To participate in the DAO, users had to hold a share of tokens. The purpose of The DAO was to finance other DApps, much like a decentralized venture capital fund. And the token holders would allow or deny funding for other projects based on their shares of the token that they bought.

Only three months after The DAO was released, its smart contract got hacked due to a vulnerability. The community was shocked, and the developers tried to mitigate the hack with a soft fork. But the hacker had different plans, and since he stole about 60 million US-Dollar worth of cryptocurrency, he told others to reject the fork in exchange for a share of that 60 million. 

The developers only saw one solution to beat the attacker and reverse his hack. The Ethereum blockchain underwent a hard fork. The result was a reset, and the network and all balances were effectively set back. All victims were reimbursed, but the community was torn because of the implications of this very fateful decision.

Ethereum Classic continued the old chain

One part of the community stuck to the idea that all transactions are final and that a hack or loss of funds shouldn’t be a reason to turn back the hands of time. In fact, Ethereum Classic was born more over an ethical debate about whether developers have the right to hard fork a network just like that. The Ethereum Classic community simply decided not to go along with the hard fork and instead kept validating the old blockchain.

Hence the name Ethereum Classic and the ticker ETC. Needless to say, the infrastructure of Ethereum Classic is very similar to that of Ethereum.

What are the differences between ETH and ETC?

Ethereum and Ethereum Classic are both blockchain-based distributed computing platforms, but they differ in their approach to handling a significant event in their history. 

Ethereum Ethereum Classic
#2 in market cap Top 25 in market cap
All-time high of roughly $4000 All-time high of roughly $100
Proof-of-Stake Proof-of-Work
Uncapped total supply

Reduces block reward by 20% every 5 million blocks

The fact that ETC simply decided to stay true to certain aspects of blockchain technology doesn’t mean there is no development. Many proponents of ETC think that Ethereum Classic is slower and more expensive points to the fact that it is meant only for the most important agreements that could possibly be settled on the blockchain. Meaning that most use cases that require fast and cheap transactions are not suitable for blockchain technology anyways.


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