What Is Ethereum Classic (ETC)?
Ethereum Classic (ETC) is an open-source, decentralized, blockchain-based distributed cryptocurrency platform that runs smart contracts. Ethereum Classic was established in 2016 after the decentralized autonomous organization (DAO), which used smart contracts operating on the Ethereum blockchain, was hacked. The original blockchain was split in two, with the majority of users choosing to reverse the hack and return the stolen funds. Ethereum Classic and Ethereum are rooted in the same code but have different technical and philosophical differences.
Key Takeaways
- Ethereum Classic is an open-source, decentralized, blockchain-based distributed cryptocurrency platform that runs smart contracts.
- Ethereum Classic is the original Ethereum blockchain.
- It was conceived by Vitalik Buterin and the Ethereum Foundation and launched in 2015.
- Ethereum Classic was created after The DAO hack in 2016.
- A dispute caused a split in the Ethereum community, with the majority choosing to reverse the hack while Ethereum Classic did not accept the reversal.
Understanding Ethereum Classic (ETC)
Ethereum Classic is a blockchain platform. It facilitates smart contracts, which automate actions via the blockchain. For example, if one party agreed to sell an item for a specific price to another, the smart contract would automate the payment and transfer of ownership, removing the need to trust that either party would fulfill its obligation.
As noted above, the blockchain was split into ETC and Ethereum after a hacking incident. This split revealed philosophical divisions within the Ethereum community. Based on the principle that code is law,a small number of developers and miners believed that the DAO's investors should suffer the consequences of investing in a flawed cryptocurrency project. However, the majority of the Ethereum community decided to roll back the blockchain, effectively creating a bailout for investors.
There have been many upgrades and improvements to the ETC project since the split. The goal of the project continues to be working toward becoming a global payment network using smart contracts that can function without centralized governance. As with other cryptocurrencies, Ethereum Classic will likely continue to strive to be a digitalstore of value, meaning it can be saved and exchanged while retaining its value.
As of May 27, 2024, the maximum supply of ETC was 210.70 million coins with 147.26 million coins in circulation. The crypto's market capitalization was $4.69 billion.
Similar to Bitcoin, Ethereum Classic records transactions of value. It can also be used as a distributed computer to run self-executing smart contracts.
History of Ethereum Classic
Ethereum was conceived by Vitalik Buterin and the Ethereum Foundation and launched in 2015. The Ethereum blockchain was established as a network where transactions were facilitated using its native token ether (ETH). The new network quickly became popular for initial coin offerings (ICOs), as different teams used the platform to launch their own tokens.
One of the most successful ICOs was the DAO, a decentralized venture fund where investors would vote on assets in which to invest. This fund quickly accumulated more than 11 million ETH from over 18,000 investors before unknown hackers discovered a smart contract bug allowing them to withdraw about one-third of The DAO's accumulated ether.
Due to the scale of the hack, many investors proposed reversing the Ethereum blockchain to rescue the affected investors, while others argued that doing so would set the precedent for future bailouts. As many as 85% of the miners on the network switched to the hard fork.
As a result, the Ethereum blockchain split into two separate networks. The newer network inherited the name Ethereum and the native token ether. The older one was renamed Ethereum Classic. It also uses ether, but it has a different symbol, ETC. The network experienced a migration of miners after Ethereum integrated proof-of-stake in 2022. Developers have created several apps using its virtual machine.
Concerns About Ethereum Classic
Although Ethereum and Ethereum Classic offer smart contracts and are after the same market, Ethereum remains the more popular of the two networks. Ethereum's ETH is second only to Bitcoin as the most valuable cryptocurrency network in the world.
One of Ethereum Classic's chief concerns is its potential limitations regarding scalability. The network can handle between 10 and 20 transactions per second, but that number is far less than that of traditional payment networks. Although Ethereum Classic underwent many software upgrades, the scalability of its payment systems remains one of its biggest challenges.
Cryptocurrency market regulations continue to develop, which may or may not change how Ethereum Classic (and other networks) operate.
Future of Ethereum Classic
The future of ETC looks less bright than that of Ethereum since Ethereum remains the more popular of the two networks.
The blockchain and cryptocurrency failed to gain much traction in the market, losing market share to other cryptocurrencies—notably Bitcoin. ETC continues trading on exchanges and is mined by the crypto community. The blockchain and cryptocurrency hang on to a seemingly solid base of traders and fans.
Like Ethereum, ETC has an improvement proposal process. Since its hard fork, it has undergone several upgrades, such as developing compatibility with Ethereum's latest changes. Despite all this, demand for ETC continues to be strong and there is the possibility that the blockchain and cryptocurrency will remain competitors in the space.
Investors will be able to start trading spot Ether exchange-traded funds (ETFs) following approval from the Securities and Exchange Commission (SEC) in May 2024. These ETFs will trade on the New York Stock Exchange (NYSE), the Nasdaq, and the CBOE BZX Exchange. There is no launch date for trading yet, as the SEC is still reviewing applications.
Ethereum Classic vs. Ethereum
One of the most significant differences from Ethereum is that Ethereum Classic retained its proof-of-work mechanism and the competitive reward system Ethereum used pre-merge. This means that Ethereum Classic's token can be mined, whereas Ethereum's cannot.
Another difference is that Ethereum does not have a limit on the number of tokens that can be issued. Ethereum Classic has a limit of 210.7 million coins that will ever be introduced. For every five million blocks, the Ethereum Classic blockchain undergoes a fifthening. This event is similar to Bitcoin's halving, where the block rewards are reduced by 20% every two years. The last fifthening occurred in 2022, bringing the reward to 2.56 ETC. The next fifthening is expected in June 2024, and the reward will be dropped to 2.048 ETC.
This reduction of rewards every two years is expected to continue. As much as 95% of ETC will mined by 2059.
Does Ethereum Classic Have a Future?
Ethereum Classic has weathered ups and downs since it forked from Ethereum. It continues to be developed and has a consistent base of traders, investors, and users. Whether it has a future depends on its ability to maintain its position as an attractive cryptocurrency and blockchain.
Can Ethereum Classic Reach $10,000?
Just like any other type of security, it's difficult to predict what will happen to cryptocurrency prices. ETC could reach $10,000, but it's just as likely it will collapse and be worthless.
Is Ethereum Classic a Good Buy?
It depends on your outlook, preferences, and risk tolerance. It also depends entirely on how the market performs and when you decide to make an entry point. Your trading strategy also determines the viability of an investment in Ethereum Classic. For instance, you may choose to buy and hold the cryptocurrency as a long-term investment or you may only keep it in your portfolio for a short time.
The Bottom Line
Ethereum Classic is a blockchain that forked from Ethereum in 2016. It maintains the blockchain that existed before the community voted to roll back the Ethereum blockchain state after thieves stole millions from investors.
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