Ethereum Classic

What is Ethereum Classic (ETC)?

Ethereum Classic is a hard fork of Ethereum that came into being following one of the blockchain industry’s most infamous episodes, the DAO hack on Ethereum.

Sharing Ethereum’s code base, Ethereum Classic offers an alternate or, according to some, a true timeline of Ethereum. This timeline accepts the effects of the DAO hack under the principle that “code is law.”

This philosophy is the cornerstone of Ethereum Classic and firmly backs the idea of blockchain immutability. This means that blockchains are resistant to modification of their data.

“Code is law” prioritizes immutability even over decentralized decision-making and conflict resolution.

What Was The DAO Hack?

The DAO itself was the first-ever decentralized autonomous organization that operated on Ethereum using a set of smart contracts. It allowed investors and entrepreneurs to connect and seed ideas.

Participants would buy DAO tokens using ETH, and these tokens could be used to vote on which decentralized applications (dApps) to back.

Unfortunately, the DAO was exploited on the 17th of June of that year.

The perpetrator(s) of the attack took advantage of a flaw in the DAO’s code that ultimately led to the draining of 11.5 million ETH from it.

Even though the DAO code was at fault for this incident, it damaged Ethereum’s reputation. In turn, the Ethereum community voted to implement a hard fork on the chain to refund affected token holders.

In February 2022, crypto journalist Laura Shin alleged she had unmasked the DAO hacker, following an elaborate investigation that included the help of blockchain analytics company Chainalysis. Despite being a prominent author in the space, there have been instances in which Shin’s credibility has occasionally come into question. One such notable case led to a social media spat with Ethereum co-founder Charles Hoskinson.

When Was Ethereum Classic Launched?

After the DAO hack, the Ethereum community was divided over how to proceed. One fraction suggested that nothing should be done since the blockchain is supposed to be immutable.

However, when the community voted, the fraction that prevailed was in favor of a hard fork. It was meant to create an irregular state change in the mainnet that would erase the DAO theft from the Ethereum blockchain’s history.

Thus, this new chain created on the 20th of July 2016 would be given the Ethereum name and trademark. The old, unmodified chain was called Ethereum Classic.

A parallel was seen in early 2022, following the attack on the Terra Luna ecosystem’s stablecoin UST. Validators voted to roll back and create a new Luna, whereas the old chain’s token took the name Luna Classic.

What is a Hard Fork?

A hard fork is a change in the protocol of a blockchain network that sees the chain itself diverge into two. This is usually done in order to upgrade the network, but sometimes happens as a result of a community divide.

Ethereum has carried out many hard forks to upgrade the network, but Ethereum Classic is the only notable cryptocurrency to emerge from a hard fork of Ethereum.

Bitcoin has also seen hard forks that created new cryptocurrencies. The most notable of these was the emergence of Bitcoin Cash following a community dispute over scalability and block size. Bitcoin Cash then had a hard fork from which Bitcoin SV was created.

Who are the Founders of Ethereum Classic?

Ethereum Classic is a hard fork of Ethereum which represents the "original'' Ethereum chain without the refund of token holders affected by the DAO hack. As such, Ethereum’s founders can also ultimately take credit for ETC’s existence.

Vitalik Buterin was the driving force behind Ethereum’s conception. He retains an active role in its development and direction to date.

However, it must be noted that Buterin voiced his support for the hard fork following the DAO attack.

Polkadot founder Dr. Gavin Wood was also central to Ethereum’s creation. He authored Ethereum’s technical yellow paper, which was published in April 2014.

Charles Hoskinson, who went on to found Cardano, was another central member of the early Ethereum team, alongside Anthony Di Iorio, Mihai Alsie, Amir Chetrit, and Joseph Lubin.

How Does Ethereum Classic Work?

Like Ethereum, Ethereum Classic is a network of computers called nodes that build and find consensus on a blockchain.

Blocks on a blockchain are made up of a batch of new transactions as well as an identifier that must be present for the block to be considered valid.

This identifier is a cryptographic hash of the previous block, meaning that each block links to the previous. This makes the entire blockchain immutable, as changing the information on one block would change the identifier and break the chain.

This property is what Ethereum Classic considers fundamental and led to the Ethereum community’s divide after the DAO hack.

Whenever a network node adds a new block to the chain, transactions in that set are carried out, and the new network state is updated.

What Makes Ethereum Classic Unique?

Ethereum Classic is a proof-of-work blockchain that has smart contract functionality, making it a form of programmable money in the same way Ethereum is.

It is public, open source, permissionless, and ideologically bound by a like-minded community to the concept that “code is law.”

This ideology is one of its central draws, although it also stands to differentiate further from Ethereum once ETH makes its 2.0 shift to proof-of-stake.

That would leave Ethereum Classic as one of the best known PoW blockchains to offer smart contracts.

For the moment, ETC remains compatible with Ethereum thanks to its use of the Ethereum Virtual Machine. Despite initial resistance, it has adopted layer 2 technology.

What are Smart Contracts?

Smart contracts were added to Ethereum and remain in Ethereum Classic in order to automatically execute a predefined action when conditions are met.

These smart contracts aren’t easy to write, stop, or reverse when something goes wrong. This is why during the 2016 DAO hack, even Ethereum developers were powerless to actually make them stop.

However, smart contracts are transparent and visible to all parties on-chain. They function similarly to a vending machine that, when supplied with the correct amount of funds and the right selection, will give the customer the desired item.

Smart contracts can define rules and automatically enforce them, but interactions with them are not reversible.

How is the Ethereum Classic Network Secured?

Ethereum Classic is a proof-of-work blockchain, where blocks contain a set of transactions and a cryptographic hash of the previous block.

These new blocks are created by network nodes, called miners, that dedicate their computing power toward solving cryptographic puzzles.

This process sees the creation of new blocks, rewarding successful miners. On top of that, it also secures the network by building a consensus and validating the newly created block.

As a result, the security of the network is a function of how many miners there are and how well spread out they themselves are. A PoW network is easy to compromise if it has a very small number of miners, or if the majority of miners are somehow centralized.

Bitcoin, and to a slightly lesser extent, Ethereum, are both highly decentralized and have massive network effects with plenty of miners securing their networks. Ethereum Classic, however, does not enjoy the same benefit, as it has far fewer miners at work.

This weakness has led to multiple breaches of the Ethereum Classic blockchain. The network has suffered various attacks during its lifetime, including at least three 51% attacks in August 2020.

What is the Use of Ethereum Classic?

Proponents of Ethereum Classic pitch it as "untainted", "untampered", "principled", "original", "veracious", "unstoppable" Ethereum.

As such, ETC’s use cases do not differ very wildly from those of ETH, with the suggestion that Ethereum Classic is simply a version of Ethereum with all of these lofty ideals baked in.

The goal, therefore, is to serve as a framework for an ecosystem of dApps that make use of the Ethereum Virtual Machine and its smart contract functionality. One of ETC’s main goals, in fact, is to maintain compatibility with Ethereum.

The ETC token itself serves as a native token for the Ethereum Classic network and is used primarily for the payment of fees for transactions conducted on the network.

Who Controls Ethereum Classic?

Ethereum Classic labels itself as a permissionless "do-ocracy", a decentralized development ecosystem without an official team or formal hierarchy.

Consensus on development and direction for the protocol is made via the Ethereum Classic Improvement Proposal process. 

This means that technical write-ups are drafted and then agreed upon by core and volunteer client developers, implementers, and other users of the ETC mainnet.

How Much ETC Is In Circulation?

After the hard fork, ETC shared the same tokenomics as Ethereum. However, the community voted on significant changes not long after.

While Ethereum had been criticized as an "inflationary" token at the time, as it lacked a maximum supply cap, the Ethereum Classic community voted for a cap in December 2017.

This governance action set the maximum supply at 210,700,000 ETH, with a diminishing block reward similar to Bitcoin’s halving system slowing the approach toward that figure.

How Do You Buy ETC?

Given that Ethereum Classic is an established cryptocurrency that has retained a relatively high-ranking “market cap” as the industry continues to mature, you can buy it on many major exchanges.

It is commonly traded against most stablecoins and other major cryptocurrencies, including Ethereum, with some exchanges also offering fiat pairs.

However, a report by CryptoEQ posits that there have been discrepancies between the volumes reported by exchanges and those adjusted by analysts, allegedly due to wash trades and spoofing.

Is It Possible to Buy ETC Instantly?

While Ethereum Classic has a block time of just 15 seconds, transactions are relatively fast.

The low hashing power of the network due to lower adoption can be a risk to these transactions, but they are also cheap as a result of a lack of congestion.

Purchasing on an exchange is instant, but withdrawing can often be a different story.

This is because a trade on an exchange is nothing more than an interaction with the exchange’s internal ledgers. This means that your balance is changed notionally, and no trade actually takes place.

However, withdrawing a cryptocurrency from an exchange means an actual transfer of ETC from the exchange’s wallet to yours. This needs actual settlement and engages the network.

Because of the security issues that ETC has faced in the past, this withdrawal process has occasionally been extremely slow, even in comparison with fiat settlement.

How Do You Store ETC?

Like most cryptocurrencies, ETC is stored in a wallet. The two main types of wallets used to store ETC include:

• Hot wallets. Hot wallets are usually convenient and easy to use, taking the form of lite desktop clients or simple browser extensions. Metamask is an example of a hot wallet that supports ETC. You can find a useful guide to configuring Metamask for ETC on the ETC website.
• Cold wallets. These wallets stay completely offline, giving the holder protection against various types of attacks, including hacking.

Ethereum Classic Energy Consumption

Ethereum Classic uses the same Ethash mining algorithm used by Ethereum before its move to proof-of-stake and therefore has the same efficiency.

In aggregate, ETC consumes far less power than ETH does, but that’s because Ethereum Classic only has a fraction of the mining power dedicated to it. However, if ETC were to one day reach the level of adoption and use that Ethereum already has, it may reach or even surpass the levels of power consumption, drawing so much criticism from the mass media. That said, this pales in comparison to the amount of energy that the traditional finance sector consumes. Recent research shows that the consumption of the banking system alone far exceeds that of Bitcoin.

Is Ethereum Classic a Good Investment?

ETC, as an investment, has its pros and cons. At its core, putting money into Ethereum Classic means buying into its “code is law” philosophy.

Changing ETC’s monetary policy to incorporate a capped supply and diminishing supply over time was an effort to incorporate an element of Bitcoin’s “store of value.”

However, scarcity remains second to actual demand. For ETC to retain value and indeed appreciate, there needs to be a reason for investors to buy it.

The onus is on the ETC community to keep building the ecosystem and attracting developers to build and maintain a system of dApps that sees significant use.

Dappradar, which addressed that same topic in a blog post, did not, however, feature Ethereum Classic among the 30 blockchain platforms that it monitored for its 2021 dApp report.

This omission suggests that ETC lags significantly behind most other major smart contract platforms in adoption. On the bright side, this does mean that any sort of positive adoption news could be good news for ETC investors.

The shift of Ethereum to proof-of-stake could also see cryptocurrency miners move to Ethereum Classic, giving it a major boost.

Proponents of Ethereum Classic point to its involvement with digital asset manager Grayscale and the creation of the Grayscale Ethereum Classic Trust as a validation of ETC’s fundamentals.

However, it must be noted that Grayscale is a subsidiary of the Digital Currency Group (as is CoinDesk, their crypto media arm acquired in 2016), whose founding CEO is Barry E. Silbert.

On July 25th, 2016 (five days after the hard fork), Silbert tweeted that he had personally bought his first non-Bitcoin digital currency, Ethereum Classic, at $0.50.