What is Ethereum Classic?
It’s a smart contract-powered network that allows developers to build and deploy decentralized applications (dApps) on its open-source software. Hence, developers can create financial services, games, non-fungible tokens (NFTs), metaverse, and others.
The protocol was born following a decentralized autonomous organization (DAO) hack in 2016, which saw $16 million stolen from the Ethereum blockchain.
To address the situation, a few developers suggested rolling back the list of transactions to recover the stolen funds as a form of bailout for affected investors. Although 70% of the funds were subsequently recovered, 30% were left in limbo.
However, not all members were on board with this idea. This led to the formation of the Ethereum Classic as a separate blockchain platform, creating a hard fork of the Ethereum protocol.
According to the Ethereum Classic’s staunch supporters, the maxim “code is law” must be upheld no matter the situation.
The “code is law” maxim posits that smart contracts are immutable, and their integrity must be safeguarded to construct an unstoppable decentralized ecosystem.
What is ETC?
The Ethereum Classic platform is powered by its native token, ETC, which was introduced shortly after the split from the newer Ethereum protocol.
The digital asset holds significant value as it serves multiple purposes. These include:
- Payment for validating transactions within the Ethereum Classic platform.
- Covering the costs of securing block space on the smart contract network.
Since ETC operates as a PoW asset, it lacks the inherent capacity for investors to stake – a process where investors earn rewards for securing the network.
In the absence of staking, investors can earn rewards on idle ETC via the Savings feature offered by most centralized crypto exchanges. This allows investors to earn a variable interest across a stated time frame, whether a week or three months.
How Does Ethereum Classic Work?
Ethereum Classic combines the best of Bitcoin’s decentralization and security ethos with creative flexibility. The protocol is censorship-resistant and highly secure, enabling developers to build decentralized applications on the base layer using smart contracts.
So, how does Ethereum Classic’s system operate?
Transactions on Ethereum Classic are mainly run using the proof-of-work PoW consensus algorithm.
Ethereum Classic operates in this manner:
- Sent transactions are initially gathered in a memory pool (mempool), which serves as temporary storage.
- Miners pick transactions they want to validate and compete to be the first to solve the complex cryptographic puzzle.
- The first miner to do this broadcasts the solution to the entire network to inform other miners.
- Then, a revalidation check is carried out by other miners to ensure the transaction follows the set-down blockchain rules.
- Once clarified, the first miner gets the block reward (about 3.2 ETC), while the other miners get a commission from the transaction fee.
- The transaction is then added to a block of other transactions and attached to the last block in the network to form a chain.
Ethereum Classic vs. Ethereum
While both Ethereum Classic and Ethereum provide similar value, their operational setups differ.
The Ethereum Classic operates using the ancient or first-generation proof-of-work (PoW) consensus algorithm. This makes Ethereum Classic one of the few smart contract protocols enabling miners to earn network fees and block rewards for validating transactions.
Meanwhile, Ethereum has since transitioned to the proof-of-stake (PoS) setup, where validators have to lock up a significant amount of Ether cryptocurrency to be eligible for transaction verification.
|Consensus Algorithm||Proof-of-work (PoW) – first-generation||Proof-of-stake (PoS)|
|Mining Rewards||Miners earn network fees and block rewards||Validators lock up ether (ETH) for verification|
|Energy Efficiency||Less energy-efficient and power-intensive||More energy-efficient|
|Speed||Slower compared to newer networks||Faster transaction processing|
|Immutability||Strong emphasis on immutability||Allows alteration of blockchain transactions|
|Token Supply||ETC has a fixed supply of 210 million tokens||ETH has an infinite supply (with 4.5% annual growth)|
History of Ethereum Classic
Ethereum Classic officially launched in July 2016 after a fallout among the early developers of the project.
Below, we detail a more extensive backdrop of the first-ever smart contract protocol.
|30 July 2015||Ethereum launches after Vitalik Buterin and the Ethereum Foundation created the first-ever blockchain-based Turing-complete smart contract platform with the Frontier release.|
|8 September 2015||Frontier Thawing Upgrade launches, introducing the “Ice Age” that heralds the Ethereum “Difficulty Bomb” – a mechanism meant to move Ethereum from PoW to PoS.|
|16 March 2016||Homestead Upgrade – a second version of the Ethereum blockchain – is launched.|
|5 April 2016||Slock.it – a blockchain infrastructure provider – creates the first DAO smart contract audit.|
|30 April 2016||DAO crowdsale begins with members of the public allowed to send in funds in return for DAO tokens.|
|27 May 2016||DAO crowdsale is concluded.|
|17 June 2016||The DAO is hacked.|
|20 July 2016||Ethereum Classic blockchain is finally launched after much debate amongst the developers. The project token is renamed ETC in acknowledgment of the retention of the DAO hack event.|
Shortly after its deployment, the Ethereum Classic blockchain encountered numerous hacking attempts, with the 51% attack being the most significant among them.
A 51% attack occurs when a single entity or individual gains control of over 50% of the network’s resources. This often results in centralization and compromises the integrity of the blockchain by enabling the reversal of transactions.
Nonetheless, despite earlier intentions to migrate to a more scalable and energy-efficient consensus algorithm, the Ethereum Classic protocol chose to persist with the older PoW system.
Who are the Founders of Ethereum Classic?
Ethereum Classic is the legacy chain of the Ethereum protocol. The network shares the same lineup of founders – Vitalik Buterin, Gavin Wood, Charles Hoskinson, and several others.
However, the development team has been anonymous since the subsequent split into two smart contract factions.
There is no official team backing the project, but anyone can participate in the global development of the base layer protocol.
Ethereum Classic Use Cases
Ethereum Classic comes with several use cases.
Smart Contracts and dApps Creation
Ethereum Classic allows developers to create smart contracts for the smooth running of dApps. Smart contracts are computer programs that operate autonomously using preset commands. The platform allows these smart contracts to operate without external interference.
Ethereum Classic is the foundation for building dApps for the decentralized finance (DeFi) ecosystem. As a result, developers can create a wide array of DeFi applications for lending, borrowing, decentralized exchanges, yield farming, and more.
This ecosystem provides an open platform where anyone can engage in digital asset trading without limitations.
The original Ethereum blockchain offers a practical means for tokenizing real-world assets and tangible items. This enables users to easily tokenize vital items, such as real estate documents, using non-fungible tokens deployed on the Ethereum Classic protocol.
Supply Chain and Traceability
Given its transparency and immutable nature, Ethereum Classic can track products from the producer to end users. This ensures that products received by users are authentic and the supply chain process cannot be influenced.
Decentralized Games and Assets
Ethereum Classic also enables the development of censorship-resistant games and assets like NFTs. This means gamers from diverse backgrounds can enjoy these blockchain-powered games without limitations.
Moreover, they can possess in-game assets in the form of NFTs, which can be freely traded or acquired within these gaming environments.
The Future of ETC
The carbon footprints of PoW protocols like Bitcoin and Ethereum Classic have been highlighted in recent years. Both platforms require huge amounts of electricity to continuously validate transactions.
However, the rapid growth of renewable energy could help in this regard, as PoW networks can verify transactions without creating a lot of greenhouse emissions from primary fossil fuels.
If renewable energy sources are widely adopted across the crypto space in the coming years, Ethereum Classic would significantly see its stocks increase.
This is because miners will be more inclined to verify transactions without worrying about their carbon footprints.
Moreover, its limited token supply makes it deflationary, meaning the ETC value has the potential to hit triple digits in the coming years.
Ethereum Classic is the legacy chain of the Ethereum protocol. It holds the original code used to create the foremost smart contract network. However, a split opinion after a security breach led to the protocol being renamed.
The open-source crypto network still operates the PoW system, although its counterpart has since pivoted to the PoS algorithm.
This makes Ethereum Classic the only minable smart contract network today. Nonetheless, the protocol is a clear testament to the history behind the Ethereum blockchain.
Despite limited public acceptance, Ethereum Classic is still a major player in the DeFi ecosystem. We believe the network will remain so for many years to come.