What is the Difference between Ethereum and Ethereum Classic

Killer Whale Crypto
Killer Whale Crypto
April 26, 2021, 11:37 PM UTC

An in depth discussion...

The tale and inevitable lesson behind the Ethereum (ETH) and Ethereum Classic (ETC) saga is much deeper than cryptocurrency alone. It’s a modern tale of battling ideologies, fierce loyalism, and in the end, perceived optimism in making the best out of a bad situation. Let’s begin to unravel what happened.

ETH vs ETC: A complex tale:

Because it didn’t generate enough initial interest, Buterin decided to raise funds via a crowd-sale in July 2014. Little did anyone know what would take place next and the chain of events that would ultimately unfold. The crowd-sale became one of the largest crypto fundraising efforts in history - generating around 25,000 BTC with a market capitalization of $17 million at that time. The global, open-source software platform, Ethereum, was born.

What is the difference between Ethereum and Ethereum Classic? In explaining the platforms, there are a few things to highlight. The main difference between Ethereum Classic (ETC) vs. Ethereum (ETH) is immense despite the similar name. Ethereum Classic (ETC) runs on the same protocol doing a similar function. Ethereum Classic’s primary value is due to being a speculator market. Ethereum (ETH) is more along the lines of a software company that wants to grow. Ethereum has value due to a mix of a speculator market but also due to its use of case scenarios and community support. It would also allow the creation of decentralized smart contracts. Smart contracts are essentially agreements between two parties that is written in code. A contract can be automatically processed by the blockchain once the conditions are met. This alone made it very appealing to many businesses. With the combination of the blockchain’s immutability, paired up with its open-source functionality. In the battle between ETH vs ETC, Ethereum simply sounded too good to be true.

And much like a Shakespearean tragedy, Hamartia, or a hero’s tragic flaw, would come to fruition...

The DAO Split: Ethereum vs. Ethereum Classic:

A pivotal turning point in our story happened in 2016. An organization known as the Decentralized Autonomous Organization, or DAO, was conceived. The DAO was a decentralized sort of venture capital or hedge fund that was going to fund decentralized applications (also known as DAPPs) built on the Ethereum ecosystem. The DAO was set up to give funders the power to say which DAPPs get funding. Investors would have to buy DAO Tokens using Ether as the currency to purchase them. The tokens integrated holders into the DAO system and gave them a certain amount of voting power. To be approved, it was a pretty straightforward process: They would have to be whitelisted by reputable figureheads in the Ethereum community who would act as curators. Next, the DAPPs would be voted on by those who held DAO tokens. Once the proposal reached 20% approval, they would then get a share of the DOA funds required to get started.

The immense potential was seen as the flexible process as well as the frenzy of people jumping to join the action made for a huge first month. The first month saw well over $150 million of Ether raised. It all seemed too good to be true. Or so we thought.

For as much as Ethereum was being lauded, it did have its own issues and one major flaw. Enter the “Split Function”. A split function would allow an investor to withdraw their support from a project when they chose so. Once you decided to withdraw your investment, one of two things would happen: you would either get your Ether back and you have the option to create a “Child DAO” which essentially would act as a smaller version of the DAO. The only stipulation was that the funders had to hold their Ether for 28 days before they could spend them.

At its absolute peak, the DAO raised around $150 million via crowdfunding but there existed some serious security problems, particularly related to the Split Function. The process itself wasn’t as airtight as it should’ve been and on June 17th, 2016, this flaw was exposed. An unknown person or persons hacked in and stole around $50 million or about a third of the DAO’s Ether. It’s easy to blame Ethereum in the ETH vs ETC battle. Ethereum was made to be immutable and inspire hope but in looking back on the story, a hack may be an overstatement. It wasn’t an “if” it would be hacked, it was a “when”. All the hackers had to do was take advantage of the Split Function. To exit the DAO, all someone has to do was send a request and the splitting function would refund the user their Ether in exchange for their DOA tokens and update the ledger with the transaction, after updating the internal token balance. The hackers created a recursive function that allowed them to repeat the request multiple times for the same DAO tokens before the transaction could ever be registered.

At that time, the DAO had a huge percentage of the total amount of Ethereum in existence, close to 14%. With $50 million of the initial funds stolen, the DAO and Ethereum communities went into a total panic. It’s important to note that Ethereum had no real blame for what happened. The DAO ran independently on Ethereum but with so much money having been stolen, the public belief and confidence in Ethereum plummeted. To comfort holders, and after holding a vote, the community chose the Hard Fork. The hard fork helped to refund everyone who had invested in the DAO. For every 100 DAO, token holders were given 1 ETH. Some were not happy with the eventual decision, citing the original purpose of Ethereum was to be immutable and free of human tendency. With the decision, they manipulated the blockchain and refunded all affected token holders. The main idea behind a hard fork was to not allow updated & non-updated holders to interact. If you didn’t join the upgraded blockchain, you would not have the ability to interact with users of the new system. It shook belief and created the distinction between Ethereum (ETH) & Ethereum Classic (ETC). In the end, Ethereum Classic was left as the original chain, with the tokens unexpectedly taken from the DAO left untouched with the hacker. Ethereum, on the other hand, was the chain that refunded the tokens.

In the end, ETH vs ETC fiercely divided their community and has only driven further the two camps. On one hand, it was seen as extremely controversial but the only way to save Ethereum’s reputation. Others argued it was dishonest and betrayed the intended intention of blockchain technology. When it comes to pricing, Ethereum has seen a tremendous rise in price in the last year. Ethereum started 2020 at $130 and by December, it had reached $673.83. This price represented a year-to-date growth of more than 420%. Ethereum Classic, who’s all-time high was $44.34 in January 2018, has seen very little support and sits at just under $10 as of January 2020. Either way, the unfortunate event separated the two, and both have gone in opposite directions since. ETH had benefited from the support of co-founder Vitalik Buterin who was still seen as highly influential in the Ethereum community.

Final Thoughts:

Today, ETH remains largely more popular than ETC and even has the backing of the Enterprise Ethereum Alliance. With support from billion-dollar firms such as JP Morgan, Accenture, and Microsoft, the support has added credit to Ethereum (ETH) over Ethereum Classic (ETC). Ethereum is considered by some to be a mutation and violation of the principles behind ETH. But it can also be perceived as a huge victory for the Ethereum community, showing they can come together and deal with the worst hack in cryptocurrency history. Thanks to the hard fork, countess DAPPs get the opportunity to flourish and exist, something that may have not happened had the split not occurred. The remnants of Ethereum Classic serve as a stark reminder of the unfortunate history of the DAO. ETH continues to show a bright future and Ethereum Classic, unfortunately, seems to be shrinking slowly, in comparison to the market cap. Ethereum will also be updating from a proof-of-work (PoW) to a proof-of-stake (PoS) in an upgrade now known as Ethereum 2.0. A faster network, more efficient and will be able to significantly scale transactions. As most recent as February 2021, the Chicago Mercantile Exchange (CME) publicly announced that it would launch Ethereum futures, meaning a promising future for Ethereum. Ethereum Classic has lost the confidence of developers and network analysts. The future for both is not yet written in stone but when discussing ETH vs ETC, the human element inevitably happened. Thanks to greed, the split was a result of it. Whichever camp you occupy, it’s important to remember the history behind the two.

Knowledge is Half the Battle Friends!!

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