If you‘ve researched blockchain platforms like Ethereum, you‘ve likely come across Ethereum Classic (ETC). As its name implies, Ethereum Classic shares a lot in common with Ethereum (ETH) but has some key differences. In this beginner‘s guide, we‘ll dive into the distinct history of Ethereum Classic, how it works under the hood, and how it stacks up to Ethereum on features like smart contracts, token supply, and adoption rates. Whether you‘re simply curious about different blockchain projects or considering investing in cryptocurrencies like ETC, this guide will help you make sense of this unique yet lesser-known platform.
What is Ethereum Classic?
First things first – what exactly is Ethereum Classic? Ethereum Classic refers to the original Ethereum blockchain that launched in 2015. It has since functioned as a separate, standalone network after a major fork.
Ethereum Classic came to be after the infamous DAO hack in 2016. The DAO was a decentralized venture capital fund built on Ethereum that raised over $150 million dollars worth of Ether through a crowdsale. Tragically, a flaw in the DAO‘s code allowed a hacker to drain about $50 million worth of Ether into their accounts.
This caused a massive debate within the Ethereum community on whether they should rewrite history and recover the stolen funds through a fork. A faction argued that "code is law" and that blockchains should remain immutable. They rallied behind preserving the original Ethereum chain now known as Ethereum Classic. The majority decided to fork and create a new Ethereum chain that restored the stolen funds.
Although born out of controversy, Ethereum Classic has carried on the original Ethereum vision of a decentralized world computer for running applications. It has its own community supporting its development, estimated to be about 250 active contributing members. Over its 6 year history, Ethereum Classic has amassed a market cap of over $3 billion dollars and handles around $300 million in transactions per day. Next let‘s explore how it works under the hood.
How Ethereum Classic Works
Ethereum Classic utilizes the same fundamental building blocks as Ethereum. These include:
Smart Contracts – Programmable contracts that run exactly as written without downtime. They power decentralized applications.
Ethereum Virtual Machine – The virtual machine that executes smart contracts. It runs on every node in the network.
Proof-of-Work Mining – The consensus mechanism that allows nodes to agree on the network‘s state and rewards miners for adding blocks.
Just like on the Ethereum network, Ethereum Classic users can create and deploy smart contract applications. Developers program application logic into smart contracts using languages like Solidity. The applications then run on the Ethereum Virtual Machine of every node.
Below is a simple diagram of an example DApp built on Ethereum Classic:[DIAGRAM]
The network is secured through proof-of-work mining using the Ethash mining algorithm. Miners compete to package transactions into blocks and append them to the blockchain. This allows all nodes to achieve consensus on the state of the network. Miners earn rewards in the native currency Ether Classic (ETC) for each block added.
One key feature of Ethereum Classic is immutability. Once data is written to a block, it cannot be changed retroactively. This provides strong security guarantees for DApps, ensuring data remains tamper-proof. Now let‘s compare Ethereum Classic to Ethereum.
Ethereum Classic vs. Ethereum Key Differences
While Ethereum Classic and Ethereum share similarities in their underlying technology, there are some notable differences between these two blockchain platforms:
Total Token Supply
One major difference is the total token supply. Ethereum has no cap on the supply of Ether. In contrast, the total supply of Ether Classic is fixed at 210 million ETC. This provides inherent scarcity, which proponents argue preserves value better.
While Ethereum has an uncapped supply that continually increases, Ethereum Classic has a fixed 210 million total supply.
Ethereum migrated from proof-of-work to a proof-of-stake consensus in September 2022. Proof-of-stake allows ETH holders to stake coins to help validate transactions instead of mining. Ethereum Classic, on the other hand, continues to use proof-of-work mining. Supporters argue this makes it more decentralized and secure.
Adoption and Usage
When it comes to adoption, Ethereum is far ahead. Ethereum has 2,000+ decentralized applications built on it compared to just under 100 on Ethereum Classic. Ethereum also dominates trading activity with over $6 billion average daily transaction volume versus just $300 million on Ethereum Classic.
|Platform||Launched||Average Daily Transaction Volume||Decentralized Applications|
|Ethereum Classic||2016||$300 million||<100|
This massive gap in usage results from Ethereum‘s large head start and developer network effects. Ethereum Classic has had to rebuild a developer community from scratch.
Similarly, the Ethereum community dwarfs Ethereum Classic‘s. Ethereum boasts hundreds of thousands of Twitter followers and subreddit members, compared to just around 60 thousand for Ethereum Classic. This disparity is likely because Ethereum Classic did not retain the original community after the fork.
Should You Invest in Ethereum Classic?
So should you buy Ethereum Classic as an investment? There are credible arguments on both sides to consider.
- Trading at a lower price per coin than Ethereum
- Fixed token supply increases scarcity long-term
- Commitment to proof-of-work perceived by some as more secure
- Sovereign & independent network not controlled by Ethereum foundation
- Lower mainstream usage and adoption to date
- Less developer activity and applications built on it
- Smaller community than Ethereum for support
- Past major hacks like DAO demonstrate vulnerabilities
Ethereum Classic has potential value with its limited supply and ideological benefits. But the lower adoption rates pose risks – networks rely heavily on usage and community support. Price volatility is also high, making investments risky.
For example, in early 2022 Ethereum Classic price approached $200 before crashing below $20 – over a 90% fall. Such extreme swings can make Ethereum Classic and other cryptocurrenies a highly speculative investment.
Ethereum Classic has seen major boom and bust cycles, reaching over $175 before crashing below $20 in 2022.
Experts recommend only investing money you can afford to lose. As with any cryptocurrency, carefully weigh the risks and be wary of hype driving short-term price spikes. Ultimately Ethereum Classic could pay off long-term, but it has challenges to overcome first.
How to Obtain and Store Ethereum Classic?
If you decide to get some Ethereum Classic, here are some recommended methods to obtain and store it securely:
The two main avenues for obtaining ETC are:
- Exchanges – Buy instantly using dollars or other cryptocurrencies. Top exchanges include Coinbase, Kraken, and Binance.
- Mining – Contribute computing power to process transactions and earn block rewards. Requires dedicated hardware like GPUs or ASICs.
For beginners, we recommend using a mainstream exchange like Coinbase to purchase your first ETC. Here‘s a quick step-by-step guide to buying on Coinbase:
- Sign up for a Coinbase account and complete identity verification.
- Deposit funds into your account via bank account or wire transfer.
- Navigate to the Buy/Sell page and enter the amount of ETC you want to buy.
- Complete your purchase by selecting a payment method.
- The ETC will arrive in your Coinbase account wallet.
Once you‘ve obtained ETC, you‘ll want to move it to a secure wallet off the exchange. Recommended options include:
- Hardware wallet (recommended) – Store ETC offline on a device like the Ledger Nano S. Provides top-level security.
- Mobile wallet – Mobile apps like Trust Wallet allow you to store and transact ETC conveniently.
- Paper wallet – Wallets like EtherWall let you print out your private keys for offline storage.
Make sure to safeguard your wallet‘s private key or recovery phrase. Without it, you won‘t be able to access your ETC!
Although lesser known than Ethereum, Ethereum Classic preserves the original vision of a decentralized world computer for running applications. Born out of disagreements after the DAO hack, Ethereum Classic split off to form its own blockchain that values immutability and security.
However, Ethereum has seen significantly higher adoption rates so far. Ethereum Classic will need to attract more developers and users to keep up with its more widely used counterpart. But with its fixed token supply and ideological appeal, Ethereum Classic will likely continue to command value within the greater blockchain ecosystem.
This guide just scratches the surface of this unique project. For investors and developers interested in Ethereum Classic, be sure to do your own thorough research before getting involved. As with any cryptocurrency, exercise caution and manage risks when obtaining, storing and investing in ETC.