When you’re going about researching different digital currencies, you will likely stumble across a little coin named Ethereum Classic. But what is Ethereum Classic? When comparing Ethereum vs. Ethereum classic, what do you need to know? I did some research to answer these questions.
Ethereum Classic is a smart contract blockchain platform like Ethereum, but is actually the longer blockchain of the two. In the eyes of many, Ethereum Classic is more trustworthy because of its community’s decision to hold to the principle of Immutability, the idea that “code is law.”
If you aren’t familiar with cryptocurrency terms, what you just read will likely sound a little confusing. The rest of this article is meant to explain that paragraph, and give you further insight into the blockchain platform Ethereum Classic.
Ethereum Classic Snapshot
-Ethereum classic is the longest running of the Ethereum blockchains
-It is a smart-contract-executing platform like Ethereum
-Founded on the principles of immutability, and capped currency supply
-Kind of like a more developer-friendly, flexible version of Bitcoin
-Vitalik Buterin is technically the creator
-The DAO hard fork split the blockchain into two separate platforms
-The split occurred on June 17th, 2016 at block #1,920,000
-Grayscale Investments runs an Ethereum Classic trust
-It was listed on Coinbase in Fall of 2018
-Many believe it will be highly compatible with the Internet of Things
How did Ethereum Classic Start?
That’s right. In a technical sense, the Russian boy wonder gets credit for being the mind behind behind the software that runs both Ethereum, and Ethereum classic.
This is because of a little something called a “hard fork.” When a hard fork occurs, what used to be a single blockchain is split into two separate blockchains from that point onward. All information PRIOR to the fork is is shared by both of the new chains. Blocks (of information) added AFTER the fork are only contained on their respective chains.
Now, reading that, you may be thinking to yourself, “Why does it matter if you fork a blockchain?”
To be perfectly honest, no one gets to be the final authority on that issue.
See, the world of cryptocurrency is totally new, meaning that people currently have a lot of theories, but the reality of how those theories interact with humans remains to be seen. Keep that in mind as you read any content about cryptocurrency. Including Koin Keys.
When it boils down to it, there are two primary schools of thought about updating blockchains.
- Code is Law
The principle of immutability is central to the decentralization movement. Immutability refers to the principle that once a transaction (block) is added to the chain, in order to keep the chain accurate, it must never be altered…no matter what.
In other words, if a blockchain is to remain immutable, then once a block is added to the chain, it must never be reversed, removed, or altered.
People that support this idea are the ones behind Ethereum Classic.
- Governance is Good
The other school of thought is that updates are a normal part of the development cycle of technology, and the governing structure of a given blockchain protocol exists in order for the community to get to decide what direction it would like to go.
The implications of this mindset, it should be stated, are immense. This means that if a sufficient vote is reached within the particular governance structure of any blockchain, almost any action can be taken. This would include reversing transactions that have already been completed.
This is the mindset that is behind Ethereum.
The DAO Hard Fork
The term DAO stands for Decentralized Autonomous Organization. It is a kind of organization that developers hope to build using blockchain technology.
The DAO hard fork refers to a specific one of these organizations that was hacked on June 17th, 2016. A hacker found a loophole in the code that allowed him/her to access the funds stored in its multi-sig wallet.
This hack led to the loss of approximately $50 million dollars worth of Ether, and the greatest debate in blockchain’s short history.
The question facing the Ethereum community was what to do regarding the stolen funds. Should the community do nothing, and adhere to the principles of immutability? Should they initiate a soft fork? Or, should they fully return the stolen funds to the rightful owners by reversing the smart contract containing them through a hard fork?
Obviously, the decision was made to commit a hard fork, thus creating two versions of Ethereum. The vast majority of developers, and the majority of community interest followed Ethereum, and it’s founder Vitalik Buterin.
Those dedicated to the principle of immutability, and the belief that code is law, stayed with the original version of Ethereum. That original version being known today as Ethereum Classic.
It is important to remember that the name Ethereum belongs to the chain that is the FORK of Ethereum Classic. This means that the the true, original Ethereum blockchain is under the name Ethereum Classic.
This hard fork took place on block #1,920,000. From that point forward, the two chains have been developing in entirely separate directions.
Though the video below is specifically about Bitcoin, the principle of a hard fork belongs to any and all blockchain protocols. For a visual explanation of what we just went over, you can watch the video.
Grayscale Investments Ethereum Classic Fund
After the nearly-radioactive fallout had cleared the air following the DAO hard fork, many thought that ETC would be a dead chain. Many developers and long-time cryptocurrency enthusiasts believed that the majority of development and growth would occur on the new fork of Ethereum.
However, the principled developers behind Ethereum Classic finally gathered themselves and after a stagnant period of approximately 6 months, three primary develpement teams began to work full time on the protocol.
After a long period of research, this is when Barry Silbert, Founder & CEO of Digital Currency Group decided to create an investment trust comprised entirely of Ethereum Classic.
As you can see below, Grayscale Investments purchased $22.7 million dollars worth of Ethereum Classic, and operates the fund as a trust investment vehicle for traditional investors.
This vote of confidence has caused many cryptocurrency enthusiasts, investors, and developers to take another look at the smart contract platform.
Ethereum Classic and the Internet of Things
One of the primary reasons for Grayscale’s interest in Ethereum Classic is its potential compatibility with the “internet of things.” While this technology is only in its early days, the possibilities presented by this new frontier are endless.
Barry Silbert has said on multiple occasions, as well as in the Tweet below, that he believes Ethereum Classic could be the “gas for the Internet of Things.”
Today, this sounds like a far-flung idea, but in the coming 5-10 years, as IoT technology develops, Ethereum Classic could prove to be the most useful micropayment currency for these new products.
These types of predictions are highly speculative, and should not be considered investment advice. However, bear in mind that there are very smart people out there that are spending millions of dollars and years of their lives on these kinds of projects.
I think that is something to take into consideration.
Ethereum Classic Pros & Cons
As with all cryptos, Ethereum Classic has benefits and issues. Here are a few of them:
- Dedicated, principled developers
- Capped currency
- Significant interest from major investors in cryptocurrency space
- Compatibility with Internet of Things technology
- Fewer developers than Ethereum
- Does not have same media attention as Ethereum
- Will not participate in technological developments that occur on Ethereum
- Unproven (as are almost all cryptos)
Ethereum Classic Resources
This is a collection of the most useful documents, links, podcasts, and videos we have found regarding Ethereum Classic. If you’re interested in doing your own research, these should get you started.
Discussion of all the details of Ethereum Classic by Decentralized TV.
Conference keynote by Charles Hoskinson, one of the primary developers in Ethereum Classic.
After spending so much time looking into Ethereum Classic, I have to say I am surprised by some of the things I’ve learned.
For instance, I was not aware of the immutability.
I was not aware that there was a cap for the total supply of the currency through a diminishing block reward structure. (This is the same diminishing block reward system used for Bitcoin.)
And I certainly wasn’t aware of the massive $22.7 million dollar investment made by Grayscale.
When I look at all the puzzle pieces from a bird’s eye view, it leads me to a rather simple conclusion.
If you believe that the constant-update model is best when it comes to new technologies, Ethereum is the project you should be looking into. If, however, you believe in the fundamental tenants of immutability, capped currency, and censorship resistance, then you should continue to look into Ethereum Classic.
Use the resources section above to begin doing your own research, and please comment below your thoughts on things we should add to this guide, resources we missed, and any questions you may have.
(No information, product, or service produced or sold by Koin Keys is meant to be construed as financial advice. It is possible that the author of this, and any other article on Koin Keys, owns the cryptocurrency they are writing about, or discussing. Neither the owners of Koin Keys, the employees of Koin Keys, nor the contractors of Koin Keys are financial advisors. Therefore, neither Koin Keys, nor the owners thereof may be held liable for any financial or personal decisions made by our readers. Cryptocurrencies are volatile assets, and caution should be exercised in the decision to make any purchases.)