If you already know ethereum, you should know it’s bitcoin’s closest competitor, and is the second most popular cryptocurrency in the world. But did you know ethereum has a twin, well, not really a twin, more like an older brother… ethereum classic. Even though both coins have many things in common there are still many differences that makes one coin a much better investment than the other. In this website we will discuss all that.
Let Us Begin
Ethereum as a public open source software platform built to support smart contract functionality. The network uses ether as its currency to process transactions and provide computer power to developers. Ethereum was first described by Vitalik Buterin in late 2013, he argued that bitcoin needed a different programming language to automate the execution of tasks as this would allow developers to build applications on top of its blockchain, this idea did not get enough support in the bitcoin community leading to the creation of ethereum in 2014.
Initial development efforts were funded through crowd-sale in July 2014. It raised more than 25000 bitcoins, making it the largest ever crypto raising at that time. After the crowd sale, Ethereum had a market capitalization of just over 17 million dollars compared to almost 70 billion dollars today. The concept of a smart contract is critical to the understanding of ethereum – symbol eth and ethereum classic, symbol etc.
To keep things simple a smart contract is an agreement between two parties written in code, it says the condition they have to be met by each party for the contract to be executed once conditions are met. The contract is processed by the blockchain and executed without a need for a third party verification, making the concept of spending money cheaper while staying secured, coupled with the immutability of the blockchain and its open source design, smart contracts present an opportunity for many businesses. In fact, in 2019 Forbes identified more than a hundred large American companies actively exploring blockchain technology with many of them using the ethereum network. Ethereum Classic (ETC) is the original ethereum blockchain eth and etc share the same blockchain record before the July 2016 hard fork. Because of that the initial design and functionality of these two networks were essentially the same.
So What Caused The Split?
Let’s go back in time to 2016. Ever heard of the dao aka decentralized autonomous organization? well as the name suggests it’s an organization that automatically stores rules and processes and codes. Well, on June 17 2016 the dao was hacked and about 50 million dollars were stolen, it’s crazy to say this but back then ethereum was trading around 20$ and after the attack it plummeted to 13 and even though the hacker did take away 50 million dollars worth of ether, the way the system was designed as the hacker wouldn’t gain access to the money, that’s because the dao smart contract explicitly stated that any of the invested eth taken out of the dao wouldn’t be accessible for 28 days. With this in mind, eth real community and team decided to take action and three potential solutions were pointed out:
- Nobody does anything.
- A soft fork.
- A hard fork.
The first scenario is pretty self-explanatory, do nothing and move on as if nothing happened.
Some people argue that by making any changes it will go against the very nature and underlying philosophy of crypto blockchain itself, after all, it’s supposed to be immutable and the code is strong. Unfortunately though, the majority were not happy with this decision, so that takes us to the second and third scenarios. I’ll explain what they both are.
Whenever a chain needs to be updated there are two ways of doing that, a soft fork or a hard fork. Think of a soft fork as an update in the software which is backward compatible. What does that mean? suppose you bought the new ps5 and you want to play one of your old ps4 games. You can still play it because your ps5 is backward compatible, but having said that there is a difference all the updates that you can enjoy in the newer version won’t be visible to you in the older version. Going back to our PlayStation analogy, again, the opposite, it would not be true that you will not be able to play ps5 games on a ps4. That is basically what ethereum plan to do with their blockchain. The software, when it’s your choice whether you want to update or not but regardless the updated users and the non-updated users could still interact with each other.
The idea was to completely lock down the ether that was stolen by the hacker by ignoring and segregating any blocks that contain a transaction which will help the hacker move around their stolen ether. This seemed like a great plan and the majority of the ethereum community was on board but then a problem surfaced. Implementing a software will result in a denial of service attack vector. Long story short, if they went this route, so what will happen is the movement of the software gets implemented and the attacker will find a run around the system, so I was concluded that the soft fork was a no go. This meant that there was only one way for the ethereum community to go and that was the hard fork. What is a hard fork? the primary difference between a soft fork and a hard fork is that the latter is not backward compatible. Once it’s utilized, there is absolutely no going back if you do not join the upgraded version of the blockchain and then you do not get access to any of the new updates or interact with the users of the new system. Whatsoever, the way the hard fork and ethereum is supposed to work is that it’s a branch that separates from the main blockchain and immediately after the fork the two chains become completely different entities. The new chain was named ethereum or eth for short. This hard fork was mainly formed to refund all the money that has been taken from everyone from the dao via a refund smart contract which had the sole function of withdrawal. This proposal caused a huge controversy in the community and there was a split. The people who were anti-hard fork refused to change to the new blockchain and decided to remain in the old blockchain naming it ethereum classic or etc. for short, after this where we came to a battle that is raging on the ethereum community as we speak. The battle between etc and eth. This battle is fascinating because it’s an ethical and ideological one, so let’s examine both sides in detail.
Why did people stick with an old chain when all the ethereum heavy hitters move on to the new chain? well, the answer to that is a more philosophical one. When ethereum and cryptocurrency in general was introduced it was supposed to be a stance against financial corruption, the reason why the blockchain was made immutable was that they wanted the system to be resilient against people changing the system. That is why so many etc sympathizers the hard fork, which is a convenient cop. If you’re changing the entire chain by one hack that completely defeats the purpose of ethereum in the first place. You’re proving that the blockchain can be affected by human thieves and this has resonated with a lot of crypto idealists.
Some pretty big hitters have gotten behind etc, not all that sounds well and good but there are some serious problems with ethereum classic which shouldn’t be ignored. The main problem with etc is the lack of backward compatibility.
With eth all the heavyweights of the community have moved on from the original ethereum chain which means that anyone who is part of the etc won’t be able to access any of the updates done by the eth develpoers. The perfect example is eths move from the proof of work to the proof of stake. ETC won’t be able to implement that because their software simply doesn’t allow the use of updates, and it goes further than that, eth is ethereum no matter what anyone else says, the
original heavy hitters are all part of the system and eth also happens to be the one going through the most revolutionary changes as it’s constantly being updated, so which one should I invest in? well I am not a financial advisor, I’m
not giving any legal investment advice, but it is fair to say that ethereum does have some considerable advantages over ethereum classic. Let’s first look at the growth in the past 12 months, if you invested a hundred dollars into etc
and a separate 100 into eta 12 months ago, today your etc investment would be worth for a nice gain of 63% on your investment, but your eth investment will be worth a whopping 407 dollars for a huge gain of 307%.
Regular ethereum clearly takes the cake over ethereum classic. I’m not saying no one should invest in ethereum classic, but regular ethereum just holds so many advantages over the classic version.
To sum this up:
Ethereum and classic Ethereum used to be together but they broke up after a 2016 hack scandal. The new ethereum kept the same name and the old ethereum added classic to it’s name while still keeping its operations based upon the same principles. Meanwhile the new ethereum evolved when the hard fork in 2016 split the blockchain into ethereum classic and ethereum. Most developers chose to upgrade to the new ethereum protocol limiting the size of the etc community and its ability to improve the network.
If you’re still debating whether you should invest in ethereum or ethereum classic, my opinion is a lower risk high reward scenario is better than a scenario that is higher risk lower reward, in this case, I think ethereum (eth) is clearly the winner.
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