The crypto purists faced off against the crypto pragmatists, giving rise to two cryptos.
Which is the real deal: Ethereum or Ethereum Classic? Don’t let the names fool you. They’re pretty much the same age. So, what is the difference between Ethereum vs. Ethereum Classic? And does it matter?
This article will help you understand the basics so you can decide which one is right for you. But first, let’s discuss how blockchains and hard forks come into play.
- 1 Table of Contents
- 2 The Ethereum Blockchain
- 3 Ethereum vs. Ethereum Classic: How Do They Differ?
- 4 Ethereum vs. Ethereum Classic: How Are They Similar?
- 5 Ethereum vs. Ethereum Classic: Which One Should You Buy?
- 6 How to Buy Ethereum or Ethereum Classic
Table of Contents
The Ethereum Blockchain
All cryptocurrencies exist on a blockchain. Blockchains are a type of digital ledger that can function in a distributed fashion. That is, they can be spread over a network of computers with no one central location, making them much more resilient and tamperproof.
A key characteristic of blockchains that plays a big part in the Ethereum vs. Ethereum Classic story is immutability. Blockchain protocols allow for transactions to be recorded without centralized control but in an agreed-upon and unchangeable manner.
Participants in the blockchain — known as miners or validators — prepare transaction records, validate them, and then submit them to a consensus mechanism before they are accepted and added as a permanent block to the blockchain. Once added, the block cannot be changed.
However, back in 2016, there was a major hack of the system and millions of dollars in ETH was stolen. Not everyone agreed the solution to the problem was to change the transaction records involved in the hack and theft.
One group wanted to fix the problem, erase the erroneous hack and theft, and restore the crypto to its original owners. The other did not.
The solution? A hard fork.
Anatomy of a Hard Fork
A hard fork is a division of a blockchain when there’s disagreement about what the next natural evolutionary step of the blockchain should be. A blockchain, like most software applications, is meant to change. Upgrades, improvements, and the like are released as new versions.
Most of the time, the community of blockchain participants supports the next version and its changes. But sometimes, the changes are contentious. If compromises don’t work, the blockchain equivalent of a divorce results: one blockchain splits into two.
A soft fork gives birth to two blockchains and versions of its associated cryptocurrency that are somewhat compatible. In the parlance of software, they are “forwards compatible.” This means two lanes will live side-by-side. The old version will accept blocks from the new version.
A hard fork is irreconcilable differences and incompatibility. Once the fork occurs, both resulting blockchains operate independently and will not accept new blocks from the other version. This also results in two cryptocurrencies where there had been one.
In the case of Ethereum, this divergence was the result of the successful hacking attack mentioned earlier. It became known as “The DAO” attack since it was a hack of a decentralized autonomous organization (DAO) whose smart contract to raise funds in Ether had a vulnerability in it.
The attacker exploited the vulnerability and drained funds from the DAO, which had raised a record $150 million. The magnitude of Ether involved had the potential to adversely affect the Ethereum blockchain itself, even though it had not been hacked and was still secure.
One proposed solution was to institute an update that effectively rewound time to before the attack and reallocated The DAO’s funds to a new smart contract that allowed investors to recoup their Ether. In a sense, it violated blockchain’s immutability to fix a massive theft.
It’s not difficult to understand why some would object to the change. The Ethereum blockchain was acting to protect the interests of investors in a major application built on its network, but in doing so, they were undermining the principles of the blockchain.
The update was implemented on July 20, 2016, resulting in a hard fork. Many accepted the update and continued participating in the Ethereum blockchain, whose cryptocurrency, Ether (ETH) remained.
Those who didn’t agree continued with the old blockchain that contains all the original transaction records (blocks) from the attack and its aftermath. This blockchain became known as Ethereum Classic, and its cryptocurrency is distinguished by its trading symbol ETC.
Ethereum vs. Ethereum Classic: How Do They Differ?
The initial difference between the two cryptocurrencies (and the blockchains supporting them) was ideological. As we’ve seen, those who remained with the Ethereum blockchain believed the DAO attack warranted an update rewriting history and closing the vulnerability.
Supporters of Ethereum Classic believed that sticking with the original blockchain software and keeping the transaction history inviolable was the right course despite the investors in the DAO losing their crypto investment. Differences have since multiplied.
Transactions per Second
Because Ethereum (ETH) has been regularly updated, it can handle more transactions per second than Ethereum Classic (ETC). It also enjoys a richer developer environment. So there are many innovations (NFTs, DeFi apps) that are generally lacking on the ETC blockchain.
ETH has no supply cap, meaning new ETH coins can be produced with no theoretical limit. ETC is capped at 210,700,000 coins and reduces its mining reward by 20% every 5,000,000 blocks in a strategy similar to Bitcoin halving.
Since The Merge — the release of the latest version of the Ethereum blockchain — a new difference has appeared: The two blockchains now use different consensus mechanisms. In The Merge, Ethereum adopted proof-of-stake, eschewing proof-of-work that ETC still employs.
In turn, this has sparked another point of divergence. With proof-of-work, participants called miners validate and submit blocks for addition by winning resource-intensive contests to solve difficult math puzzles and are rewarded for their work with crypto tokens.
This work is called mining, and it requires a significant investment in specialized computing equipment. Since The Merge, Ethereum effectively has no more miners. Instead, validators fill the role by staking crypto as collateral to qualify. What about all that specialized equipment?
Some miners have responded by moving to Ethereum Classic since its underlying blockchain is an older version of ETH’s. By one measure, mining activity on ETC jumped 280% after The Merge, indicating a move by miners.
A final point of difference? The price of the two cryptocurrencies. ETH has continued to grow in popularity and is hands down the second-largest cryptocurrency after Bitcoin. Its value has remained well over $1,000 per coin. ETC is a fraction of that, ranging from $50 to the upper 20s.
Ethereum vs. Ethereum Classic: How Are They Similar?
In addition to the origin story they share, the two blockchains remain designed for a similar purpose: not primarily as a support for a cryptocurrency, but as a support environment for developers of new apps and services.
So, in a sense, they share a target market. However, with the new difference in consensus mechanisms there may be a revived interest in ETC and a larger community of participants and innovators looking for a similar environment to Ethereum.
Ethereum vs. Ethereum Classic: Which One Should You Buy?
Clearly, the differences between the two blockchains and their attendant cryptocurrencies present different scenarios for people looking to buy crypto. ETH enjoys a larger market capitalization and the number two spot in the crypto world.
ETC has hung on in the years since the hard fork and seems to have no intention of disappearing. It especially appeals to crypto purists who believe crypto should be decentralized, free of control, and stick to the rules of blockchain immutability.
Its retention of proof-of-work, though, with its huge energy consumption and scalability issues may hamper ETC from widespread use. It’s difficult to predict how it will fare in the future.
Some people buying crypto are looking for relative stability and long-term appreciation. Others are interested in short-term trading, where volatility can actually present opportunity. Still others value the crypto’s blockchain: its ecosystem, app development, and digital assets.
One of the keys to deciding is finding the right crypto partner.
How to Buy Ethereum or Ethereum Classic
If you have the right crypto partner, you can compare different types of crypto, including Ethereum vs. Ethereum Classic, and choose the ones that are right for you.
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