Blockchains are all about trade-offs.
Some consider Bitcoin too slow and rigid while others consider Ethereum too prone to errors and censorship. Both networks are making trade-offs, in Bitcoin’s case sacrificing speed and flexibility for immutability and security, in Ethereum’s case sacrificing some of the former for the latter.
But what if you want something in the middle? A cryptocurrency that is censorship-resistant but also programmable? This is where Ethereum Classic comes in.
What is Ethereum Classic?
ETC is the native cryptocurrency of the Ethereum Classic original blockchain.
Ethereum Classic is a fork (branching off of) the original chain for Ethereum (ETH). However, the rules of the ETC protocol are closer to Ethereum’s original rules, hence the name Ethereum Classic. Ethereum was split into two chains when a major hack occurred in 2016 and $50 million worth of ETH was stolen from Ethereum’s decentralized autonomous organization (DAO).
While crypto hacks have become more common, this was a major event at the time, shaking confidence in cryptocurrency. Ethereum developers made the decision to roll back the blockchain and essentially reverse this theft, despite this going against the concept of immutability — blockchains are supposed to be secure and impossible to edit. Many viewed this return of funds as a “bailout.”
In rolling back the theft, Ethereum developers essentially created an alternative version of the network, and Ethereum Classic is the version of Ethereum that accepted the theft and continued with that theft on its records.
Ethereum vs. Ethereum Classic
Ethereum and Ethereum Classic are similar in many ways. However, in a technical sense, Ethereum Classic strikes a balance somewhere between the two largest cryptocurrencies, Bitcoin and Ethereum. It is more immutable and scarce than Ethereum, but less so than Bitcoin. Conversely, it is more flexible and programmable than Bitcoin but less so than Ethereum.
Admittedly Ethereum Classic’s use cases and examples of projects using ETC are quite small at this time. However, the network does hold promise in terms of its adherence to sound, decentralized money principles and growth potential.
For some, Ethereum Classic is an insignificant project in comparison to the growth of ETH, for others, it is the more authentic version of the original Ethereum with sounder fundamentals and more potential upside.
In this guide, we’ll explore the potential use cases for Ethereum Classic and let you make up your mind by yourself.
Ethereum Classic Use Case: Store of Value
ETC is primarily used as a store of value, much like Bitcoin (BTC). A store of value is an asset that maintains (or preferably grows) one’s purchasing power over time. Thus, the primary use case of ETC is to store your savings in it over a significant time period.
As we will see it is debatable whether or not ETC has succeeded in its primary use case to this point, since it has not grown as much as ETH or some of the other larger cryptocurrencies. However, ETC does hypothetically have strong fundamentals that could prove beneficial in being a store of value on a longer time frame.
Perhaps the most important attribute of a store of value is having a limited supply. A limited supply in cryptocurrency means that a user’s position (percentage of the network they own) cannot be diluted over time. With an unlimited supply, new coins can be created without increasing the overall value of the network. This means that each coin is theoretically worth less than before.
This can in some ways be viewed as a form of theft, where those with the ability to issue new tokens extract wealth from other token holders with less authority.
ETC’s supply is capped at 210,700,000. The 21 is an ode to Bitcoin and its supply cap of 21 million. This ensures that one’s share of the network will not be diluted over time. However, limited supply is not the only requirement of a store of value, as we will see below.
Ethereum Classic Use Case: Censorship Resistance
In addition to having a limited supply, other important attributes of a store of value are security and censorship resistance. Security so that your savings are protected from criminals and censorship resistance so that a state or authority cannot arbitrarily block access to your savings on a whim.
ETC is generally considered a more secure and censorship resistant option to ETH, which has chosen, to an extent, to pursue programmability at the expense of these qualities.
The easiest way for an adversary to attack a blockchain is by reversing transactions. Like Bitcoin, ETC has implemented a Nakamoto consensus-based proof of work system. Nakamoto consensus is the name of the set of protocol rules implemented by Bitcoin’s pseudonymous founder, Satoshi Nakomoto.
These rules enforce a trustless system that makes it extremely difficult if not impossible to change transactions that are already written on the blockchain. This is also referred to as immutability.
This has led some to believe that ETC is ultimately a better store of value than ETH. However, this is widely debatable since ETH has done significantly better at growing the purchasing power of holders to this point. The counterpoint from ETC supporters would be that this has mainly been driven by speculation and not fundamentals. It’s possible that in the future this security and immutability could make ETC a more trusted store of value.
Ethereum Classic Use Case: Utility Token For Decentralized Applications
ETC is also programmable, which allows developers to build decentralized applications on top of the protocol. Like Ethereum, it allows smart contracts to be programmed to self-execute when certain demands are met, opening up a whole range of possibilities.
For example, smart contracts can allow farmers to enter into insurance agreements and then pay out a certain sum of money in the event of adverse weather conditions affecting crops. There are applications in law, finance, insurance, academia, and much more.
Most decentralized applications built on top of Ethereum Classic require the ETC digital asset for the user to participate. In this case ETC acts as a utility token.
At the time of writing the Ethereum Classic Dapp ecosystem is still very small compared to other large blockchains, however, a few unique applications have emerged which take advantage of ETC’s unique mix of immutability and programmability. As mentioned, ETC is a good fit for decentralized applications that require a bit more flexibility than Bitcoin, but also value immutability over limitless flexibility.
An example of a decentralized application built on Ethereum Classic is Stampery, which requires ETC to access its unique data certification and evidentiary tools. Stampery ensures that changes to legal and corporate documents and agreements are tracked and recorded, making corporate investigations run much smoother.
Some NFT creators have begun to create digital art on Ethereum Classic, due to high fees on the Ethereum chain. The NFT market on ETC is still small but this also provides an opportunity for creators who have less competition than they would on ETH.
ETC Punks is an example of a growing application that utilizes ETC for NFTs. Users can trade ETC for these collectible digital art pieces. Over 10,000 ETC punks have been minted on the platform.
A Perfect Balance
As we have seen ETC is primarily a store of value, in addition to having some smart contract programmability that allows for decentralized applications to be built on the Ethereum Classic blockchain. The majority of these Dapps also require the use of the ETC native token to participate. ETC has a smaller market share than Ethereum, but a loyal user base who respect the decision to stick with the original vision of Ethereum.
If you value immutability and security, but also want a cryptocurrency that is more programmable than Bitcoin, Ethereum Classic is an interesting project and coin to look into.