The Ethereum blockchain is the second-largest cryptocurrency worldwide and is home to a diverse collection of dApps, NFTs, and passionate community members. However, many years ago, a major hack resulted in huge controversy within the community. From this controversy, the network split in two, forming two separate chains—Ethereum and Ethereum Classic.
In this article, we’re going to dive into the history, the controversy, and the fundamental differences between the networks.
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Ethereum vs. Ethereum Classic
Ethereum, a decentralized open-source blockchain platform with smart contract capabilities, is the second-largest cryptocurrency by market capitalization. It is the birthplace of Decentralized Finance (DeFi) and has its own cryptocurrency, Ether (ETH).
Conceived by programmer Vitalik Buterin in 2013, Ethereum aimed to create a decentralized and trustless ecosystem that facilitated more than just token trading. With the launch of the Ethereum Virtual Machine (EVM) in 2015 and an Initial Coin Offering that raised $17.3 million, Ethereum became a hugely popular platform due to the ability to run self-executing smart contracts.
Smart contracts enable permissionless transactions, eliminating the need for intermediaries. They facilitate cryptocurrency trading, dApps (Decentralized Applications), and the creation of DAOs (Decentralized Autonomous Organizations).
Ether (ETH) serves as the fuel for deploying smart contracts and dApps on Ethereum. Users pay a “gas” fee, determined by network resources and congestion levels. Ethereum also allows for the creation of other tokens, such as ERC-20 tokens adhering to Ethereum’s standards, as well as non-fungible tokens (NFTs) using smart contracts.
Ethereum’s innovation fueled the rise of DeFi and the concept of Web 3.0, a decentralized ecosystem free from traditional banking and government regulations. However, in 2016, a DAO called “The DAO” fell victim to a hack of over $60 million. This hack led to the splitting of Ethereum into Ethereum and Ethereum Classic.
The DAO was one of the earliest Decentralized Autonomous Organizations founded. It was set up to act as an investor-directed venture capital (VC) fund. The DAO launched a fundraiser to create a decentralized marketplace, one where users could trade anything from houses to cars to services. It garnered a huge amount of hype and raised over $150 million. However, on June 17th, a hacker exploited a security flaw and siphoned 3.6 million ETH (about $60 million at the time) into his own accounts.
The Ethereum community was shaken badly, and market confidence dipped alongside the price of ETH. Discussions began about the best way to move forward with minimal impact on both the investors and the network while still staying true to the ethos of Web3 and cryptocurrency. Some suggested blacklisting the funds stolen or changing past transactions to return the ethers to the previous owners. Part of their reasoning was that the hack could shake market confidence and that Ethereum could be “too big to fail.”
However, other crypto idealists protested, claiming that this ran counter to everything crypto was all about—”code is law”—and to reverse transactions would undermine the entire project and the wider crypto ecosystem. In the end, these two irreconcilable viewpoints resulted in a hard fork.
What is a Hard Fork?
A hard fork is a radical and permanent change to the protocol of a blockchain that results in the chain splitting off into two branches. One blockchain continues on with the original rules, while the other adopts a new set of rules and forms a new blockchain. It’s normally the result of a disagreement within the community or the development team. Hard forks are sometimes planned well in advance after long discussions or can happen rapidly due to unexpected events.
Ethereum vs. Ethereum Classic Hard Fork
After much debate, the Ethereum blockchain underwent a hard fork on July 20th. It essentially rolled back the transaction history to before the hack—returning funds to the original holders. This was extremely contentious as blockchains are meant to be immutable—it shouldn’t be possible to reverse transactions.
Those who refused to support this hard fork formed Ethereum Classic—a blockchain where the hack still happened (although the value was much less). This network was composed of a much smaller community, and the value of the token, ETC, has remained much lower than ETH since its inception.
Ethereum vs Ethereum Classic Comparison
While the two chains were once the same, they have gone in quite different directions since the hard fork. Ethereum Classic has prioritized immutability and adhering strictly to the original rules. Ethereum, on the other hand, has focused on growth and development with a little bend to the rules when required. The table below shows some of the core differences. We’ll also dive into some of the fundamental differences in how each blockchain operates and the roadmaps they have planned.
|Supply||Unlimited (4.5% max per year)||Fixed Supply (230million)|
|Mining Method||Proof-of-Stake (PoS)||Proof-of-Work (PoW)|
|Immutability||Possible to change transactions with a consensus||No changes can be made to transactions|
|Price (May 2023)||$1,843.46||$18.24|
Blockchain Technology and Architecture
Both Ethereum and Ethereum Classic share a common foundation. They use the Ethereum Virtual Machine (EVM) and are built upon the principles of decentralization, transparency, and immutability. Until recently, they also both used a Proof-of-Work mining method for settling transactions.
However, since the fork, Ethereum has undergone significant upgrades and improvements, such as the implementation of Ethereum 2.0 and its transition from Proof-of-Work (PoW) to Proof-of-Stake (PoS). This was done to tackle high gas fees, scalability, and environmental concerns.
Ethereum Classic, on the other hand, has stayed true to the original rules and has remained extremely conservative when it comes to implementing any changes. In the eyes of the Ethereum Classic community, the blockchain and code will always be immutable.
Ethereum has since implemented many new security upgrades and third-party audits to protect the integrity of the network. Ethereum Classic has made concerted efforts; however, as a smaller network with a lower hash rate, it is inherently more vulnerable to network attacks such as a 51% attack.
Both follow a similar governance model where the community discusses and votes on any potential changes and the roadmap. Ethereum uses the Ethereum Improvement Proposal (EIP), while Ethereum Classic uses the Ethereum Classic Improvement Proposal (ECIP) process. Overall, the governance model is the same; however, the Ethereum Classic community tends to be more conservative when it comes to making changes, preferring to uphold the immutability of the blockchain.
Community and Use Cases
Ethereum has a highly active and vibrant community of developers, investors, and creatives. This active community has propelled Ethereum’s dominance in the blockchain industry, and the ecosystem has a wide array of dApps and projects. Ethereum has seen widespread adoption in various industries, serving as the go-to platform for dApps, decentralized finance, and tokenization of assets. Its flexibility and scalability have enabled the development of innovative solutions across multiple sectors.
In contrast, Ethereum Classic’s community is smaller, yet it remains dedicated to the original Ethereum vision, attracting those who value the preservation of immutability. With its more limited community, Ethereum Classic finds niche applications and adoption in specific industries or communities that align with its principles.
Price History and Roadmap
As a result of the hard fork, investor confidence was mostly restored, and the price of Ethereum (ETH) continued to appreciate over the years reaching a high of $4,891.70. Although the price has reduced considerably following last year’s crash, it has been recovering steadily. Ethereum Classic (ETC) has experienced small spikes but has never come close to the price of ETH. This is partly due to the smaller community and lower adoption rates.
Ethereum has always been an ambitious project with an innovative community continually working on improvements and changes. Now that the network has moved to a PoS mining method, the community is focused on further addressing scalability, reducing energy consumption, and improving overall security.
Ethereum Classic has a small network and has struggled with broader adoption. However, it continues to attract investors who value its core ideals. While there is no traditional roadmap, changes are discussed by the community. Changes are made slowly and steadily.
Ethereum vs Ethereum Classic: Key Takeaways
Ethereum and Ethereum Classic represent two distinct philosophical paths stemming from the same foundations. Ethereum has achieved widespread adoption and market success through continuous development and upgrades. It has become a prime example of the potential of DeFi and crypto. Ethereum Classic remains rooted in the original principles of immutability and decentralized governance. It showcases the dedication and ideals of the community members who truly believe that code is law.
Which network is better ultimately depends on your priorities and ideals. As time goes by, the two chains should evolve even further as the crypto landscape grows and expands.