When Ethereum first came out, it wanted to be at the heart of a truly decentralized internet experience. Ethereum allows anyone to host immutable transactions on a public ledger that other users can freely participate in.
Since then, Ethereum has become the center of costs for decentralized finance, minting and exchanging NFTs, and more. However, when it comes to Ethereum, it can be confusing why there are two different versions – ETH and ETH Classic.
For those who have recently joined the crypto space, you may be wondering: why are there two types of Ethereum and which one should you invest in?
What was Ethereum’s DAO hack?
In 2016, The DAO (a decentralized autonomous organization) launched a crowdfunding campaign to create an investor-run venture capital company. This would allow investors to take part in block voting that could guide the future of the platform.
Less than a year after launching the Ethereum network, The DAO launched a token sale that was expected to last 28 days. With over 11,000 investors, The DAO raised $150 million worth of Ether (the native token of the Ethereum platform) in just three weeks.
However, a vulnerability in The DAO’s wallet smart contract code led to malicious actors exploiting it before it could be fixed. With that, over $60 million in ether tokens disappeared from the pool, shocking the blockchain community as a whole.
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Because of this highly publicized debacle, the Ethereum network, its developers, and supporters experienced first-hand the dark side of decentralization and the various ways fraud is still possible on the blockchain.
The Hard Fork: The Creation of ETC and ETH
Originally, Ethereum developers wanted to implement a soft fork to reverse the transactions that took place before the hack. However, after many dramatic threats from the alleged attackers, the Ethereum development team opted for a hard fork instead.
Unlike a soft fork, where there is simply a divergence in one blockchain, a hard fork creates two different blockchains with a radical change in protocols. This marked the birth of Ethereum (ETH) and Ethereum Classic (ETC). The two platforms offer the same technology platforms with some key differences.
Whether you’re new to crypto or have always wondered about the differences between Ethereum and Ethereum Classic, here are the five main differences between the two.
1. ETH vs. ETC: Ideology
After the hack, developers and users of the Ethereum platform could not agree on how to deal with it. On the one hand, many wanted to reverse the questionable transactions. On the other hand, many people also believe that the history of a blockchain is sacred and should not be tampered with.
To sum up the ideological differences, the Ethereum Classic website states: “We believe in the original vision of Ethereum as a world computer that you can’t turn off, running irreversible smart contracts.”
2. ETH vs. ETC: Divergent consensus mechanisms
In the blockchain, consensus mechanisms are fault-tolerant systems. With consensus mechanisms, blockchains agree on a single network state across nodes.
Similar to Bitcoin, Ethereum Classic uses a proof-of-work model where miners validate transactions through complex mathematical puzzles.
Alternatively, ETH is working towards the Proof-of-Stake model, where users validate transactions with Ether they hold and produce rewards for adding blocks to the chain.
3. ETH vs ETC: Trading Volume
Trading volume is the sum of actual transactions that take place in a given currency. In general, a higher trading volume corresponds to the liquidity of a cryptocurrency. Additionally, the higher volume also reflects the general interest of its community and increasing pairings when exchanging with other cryptocurrencies and fiat money.
According to Statista, ETH processes more than 1.1 million transactions per day. Compared to ETC, ETH has a significantly larger trading volume. Because ETC has a fraction of ETH’s trading volume, its price can be more volatile, which can be a bane or a boon for those who view it as an investment vehicle.
4. ETH vs ETC: Market Cap & Max Coin Supply
The total number of coins in circulation multiplied by their price determines the market cap of cryptocurrencies. Thus, the total market value of ETH and ETC depends on their circulating supply, not their total supply.
Similar to Bitcoin, the maximum supply of the Ethereum Classic network is around 210 million. As of this writing, the current market cap for ETC is $9.5 billion. As a result, ETC as an investment vehicle is likely to experience higher volatility.
On the other hand, Ethereum does not have a maximum supply but does have an annual cap of 4.5% per year. For example, at the time of writing, ETH has a market cap of $460 billion, second only to Bitcoin at over $900 billion.
In general, market caps can reflect strong indicators of popularity or investor interest. However, market caps have limitations such as B. a coin’s maximum supply, which does not necessarily reflect the amount in circulation in the future and should not be used as the sole indicator of a cryptocurrency’s health.
For example, millions of mined bitcoins are considered lost, so the actual number of tokens in circulation is significantly lower.
5. ETH vs. ETC: Mining
According to Coin Bureau, ETC only needs half the hash rate to break even on your mining rig. Furthermore, since ETC has a maximum supply, miners mainly earn from transaction fees instead of minting new blocks once ETC hits its cap.
As Ethereum Classic is easier to mine than Ethereum, ETC may be better suited for GPU miners.
ETH vs. it’s: Different ideologies, similar technologies
If you are considering investing in either of the two, it is important to understand that the cryptocurrency market is highly volatile. There is never a guarantee that a coin will stand the test of time.
Despite the state of its technology and its complicated history, the crypto market has proven that better technology does not always guarantee public interest or profitability. As always, never invest more than you can afford to lose!
Bitcoin vs Ethereum: What’s the difference?
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About the author
Quina Baterna
(252 published articles)
Quina is a staff writer for MUO, a resident adrenaline junkie and lover of all things tech. She lives mainly in Southeast Asia and has a degree in Information Design.
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