What is Ethereum Classic?
Ethereum Classic is advertisingdecentralized blockchain and computing platform. The project is a hard fork – a split entity – of the Ethereum blockchain.
It is a smart, contract-based network that allows developers to build and deploy decentralized applications (dApps) on its open source software. Therefore, developers can create financial services, games, non-fungible tokens (NFTs), metaverse, and others.
The protocol emerged after a 2016 hack of a decentralized autonomous organization (DAO) in which $16 million was stolen from the Ethereum blockchain.
To resolve the situation, some developers suggested resetting the list of transactions to recover the stolen funds as a form of rescue for affected investors. Although 70% of the funds were subsequently recovered, 30% remained pending.
However, not all members agreed with this idea. This led to the creation of Ethereum Classic as a separate blockchain platform, creating a hard fork of the Ethereum protocol.
According to the staunch supporters of Ethereum Classic, the maxim “Code is Law” must be adhered to in every situation.
The maxim “code is law” states that smart contracts are immutable and their integrity must be protected to build an unstoppable decentralized ecosystem.
What is ETC?
The Ethereum Classic platform is based on its native token ETC, which was introduced shortly after the fork from the newer Ethereum protocol.
The digital asset has significant value as it serves multiple purposes. These include:
- Payment for validating transactions within the Ethereum Classic platform.
- Covering the costs of securing block space in the smart contract network.
Because ETC operates as a PoW asset, it lacks the inherent ability for investors to stake – a process whereby investors receive rewards for securing the network.
Without staking, investors can earn rewards for unused ETCs through the savings feature offered by most centralized crypto exchanges. This allows investors to earn variable interest over a set period of time, be it a week or three months.
How does Ethereum Classic work?
Ethereum Classic combines the best of Bitcoin’s decentralization and security ethos with creative flexibility. The protocol is censorship-resistant and highly secure, allowing developers to build decentralized applications on the base layer using smart contracts.
How does the Ethereum Classic system work?
Transactions on Ethereum Classic are primarily executed using the Proof-of-Work PoW consensus algorithm.
Ethereum Classic works this way:
- Transactions sent are first collected in a memory pool (mempool), which serves as temporary storage.
- Miners select transactions they want to validate and compete to be the first to solve the complex cryptographic puzzle.
- The first miner to do this broadcasts the solution to the entire network to inform other miners.
- Then, other miners perform a revalidation check to ensure that the transaction complies with the established blockchain rules.
- Once this is cleared, the first miner will receive the block reward (around 3.2 ETC), while the other miners will receive a commission from the transaction fee.
- The transaction is then added to a block of other transactions and appended to the last block in the network to form a chain.
Ethereum Classic vs Ethereum
While both Ethereum Classic and Ethereum offer similar value, their operations differ.
The Ethereum Classic works with the old first generation Proof-of-Work (PoW) consensus algorithm. This makes Ethereum Classic one of the few smart contract protocols that allows miners to earn network fees and block rewards for validating transactions.
Meanwhile, Ethereum has moved to Proof-of-Stake (PoS) setup, which requires validators to lock a significant amount of Ether cryptocurrency to be eligible for transaction verification.
|Consensus algorithm||Proof-of-Work (PoW) – first generation||Proof of Stake (PoS)|
|Mining rewards||Miners earn network fees and block rewards||Validators lock Ether (ETH) for verification|
|Energy efficiency||Less energy efficient and energy intensive||More energy efficient|
|speed||Slower compared to newer networks||Faster transaction processing|
|immutability||Strong emphasis on immutability||Allows modification of blockchain transactions|
|Token supply||ETC has a fixed supply of 210 million tokens||ETH has infinite supply (with 4.5% annual growth)|
History of Ethereum Classic
Ethereum Classic was officially launched in July 2016 after a dispute between the project’s early developers.
Below we describe the background of the first-ever smart contract protocol in more detail.
|July 30, 2015||Ethereum is launched after Vitalik Buterin and the Ethereum Foundation created the first blockchain-based Turing-complete smart contract platform with the Frontier version.|
|September 8, 2015||The Frontier Thawing Upgrade launches, ushering in the “ice age” that heralds Ethereum’s “difficulty bomb” – a mechanism designed to transfer Ethereum from PoW to PoS.|
|March 16, 2016||Homestead Upgrade – a second version of the Ethereum blockchain – launches.|
|April 5, 2016||Slock.it – a blockchain infrastructure provider – creates the first DAO smart contract audit.|
|April 30, 2016||The DAO crowdsale begins with members of the public being allowed to submit funds in exchange for DAO tokens.|
|May 27, 2016||The DAO crowdsale is complete.|
|June 17, 2016||The DAO is hacked.|
|July 20, 2016||After much debate among developers, the Ethereum Classic blockchain is finally launching. The project token will be renamed ETC in recognition of the retention of the DAO hack event.|
Shortly after its launch, the Ethereum Classic blockchain experienced numerous hacking attempts, with the 51 percent attack being the most significant among them.
A 51 percent attack occurs when a single entity or individual gains control of more than 50 percent of network resources. This often leads to centralization and compromises the integrity of the blockchain by allowing transactions to be reversed.
However, despite previous intentions to move to a more scalable and energy efficient consensus algorithm, the Ethereum Classic protocol chose to stick with the older PoW system.
Who are the founders of Ethereum Classic?
Ethereum Classic is the legacy chain of the Ethereum protocol. The network has the same founders – Vitalik Buterin, Gavin Wood, Charles Hoskinson and several others.
However, the development team has been anonymous since the subsequent split into two smart contract factions.
There is no official team supporting the project, but anyone can participate in the global development of the base layer protocol.
Classic Ethereum use cases
Ethereum Classic offers multiple use cases.
Smart contracts and dApps creation
Ethereum Classic allows developers to create smart contracts for the smooth operation of dApps. Smart contracts are computer programs that work autonomously using preset commands. The platform enables the operation of these smart contracts without external intervention.
Ethereum Classic is the foundation for developing dApps for the decentralized finance (DeFi) ecosystem. This allows developers to build a wide range of DeFi applications for lending, borrowing, decentralized exchanges, yield farming, and more.
This ecosystem provides an open platform where anyone can participate in digital asset trading without restrictions.
The original Ethereum blockchain provides a convenient means of tokenizing real-world assets and tangible items. This allows users to easily tokenize important items such as: B. Real estate documents, using non-fungible tokens deployed on the Ethereum Classic protocol.
Supply chain and traceability
Because of its transparency and immutability, Ethereum Classic can track products from manufacturer to end user. This ensures that the products received by users are authentic and the supply chain process cannot be influenced.
Decentralized games and assets
Ethereum Classic also enables the development of censorship-resistant games and assets like NFTs. This means that players from different backgrounds can enjoy these blockchain-based games without any restrictions.
Additionally, they can own in-game assets in the form of NFTs, which can be freely traded or purchased in these gaming environments.
The future of ETC
The carbon footprint of PoW protocols like Bitcoin and Ethereum Classic have been highlighted in recent years. Both platforms require large amounts of electricity to continuously validate transactions.
However, the rapid growth of renewable energy could help in this regard, as PoW networks can verify transactions without generating large greenhouse gas emissions from primary fossil fuels.
If renewable energy sources become widespread across the crypto space in the coming years, Ethereum Classic holdings would increase significantly.
This is because miners are more inclined to verify transactions without worrying about their carbon footprint.
Additionally, it is deflationary due to its limited token supply, meaning ETC value has the potential to reach triple digits in the coming years.
Ethereum Classic is the legacy chain of the Ethereum protocol. It contains the original code used to build the leading smart contract network. However, divided opinion following a security breach led to the protocol being renamed.
The open-source crypto network still operates the PoW system, although its counterpart has since switched to the PoS algorithm.
This makes Ethereum Classic the only mineable smart contract network today. Nevertheless, the protocol is a clear testament to the history behind the Ethereum blockchain.
Despite limited public adoption, Ethereum Classic is still a major player in the DeFi ecosystem. We believe the network will remain this way for many years to come.
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