What Is Ethereum Classic? - WhatIsBlockchain.Com

Ethereum Classic (ETC) is a blockchain-based decentralized cryptocurrency platform that is open-source, decentralized, and performs smart contracts. A malicious attack in 2016 on The DAO, a smart contract running on the Ethereum blockchain, led to the creation of a competing cryptocurrency known as Ethereum Classic.

The original blockchain was subsequently forked in two, with most users opting to undo the hack and retrieve the money taken.

The schism exposed fundamental differences in worldview among members of the Ethereum community. According to the ideology that “Code is Law,” some developers and miners believed that investors in The DAO need to bear the repercussions of their decisions to put their money into a fundamentally wrong project.

However, the vast majority of the Ethereum community concluded that the blockchain should be rolled back, which, in effect, provided a rescue for The DAO’s investors.

ETC was one of the first cryptocurrencies to be traded on the Bitcoin Exchange Market and had a market cap of $1.08 billion as of February 2017. While the currency is still trading below its historical 2011-2016 highs, it has shown signs of growth in price and interest in recent weeks.

ETC surged more than 40% on March 8, 2017, following heavy volume selling throughout the week from investors looking to avoid the risk of further losses that a hard fork would entail.

Ethereum is a blockchain platform that operates very similarly to that bitcoin; however, there is one significant distinction between the two: in addition to recording value transactions, Ethereum can also be used as a distributed computer to perform self-executing smart contracts.

For smart contract facilitation, decentralized governance is one of the benefits that Ethereum Classic brings to the table. In other words, the contracts can be enforced even without a third party, like a lawyer or legal representative.

Smart contracts are similar to if-then statements in that if the activities required within the agreement have been fulfilled, then the replying contract parameters will be completed. This ensures that both parties are held to the terms of the agreement.

If the contract’s parameters are not satisfied, the parties may be subject to a penalty or a fee, or the contract may be null and void, depending on the terms agreed upon at the outset of the deal.

For instance, in a real estate transaction, if the contract stipulated that an initial deposit had to be paid on a specific day and the funds were not received on that date, then the contract could be nullified because the initial deposit was never paid.

The distributed ledger or blockchain network that houses the smart contracts contains the contracts themselves. A distributed ledger is a ledger of transactions and contracts that are kept and maintained in a decentralized way across many locations. This ledger is also known as a distributed or distributed database ledger.

A smart contract is a computer program that automatically carries out the conditions of an agreement between a buyer and a seller. This agreement is written in code lines contained within the smart contract.

Since the code regulates how the contract is carried out, there is no requirement for any external monitoring or censorship to be carried out by a centralized authority.

History of Ethereum Classic

The ether coin, also known as ETH, was used to facilitate transactions when the Ethereum blockchain was first created. At that time, the blockchain existed as a single network. The new network immediately became popular for initial coin offers (ICOs), as other teams utilized the platform to launch their currencies, leading to the network’s rapid popularity.

The DAO, a decentralized venture fund where buyers would vote on assets to invest in, was one of the most successful initial coin offerings (ICOs).

Before unknown hackers identified a weakness in The DAO’s smart contract that allowed them to extract around one-third of The DAO’s accumulated ether, The DAO had already rapidly accumulated more than 11 million ETH from more than 18,000 investors.

As a result of the scope of the attack, several investors suggested reversing the Ethereum blockchain to save the impacted investors. However, some investors worried that doing so would establish a precedent for such bailouts in the future. In a swiftly organized vote, the majority of the community (97%) decided that the missing funds should be restored by means of a hard fork.

As a direct consequence, the Ethereum blockchain branched off into two distinct networks. The more recent network is still known as Ethereum and operates with ether or ETH as its native cryptocurrency. The more established version is called Ethereum Classic, and it employs ETC.

Tensions between the two camps have continued since then but are expected to be resolved in the future.

Before the fork, it was rumored that Ethereum’s developers might introduce proof of stake to automatically confirm transactions, with ETC’s developers taking an interest in this theoretical change. If implemented, ETC supporters expect that this would upgrade the blockchain from a proof-of-work to a proof-of-stake consensus mechanism.

Over the summer of 2017, Ethereum Classic has been experiencing a strong rally with over 40% gains in USD terms. Its price has remained relatively stable within the range of $15-27 without ever getting close to its all-time highs.

The token is traded at a price significantly higher than its value on the Ethereum blockchain.

Concerns about Ethereum Classic

Like many other cryptocurrencies, the Ethereum Classic team of developers has indicated a desire to allow users to mine their coins with specialized hardware. They have also stated that the currency will support many more functions than other cryptocurrencies.

In terms of safety and security, the Ethereum Classic team has planned upgrades that will enable it to be fully compatible with better-known chains, such as bitcoin and other popular currencies.

The Ethereum Classic blockchain employs a Proof of Work consensus mechanism, similar to the Bitcoin protocol. However, the Ethereum Classic team has plans to replace the Proof of Work algorithm with a proof of stake mechanism.

Compared to other cryptocurrencies based on proof-of-work, the Ethereum Classic network uses an approach known as “proof-of-work – difficulty adjustment.” In spite of the fact that Ethereum and Ethereum Classic are competing for the same market and offer smart contracts, Ethereum has garnered greater support due to its reputation as the more trustworthy of the two networks.

Additionally, Ethereum’s ETH is the world’s second most valuable cryptocurrency network, trailing only Bitcoin’s BTC in terms of market value.

When it comes to scalability, one of the most significant issues that could arise with Ethereum Classic is its possible restrictions. In a typical scenario, the network can process 15 transactions per second; nevertheless, this figure is significantly lower when compared to payment networks like Visa, which can process more than a thousand transactions per second.

Although Ethereum Classic has undergone numerous software improvements, the scalability of its payment systems is still one of the most significant difficulties it will face in the future.

Also, there is a good chance that security will continue to be a concern with smart contracts, particularly because Ethereum Classic has previously been the victim of a breach that resulted in the theft of millions of dollars.

Because of these concerns, implementing smart contracts based on Ethereum Classic may be precluded from being utilized in significant financial and real estate transactions.

Developing regulations for the cryptocurrency market is still in progress, which may or may not affect the functioning of Ethereum Classic and other networks. Due to the decentralized nature of their networks, the Securities and Exchange Commission (SEC) does not consider cryptocurrencies like Ethereum or Bitcoin to be securities.

Since cryptocurrencies are not recognized as securities, their inclusion in various financial products that include a mix of securities, stocks, and bonds, such as exchange-traded funds and mutual funds, may be difficult to get if they aren’t recognized as securities first.

Moving forward, there is still a great deal of ambiguity regarding the regulatory situation for Ethereum Classic and other blockchain networks that are less widely used.

Although Ethereum Classic has been around for more than a year, it has yet to garner as much support from miners and investors as its counterpart. Several other currencies appear more trustworthy when compared to Ethereum Classic.

If a user wants to use the network, they may need to download the entire blockchain, which is approximately 48 gigabytes in size.

Ethereum Classic Investment Analysis

As Ethereum Classic is based on the Ethereum platform, it is likely to follow a similar path to the original platform’s earlier development stage. Launching a new platform naturally encourages the growth of other cryptocurrencies due to their popularity.

In addition, when investors get involved with another blockchain network, they may be reluctant to move their funds into an altcoin that has yet to gather significant market share. When the greater public does not recognize a crypto-asset, there is a good chance that its available liquidity and market rate will decline.

Even though Ethereum Classic has returned to the popularity it enjoyed during its inception, the currency has yet to be able to surpass the industry’s major players and gain substantial market share. This suggests that attempts by investors to enter into ETC at current levels are likely to be risky, as capital may be lost if the platform continues to gain momentum in mining and usage.

Future of Ethereum Classic

Although Ethereum Classic has enough liquidity to maintain its value and even increase it, the future of the currency is heavily dependent on the application of the Ethereum Classic platform to significant transactions within both financial and private spheres. At present, most users utilize their platforms for relatively small financial transactions.

Ethereum Classic has great potential since it aims to facilitate large-scale exchanges between individuals or businesses in private or public networks. Considering that Ethereum is seen as the more authentic of the two networks, especially in light of the security problems surrounding Ethereum Classic, the future of Ethereum Classic appears to be less promising than that of Ethereum.

Investors have lost faith in ETC over the years owing to hacks into the system, and Ethereum Classic may have a difficult road ahead of it unless ETC can rewrite its code and software to prevent future hacks. On the other hand, it is currently unknown how the smart contracts will be developed as part of the Ethereum Classic project or whether or not they will be feasible for wider implementation.

The primary concern that most investors have over Ethereum Classic is that the currency has multiple vulnerabilities. In the past, the ETC network has experienced severe security breaches, including one that resulted in a $4 million loss of funds during a DAO hack in June 2016.

As a result of these breaches, there is skepticism surrounding whether or not ETC will be able to retain its market position and financial stability moving forward.

Ethereum Classic and the DAO:

The DAO, which stands for “decentralized autonomous organization,” was a financial venture that raised more than $100 million in digital currency and was built on the Ethereum platform. In June 2016, however, a controversial hack of the DAO resulted in the theft of roughly $50 million worth of Ethereum Classic.

Investors that had taken part in the DAO crowdfunding campaign lost all of their money as a result. The vulnerability that led to the hack was identified later by a group of Vitalik Buterin and Ethereum developers who worked on the white paper describing the DAO.

Despite the concern that led to the hack, Ethereum Classic has many of the same features as its counterpart. The creators aim to utilize these features to develop smart contracts in light of the data collected by an organization like DAO.

Should You Invest in Ethereum Classic?

While Ethereum Classic has great potential, the currency faces security challenges that could undermine its performance over time. At present, it’s still being determined whether or not ETC will be able to maintain its value during the next phase of its development. If this network cannot protect itself against malicious individuals, it may be subject to additional attacks in the future.

If you are interested in participating in ETC’s network, you should take additional time to learn about the currency and its security challenges. This can help ensure that your capital is safe and does not become the target of hackers. If more individuals utilize Ethereum Classic, this cryptocurrency’s price will increase.

It is impossible to imagine Ethereum Classic ever having a foothold like Ethereum, given the concerns of scalability and energy consumption, as well as the continuous widespread adoption of Ethereum.

ETH strives to address some of its shortcomings, whereas Ethereum Classic continues business.

No matter how righteous or immutable Ethereum Classic is, it must be feasible enough to be utilized globally to gain the locomotion that more appropriate cryptocurrencies will. The virtues of changing the code can be debated, but Ethereum Classic will never gain the traction that more appropriate cryptocurrencies will.

It is more difficult to forecast the short-term repercussions of the merger and any personal developments that may occur. ETC could experience stretches of outperformance in the immediate term.

In the long run, unless ETC can address more of its difficulties or there is some unanticipated unfavorable development with Ethereum, the chances of Ethereum Classic taking over the major stage are, at best, extremely improbable. This is the case unless ETC can fix more of its problems.

Ethereum Classic and Ethereum:

When it comes to Ethereum Classic vs. Ethereum, most potential investors will compare the two currencies based on their transaction rates, mining rewards, market rates, and use cases. These are all important factors when comparing these blockchain networks.

On the surface, Ethereum Classic and Ethereum seem to be quite similar. But, unlike Ethereum Classic, the white paper behind Ethereum describes how the project aims to address some of its shortcomings.

Unlike Ethereum Classic attempting to correct a potential security flaw in Ethereum’s code, the developers behind Ethereum describe how they intend to incorporate smart contracts and other features to resolve some of the shortcomings on their network.

Conclusion:

Ethereum Classic is a digital currency created after the hard fork in 2016. At first, many people believed that ETC would never be able to maintain its position within the market. However, since ETC came into existence, it has managed to gain a substantial amount of support from investors.

The continued existence of Ethereum Classic can be attributed to a five-pronged development plan for the currency designed to improve liquidity and network compatibility.

Ethereum Classic has a variety of features that make it suitable for use in a vast array of industries. Ethereum Classic promises that it can create an environment in which the network can be used to develop applications and services that are highly scalable, efficient, and secure. It is because of these benefits that investors are willing to support ETC.

The future success of Ethereum Classic will depend on how well the developers behind the currency can address the various security flaws that plague its counterpart.