Ethereum and Ethereum Classic have very similar names, and a complicated shared history...what sets the two cryptos apart?
Well, it’s a complex tale — a story that shows code isn’t necessarily “law,” and human will can still play a significant role in the future of any platform…even in a decentralized space.
As you would suspect, there was a time when only one Ethereum ecosystem existed. After one of the most significant events in cryptocurrency history, a hard fork took place — creating two different versions of the blockchain network.
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Origins of Ethereum
The history of the original Ethereum network began back in 2013, when Vitalik Buterin’s idea for a new programming language didn’t gain much traction within the Bitcoin community.
Buterin made a case for Bitcoin to create a new programming language that could automate tasks and allow apps to be built on top of its blockchain.
As there wasn’t much interest in his idea, he decided to raise funds via a crowdsale. In July 2014, one of the largest crypto fundraising efforts took place — amassing 25,000 BTC with a market capitalization of $17 million at the time.
Ethereum — a global, open-source software platform — was born.
What is Ether?
So far, so good. But fast forward to summer 2016, and one of the most dramatic crypto attacks in history would unfold — changing the course of Ethereum forever. A hard fork was deemed the most appropriate course of action, with most developers choosing to upgrade to Ethereum. This left the original blockchain, now known as Ethereum Classic, out in the cold to forge its own path. What caused all of this mayhem? The DAO.
What Is The DAO?
It was essentially a decentralized Kickstarter that used the Ethereum blockchain and operated via a set of smart contracts. It raised over $150 million or 12.7 million Ether in April 2016, making it one of the largest crowdfunding campaigns in history.
The DAO's Major Flaw
While the DAO was a great way to encourage decentralized investment — stopping management types from having a final say on who got funding — there were some significant weaknesses which would eventually lead to its demise.
The DAO $50 Million Exploit
The exploiters found a loophole in the blockchain code that meant the network repeatedly refunded the same DAO tokens — without the transactions being registered on the public ledger.
The DAO Hack Aftermath
The person or persons responsible didn’t manage to run off into the sunset laden with virtual assets. The 28-day rule of not being able to access your funds came into play, which meant that the Ether wasn’t lost completely. The community was left trying to pick up the pieces and assess the damage. The person or persons also eventually stopped draining the DAO, even though they could have continued.
To explain further, the problem itself didn’t come from Ethereum. Instead, it was a vulnerability that was exploited from within the code of the DAO, which was built on the Ethereum blockchain network. In spite of this, it was hugely reputationally damaging for Ethereum — and it meant that the team had to act quickly to redeem itself.
The Resulting Ethereum Hard Fork
After much deliberation within the community over the taken Ether, a vote was taken — and it was concluded that the best course of action was to hard fork and refund all affected token holders. The hard fork allowed the stolen funds to be sent to an account that the original owners were able to access.
This left Ethereum Classic as the original chain, with the tokens unexpectedly taken from the DAO left untouched with the exploiter. Ethereum, on the other hand, was the chain that returned the tokens.
Ethereum (ETH) vs Ethereum Classic (ETC)
So… which digital asset is best: Ether or Ethereum Classic?
When comparing the two, it’s worth remembering that the hard fork was seen as extremely controversial and was hotly debated at the time. For many, it was the only option to save Ethereum’s reputation. But for others, it was a betrayal of what blockchain technology set out to do: stop things from being manipulated based on a human whim.
Ethereum Classic – The 'OG' Blockchain
As a result, the ETC community argues that they have stayed loyal to the notion that the blockchain should never be changed. Their network contains the original blockchain showing every transaction, including the exploit. Critics of ETH argue that future forks could end up taking place for any reason deemed worthy enough to break the rules.
Ethereum Classic Price
On Sept. 3, 2021, Ethereum Classic mainnet split due to an exploit which previously affected Ethereum a few days ago – the "Go Ethereum" client. This led to an unplanned hard fork and decrease in 20% of the mainnet hash rate. However, as with Ethereum, investors and daily volume were not negatively affected, as nodes were updated.
Ethereum – Redeeming Investor Confidence
In comparison, the Ethereum community felt they had to take drastic action because so much investor money had been taken, and confidence in Ether was plummeting. ETH benefited from the backing and support of co-founder Vitalik Buterin, who is highly regarded and influential within the community.
Today, ETH remains more popular than ETC and has the business backing of the Enterprise Ethereum Alliance, which has more than 200 members including financial heavyweights such as JPMorgan and Citigroup. It was home to a flurry of ICOs in 2017, is supported by practically all cryptocurrency exchanges, has a bigger development team through the Ethereum Foundation, and this version of Ethereum is now at the beating heart of decentralized finance.
Should You Buy Ethereum or Ethereum Classic?
What’s Next for Ethereum and Ethereum Classic?
In December 2020, the Chicago Mercantile Exchange (CME) — the world's largest derivatives platform — publicly announced that it would launch Ethereum futures in February 2021. If everything gets signed off by the U.S Commodity Futures Trading Commission (CFTC,) the future could look even more promising for Ethereum. The derivatives will allow investors to bet on the future price of an underlying asset without actually having to own it.