Updated: Dec 20, 2019
Ethereum Classic is a cryptocurrency, which is a result of a hard fork that happened in Ethereum, on July 20, 2016. The Ethereum (ETH) community performed the fork in an attempt to restore stolen funds. It is a decentralized, open-source, blockchain-based cryptocurrency platform that runs smart contracts. Smart contracts are based on the principle - “Code is Law”. They are capable of running on their own, as they are essentially self-executing autonomous digital applications.
This guide will quickly explain the purpose behind Ethereum Classic’s creation, the creators, how it works, and various uses and applications.
What is Ethereum Classic Designed For?
Ethereum Classic was the leftover from a split in the original Ethereum blockchain. The new part is Ethereum itself. A hack occurred in June, on Ethereum, which resulted in the theft of $50 million worth of funds. The perpetrators utilized an exploit found in the DAO (Decentralized Autonomous Organization) code.
The split was performed by the core Ethereum community to return the funds to their original owners, as per existing records from before the hack. This resulted in all transactions made by the hacker as void, which also led to the two forks existing simultaneously. The new version is called Ethereum, while the older one was renamed as Ethereum Classic.
Who Is the Team Behind Ethereum Classic?
In 2016, thousands of well-intended Ethereum users invested a significant amount (11 million ether) into a program or smart contract, called the DAO. However, in the summer of the same year, hackers managed to hijack and steal all of these funds.
The community decided to carry out a hard fork, in a bid to nullify the hacker transactions and return all the wealth to DAO. Controversy suggests that Bitcoin, which regarded Ethereum as its foremost competitor, did not want the platform to bounce back.
Bitcoin investors like Barry Silbert hatched a plan to destabilize Ether and disrupt the Ethereum network, by reviving the old chain and killing off Ethereum in the process. They spawned a second community and labeled it Ethereum Classic, and the crypto exchange Poloniex (which just so happens to be co-owned by Silbert's) raced to be the first exchange to start trading the native coin of this old chain (ETC). This officially and artificially legitimized ETC.
How Does Ethereum Classic Work?
The major problem with ETC is that it is not backward compatible due to the hard fork. All the heavyweights of the Ethereum community, including Vitalik Buterin and Gavin Wood, have moved on to ETH (Ethereum). This means that ETC is unable to access any updates done by ETH, which includes the recent move from Proof of Work (PoW) To Proof of Stake (PoS).
Ethereum Classic is intended to work the same way as Ethereum, as a decentralized programmable blockchain. Like ETH, the native token ETC is traded on exchanges, offering the same functionality of smart contracts and decentralized apps. The platform also uses the same smart contracts language, called Solidity.
Ethereum Classic aims to solve issues surrounding decentralized governance, transaction finality, and applications that are tampered because of censorship, downtime, third party interference, and fraud.
What are Current and Future Applications of Ethereum Classic?
ETC is always going to be considered the black sheep of the Ethereum family. This shows itself in the valuation as well. ETH is almost 15 times more valuable than ETC. That being said, ETC has managed to carve out a substantial niche for itself in the crypto market. It has one of the largest network activities of any blockchain – nearly at par with Litecoin and consistently higher than Bitcoin Cash.
Ethereum Classic Labs has currently partnered with several groups to create and support new projects. The list includes Transform Group, Blockchain Tax Partners, North Block Capital, Chain Starter, Infiom, and the Deal Makers Network.
There are multiple developer teams in Ethereum Classic, committed to the long term vision of the crypto coin – to stay true to the classic vision of preserving the history that is not tampered with and is free from external interference.
On June 19, the Ethereum Classic Community announced the Atlantis hard fork to be in its testing phase. This hard fork is expected to be a radical change in the blockchain’s protocol and is going to be implemented as a consistent, no-rush update, to ensure compatibility of ETC with its sibling ETH. The team has partnered with ChainSafe Systems and cooperated with Parity, ECC, and IOHK to complete the technical development.
With this latest move, ETC is expected to bridge the gap with ETH and enable easier interoperability. Atlantis is also expected to incorporate multiple Ethereum Improvement Proposals (EIPs), which have been around on Ethereum for several years. These changes have brought Ethereum Classic on the verge of a new stage of technological advancement.