What is Ethereum Classic

In the early days of Ethereum, a hacker successfully stashed away $50 million worth of ether overnight, and almost got away with it. The fallout caused an ideological battle that divided the Ethereum community and shook the cryptocurrency community. Would the community stick to the principle that “code is law,” in the case of the hardened smart contracts that ran the ecosystem, or would they make an exception to save the fledgling community and return the stolen ether to its rightful owners?  

The debate ended in a hard fork. The result created Ethereum blockchain splintering off, taking almost the entire community along with it, and leaving behind the original core code and separate community. The fork also reversed the transactions and returned the stolen funds to the original accounts.  But those that stuck true to their “code is law” ethos remained with the original core code, known today as Ethereum Classic (ETC).

The Ethereum Classic price is correlated to the rest of the cryptocurrency market, meaning as the value of some of the larger assets goes up or down, so does the Ethereum Classic price. Currently, the Ethereum Classic price is trading at less than ten percent of the price of Ethereum, although both the price of ETH and the price of ETC move independently.

Ethereum’s evolution

The ethereum ecosystem is built on smart contracts — that is, contracts written in computer code, that execute themselves according to the programmed parameters. When Ethereum was created, an organization that was called the DAO (decentralized autonomous organization) was built on the Ethereum blockchain. The idea was to create the DAO to operate like a company (but without the corporate structure) and provide some infrastructure so that other decentralized applications (dApps) could be built and launched. Projects would be added, voted on by DAO token holders, then funded. Within a month of the formation of the DAO, over $150 million had been added, which amounted to 14 percent of all ether at the time.

If DAO participants didn’t like what was going on they were welcome to split off and create their own child DAO. Unfortunately, this created a massive loophole whereby a hacker was able to run an attack designed to exchange $50 million worth of DAO tokens and send it to an Ethereum address an ethereum address under his or her control.  

The hack was immediately discovered, and the price of ether plummeted. But since DAO transactions required a 28-day waiting period before the transaction cleared, the community had time to debate the possible options about whether to hard for and reverse the transaction, or the let the transaction stand.

How does Ethereum Classic (ETC) work?

Ethereum Classic works just like Ethereum (although the price of Ethereum Classic and the price of Ethereum are drastically different) — it’s built on proof-of-work mining and smart contracts, but it doesn’t share compatibility or updates with the Ethereum (ETH) codebase.  

This means that as Ethereum (ETH) transitions away from proof-of-work and into proof-of-stake, for example, these updates will not necessarily take place with ETC, unless the community develops them concurrently and independently.   

ETC devotees claim there’s nothing to stop Ethereum (ETH) from implementing another hard fork if some other hack or corruption happens in the future.