Ethereum vs Ethereum Classic – What’s the Difference?

Ethereum vs Ethereum Classic are two of the most popular cryptocurrencies in existence, although Ethereum is, by far, the bigger token by market cap. So how do you explain the difference between Ethereum vs Ethereum Classic in simple terms? The two currencies represent distinct views and philosophies on how cryptocurrencies should exist and function, and this has created a significant divide in the crypto community. 

Ethereum

Ethereum (ETH) is best described as an open software platform that is based on Blockchain technology. This platform allows developers to create and set up decentralised applications.

At first glance, all cryptocurrencies might seem alike, but this is hardly the case. There are stark differences between Ethereum and Bitcoin, for example. Bitcoin’s primary purpose is to facilitate P2P electronic cash systems, while the Blockchain it is based upon can be used to track ownership and transaction details. Ethereum’s Blockchain, meanwhile, can be used to run a diverse range of decentralised applications (DAPPs).

Ethereum Classic

Ethereum Classic (ETC) is, like ETH, an open software and public platform based on Blockchain technology. It, too, allows developers to create and set up DAPPs, and it makes use of smart contracts scripting in order to maintain its functionality.

Like Ethereum, Ethereum Classic uses the Ether value token, which can be transferred or stored in wallets. The token is also used to compensate nodes involved in solving computations.

DAO: How Did Things Evolve?

What, in retrospect, looks like the most significant moment in the Ethereum vs Ethereum Classic split is based on the organisation known as the Decentralised Autonomous Organization (DAO). This organisation was set up to fund DAPPs built on the Ethereum Blockchain and was meant to be run like a hedge fund.

The founders within the DAO had the voting powers to decide which DAPPs got funding. In order to obtain voting privileges, investors in the group would need to purchase DAO tokens using Ether currency. The more tokens an investor bought, the better he or she could influence the organisation’s decisions.

DAPPs got approved in a structured way:

1. The application would first need to be white-listed by known and respected members of the Ethereum community, who would be called curators;
2. The DAPP application would be voted on by whoever held DAO tokens;
3. A minimum of 20% approval would be required for the DAPP to get any funding.

The straightforward and transparent way which saw DAPPs funded created significant interest in the DAO. As a result, many investors began considering this investment channel and within its first month, the DAO raised over $150 million worth of Ether.

One of the DAO’s biggest flaws appeared when investors wanted to exit their positions. Through an exit door called the Split Function, funders could retrieve the Ether they invested along with the opportunity to create a Child DAO. This was basically a smaller version of the DAO, and funders who decided to exit in this way only had to abide by the condition of keeping their Ether for 28 days.

This security flaw became apparent on June 17th, 2016 when an unknown entity stole $50 million from the DAO.

The DAO Hack

The DAO hack was an eye-opener for the DAO and the Ethereum community in general. Many industry experts argue that this was not so much a hack, which normally involves a certain technical knowledge, as much as it was a disaster waiting to happen. The DAO security system was broken into because it was a poorly guarded platform.

Exiting the DAO involved a simple process of sending a request. Once this step is carried out, the Splitting Function would refund the investor with Ether, by exchanging his or her DAO tokens. The Blockchain’s ledger would also be updated with this transaction, the internal token balance would be modified.

In the DAO hack, the hacker made a recursive function, which resulted in this process being carried out numerous times using the same DAO tokens. This recursive function has the ability to function continually until a maximum of 33% of the DAO funds were withdrawn.

Apart from the destructive effect this hack had on the DAO, you must keep in mind that at the time, the organisation owned around 14% of the total Ethereum supply. When over $50 million worth of Ethereum disappeared, the entire community went into a panic, seeking solutions to this emergency.

A significant portion of the community decided that a fork was necessary to keep Ethereum alive. Others strong believed that the Blockchain should be abandoned and replaced by something new. The new Blockchain would maintain the name Ethereum, while the original Blockchain changed its name to Ethereum Classic. An estimated 10% of the community remained with ETC, with the majority of the rest moving to ETH. Over time, the forked ETH was able to recover most of the stolen funds.

Ethereum vs Ethereum Classic: An in-depth Look into Their Differences

When looking at the difference between Ethereum vs Ethereum Classic we can start off by looking at market shares both now and then. Back in 2019 Ethereum had a market cap of over $19 billion. In mid of 2021, the number has grown to $496 billion, making it the second-largest cryptocurrency.

Meanwhile, Ethereum Classic ranks in 19th place, with a market cap of just $11.37B. Even though Ethereum has gone on to dominate the smart contract environment, Ethereum Classic remains a speculative Altcoin.

While the ETC community remain loyal to the immutable ledger concept, the cryptocurrency today retains its value mainly due to trader interest. On the other hand, ETH is seen as a software organisation which can grow and develop, offering investors and community member more than just a speculative asset. In fact, the currency is backed by the Ethereum Alliance, a group made up of billion-dollar firms including JP Morgan, Microsoft, and UBS.

Ethereum vs Ethereum Classic: The Split

While the DAO hack was a pivotal moment in the ETH and ETC split, the strong ideological differences between the Ethereum community meant that sooner or later, a split would be imminent. Cryptocurrencies remain in existence thanks to community support. Without it, a currency loses all value and ultimately disappears completely.

One could argue, rather successfully, that Ethereum itself had no fault in the DAO attack since the organisation operated independently. Nevertheless, the attack was so significant, with over $50 million stolen, that community support for the cryptocurrency caved. This lack of support was evidenced by the sudden price drop from $20 to just $13. Currently, the prices of both ETH vs ETC are:

ETH is a Fork of ETC

The decision to fork Ethereum came as a result of the fact that the stolen Ether was still locked into the child DAO set up by the hacker. As per DAO rules, those funds would remain inaccessible for 28 days, which gave the community several options.

The first option was to do nothing and was supported by the roughly 10% of the community which remained with ETC after the split. While it may be hard for you to understand how this was even an option, you need to remember that for these diehard supporters, smart contract code is as good as the law. However, this the majority of the community at the time did not share in this immutable belief, they sought alternative options.

The second option being considered was to proceed with a soft fork. A soft fork would give individual members the option to update or to remain as is, but all members would, nevertheless, be able to continue interacting on the same Blockchain. With a soft fork, the community would be able to isolate the blocks which contained the hacker’s transactions, essentially blocking the funds.

However, the soft fork option had a serious problem, a Denial of Service attack vector. This attack would affect the way miners were rewarded, which would put further doubt in the long-term viability of Ethereum. For this reason, the majority voted for the third option, a hard fork.

With a hard fork, members who updated to the new system and those who did not were not able to interact. Essentially, the hard fork created two separate and distinct Blockchains. Ethereum split from the Ethereum Classic Blockchain at a specific block, number 1,920,000, just before the block holding the hacked DAO funds transactions were located.

As a result of the hard fork, all investors of the DAO were able to get their funds back, through a specialised Refund Smart Contract. This computer code exchanged 1 ETH for every 100 DAO tokens. According to Ethereum’s co-founder, Gavin Wood, the hard fork marked “the single most important moment in cryptocurrency history since the birth of Bitcoin.”

Price of Ethereum vs Ethereum Classic

When looking at the ETC/ETH graph it is clearly evident that Ethereum’s overall strength is much greater than Ethereum Classic’s.

Over the past years, Ethereum has managed to shoot up with an average growth rate of 204.6%.

However, back in 2019 speculative traders which utilised the trend trading strategy believed that ETC may be set for a significant price increase. Indeed, the below chart shows that Ethereum Classic has grown to a current price of ~90 USD. Its growth rate is lower than Ethereum’s, having it around 167.2% a year.

At the time of writing of this guide, Etheruem’s average trading price revolved around $3450 whereas Ethereum Classic’s revolved around $90.

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ETH vs ETC: Acknowledging the Issues

Neither the ETH nor the ETC Blockchains are free of issues, and today the argument on which is better continues. 

One of the most significant issues of Ethereum Classic is, understandably, that it is not compatible with the Ethereum hard fork. With many of the most influential members of the community moving on to Ethereum, Ethereum Classic has been largely overlooked. Moreover, ETC users don’t have the ability to avail themselves of the developments in ETH, such as its move from Proof of Work to Proof of Stake.

The biggest issue affecting the Ethereum community today is trust. A growing number of individuals seem to believe that the leaders within the community are seeking to manipulate future hard forks. This situation adds the risk of price volatility and uncertainty which the currency can certainly do without.

ETH vs ETC: A Look into Mining

When it comes to mining, Ethereum vs Ethereum Classic does not have many differences, for the time being. Mining ETC requires a substantial amount of RAM (for a higher mining performance 16GB of RAM will do), therefore specialised ASIC miners are normally used. The applications used for mining both ETC vs ETH use the same mining algorithm and generally operate using similar hardware. ETC has a smaller Dag file size and you can mine it using video cards with up to 3GB of RAM.

Currently, both Ethereum and Ethereum Classic rely on the Proof of Work reward algorithm. This system determines which transactions are valid and protects them from possible tampering. However, it is highly probable that in the near future Ethereum will switch its mining reward system to Proof of Stake, where the Blockchain is secured by the token’s owners. This alternative is seen as an improvement over the traditional mechanism since it uses fewer resources and achieves distributed consensus.

Until this change takes place, mining ETC brings with it several advantages over mining ETH:

• It is possible to create your own applications on the ETC platform since it offers an open code system;
• The limited supply of coins encourages the growth of its value whilst reducing the need for miners;
• Code supremacy, the fundamental concept of Ethereum Classic, guarantees the inviolability of the Blockchain while ensuring the decentralised operations within the network;
• The option of investing in the Ethereum Classic Investment Trust fund
• A high network performance due to block high closing speeds are superior to both Ethereum and Bitcoin mining.

Whether you are mining either of these two currencies or looking to invest in them, you will need to open an account with a platform that can support you. eToro is a global cryptocurrency trading platform that accepts Ethereum vs Ethereum Classic, along with a significant number of other Altcoins and, of course, Bitcoin. By using eToro to invest in ETC or ETH you can choose from a variety of instruments, including Contracts for Difference.

Ethereum vs Ethereum Classic: Concluding Thoughts

If one was to settle the Ethereum vs Ethereum Classic debate by popularity, then Ethereum is the clear winner. The cryptocurrency’s infrastructure is developing significantly and attracting a growing number of companies to Blockchain technology. While some may describe ETH as a violation of immutability, others counter by describing it as a significant moment when a community was able to join forces and tackle one of the worst hacks ever.

This was done in a democratic and decentralised manner and gives an interesting insight into what the financial world of tomorrow might look like. Without the decision to proceed with a hard fork, Ethereum might not exist today, meaning that countless existing and future DAPPs might never have been created.

Unfortunately, Ethereum Classic’s reputation will always be marked by the DAO hack, and it is unlikely that it will grow sufficiently to challenge Ethereum’s market dominance. ETH is a community-based platform which allows users to design applications which can revolutionise practically any industry. The good intentions behind the DAO could have helped Ethereum development significantly, but its major security flaw meant that it would ultimately only be remembered as the reason behind ETC’s destruction.

Many in the cryptocurrency industry believe that Ethereum has a bright future ahead of it, while Ethereum Classic continues to rank ever lower in terms of market cap. However, things in the cryptocurrency industry move quickly and sometimes, unexpectedly, so the Ethereum vs Ethereum Classic debate is not yet over.