Ethereum Classic ($ETC) is a decentralized blockchain platform launched on Jul 2016 that lets anyone build and use decentralized applications that run on blockchain technology. In 2016, after a controversial hard fork, a new version of Ethereum was launched, spawning a new network with new consensus rules. Ethereum Classic continued following the original network rules and has maintained the Original Ethereum vision of "Build Unstoppable Applications" ever since.
It positions itself as the continuation of the original Ethereum by retaining the "code is law" spirit. Its main function is to execute smart contracts, which are applications that run as programmed without the possibility of censorship or thirdparty interference.
It is a distributed network consisting of a blockchain ledger, a native cryptocurrency (called $ETC), and an ecosystem of on-chain applications and services. Ethereum Classic is the legacy chain that split from Ethereum following a contentious hard fork, known as The DAO fork, in Jul. 2017.
Like its sister chain, Ethereum Classic features an execution engine optimized for smart contract processing (known as the Ethereum Virtual Machine or EVM) and a Proof of Work (PoW) consensus system. While it shares some aspects with Ethereum, Ethereum Classic offers a more defined monetary policy and inflation schedule.
Modified GHOST protocol
The Ethereum White Paper states Ethereum, thus Ethereum Classic uses a modified version of the "Greedy Heaviest Observed Subtree" (GHOST) protocol to distinguish the "longest" base chain (the chain with the most accumulated Proof-of-Work backing it) from forks. Nakamoto Consensus, the implementation used by Bitcoin ($BTC) and its forks, is problematic in networks with fast confirmation times (i.e., block times) like Ethereum Classic. Quick block times lead to a higher stale or orphan rate, which can split mining resources among competing forks and reduce overall network security. Accelerated confirmation times also increases the likelihood a single mining pool could obtain a majority of the hash power on a given chain.
The GHOST protocol attempts to solve this issue of network security by including orphan blocks in the calculation of the longest chain. Therefore, the GHOST model determines the valid chain byweighingthe parent and further ancestors as well as the number of stale descendants. The protocol also rewards the mining of orphan blocks directly connected to the longest chain to combat potential centralization concerns. Orphan block miners do not receive any transaction fees, only a portion of the block subsidy, as stale transactions are not considered valid.
Ethereum Classic miners solve computational puzzles to generate new blocks by running the Ethash Proof-of-Work (PoW) algorithm. In this process, miners compete to discover a valid hash as defined by the network's difficulty adjustment algorithm. Ethereum Classic recalculates its difficulty level every block based on the time between the two previous blocks.
Cryptographers designed Ethash to be ASIC-resistant by making it memory intensive for specialized mining chips. But the popularity of Ethereum led mining chip manufacturer Bitmain to release the first ASICs miners for Ethash in April 2018. Since Ethereum and Ethereum Classic share the same mining algorithm at the moment, ASIC miners on Ethereum can shift their hash power over to Ethereum Classic to mine ETC. This opportunity combined with lower security spend on Ethereum Classic likely led to the various 51% attacks registered on Ethereum Classic, the first of which occurred in Jan. 2019 followed by three more in Aug. 2020.
Similar to Bitcoin, no single entity is in charge of the Ethereum Classic Project. Instead, individuals and teams following a common set of principles contribute in a permissionless grassroots do-ocracy. While this organizational structure has some drawbacks, it also makes the project immune to certain types of capture and therefore enhances long-term survival.
There is therefore no top-down leadership and "no official anything" in ETC, and even the Ethereum Classic client software. Nonetheless, there are prominent teams that operate within the ecosystem, gaining informal influence based on their reputation, track record, and contributions.
No. In fact, Ethereum is a fork of Ethereum Classic.
In 2014, Ethereum founders began work on a next-generation blockchain that had the ambitions to implement a general, trust-minimized smart contract platform.
In 2016, following a controversial hard fork, a new version of the protocol (now known as Ethereum) was launched by spawning a new network with new consensus rules. Ethereum Classic continued following the non-forked protocol with the mission to continue the Original Ethereum Vision of "Build Unstoppable Applications".
Ethereum Classic and Ethereum were once the same project, but due to a difference in philosophy, the communities split in 2016. In 2022, Ethereum switched to Proof of Stake, with Classic remaining on Proof of Work. This marked the first major technological difference between the two chains.
Apart from their consensus mechanisms, ETC and ETH remain very similar technologically, and ETC maintains EVM compatibility so that contracts deployed to Ethereum can also be easily deployed to Ethereum Classic.
After the split with Ethereum, ETC supporters published a number of documents detailing differences in philosophy, which became part of the Ethereum Classic project's DNA. You can read more about Ethereum Classic's founding documents in the foundation section.
"Code is Law" is an ideal whereby no authority has the ability to interfere with the operations of valid contracts and transactions on-chain, enabling many promising benefits that have the potential to vastly improve the state of the world.
The alternative, "Code isn't Law", has been the standard state of affairs before the dawn of blockchain technology, whereby corruptible off-chain decision making processes determine the result of contracts and transactions.
You can buy Ethereum Classic (ETC) on almost every crypto exchanges, both for fiat currency and other crypto currencies. Some of the main markets are listed below:
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The DAO hack gives rise to Ethereum Classic
The DAO hack and resulting hard fork split the Ethereum network into two separate chains: Ethereum and Ethereum Classic (ETC). The DAO was an Ethereum-based venture fund that managed to raise ~$150 million in Ether in an April 2016 initial coin offering (ICO). A few months later (July 2016), an attacker exploited a bug in one of The DAO's smart contracts, enabling the hacker to steal 3.6 million ETH of the funds collected in its ICO.
A divide in the community formed around how to resolve the issue. One camp believed reverting the chain, thus erasing the hack from the network's history, was necessary to preserve the longevity of Ethereum. The other side reasoned mutability was antithetical to the ethos of crypto networks and refused to accept a ledger rewrite. The divide led to a contentious hard fork at block 1,920,001, and the legacy chain that did not reverse its transaction history rebranded to Ethereum Classic.
Before the DAO fork split the original Ethereum chain, there was just one group of users, service providers, developers, investors, and other network participants. The hard fork or "irregular state change" split not only the protocol layer but also the social and application layers. As the legacy chain, Ethereum Classic inherited the components outlined within the Ethereum whitepaper. At the time of the fork, Ethereum Classic was still identical to Ethereum regarding these original components. However, it soon began to diverge away from Ethereum by announcing its own roadmap and vision.
Philosophy and monetary policy change
The Ethereum Classic (ETC) community stresses the core principals of censorship resistance and (most prominently) immutability. And as a continuation of the Ethereum blockchain, it features a Turing-complete smart contract language to support the development of more complex decentralized applications (dApps). The Ethereum Classic community governs the network by the motto "Code is Law," which instills the belief that ETC transactions and dApps are truly censorship-resistant and immune to any third party interference.
ETC later (March 2017) adopted a new, Bitcoin-like monetary policy fit with a fixed supply cap and disinflationary emission schedule. The proposal drastically deviated from the original Ethereum monetary policy, which remains in flux as Ethereum core devs look to establish a more concrete economic model for its future Proof of Stake (PoS) network. Instead of monetary flexibility (and some uncertainty), Ethereum Classic now features a max supply of 210,700,000 tokens and miner reward reductions every five million blocks. And unlike Ethereum, the community intends to stick with Proof of Work (PoW) as its consensus and token issuance mechanism.
Development teams and future developments
ETC's structure varies from most blockchain projects, incorporating multiple development teams (IOHK, ETC Labs, and ETC Cooperative), each with their own goals. In general, most of these teams have focused on providing sidechain scaling solutions, improving development tools (SDKs), and promoting cross-chain transactions so others can build on Ethereum Classic. Some of these efforts, including Connext's state channels and ChainSafe's bridge to Ethereum and Cosmos SDK-based chains, have already launched.
ETC is one of the few cryptocurrencies where investors can gain exposure to it through a traditional brokerage and or retirement account. Grayscale Investments created an Ethereum Classic Investment Trust (ticker ETCG) that allows investors to gain exposure to ETC without having to store or secure it directly.
As a minority chain using the Ethash mining algorithm, Ethereum Classic has been the target of multiple 51% attacks. The first attack occurred in Jan. 2019, when crypto exchange Coinbase detected a deep chain reorganization of the Ethereum Classic blockchain. The number of identified reorganizations eventually increased to a total of fifteen, twelve of which contained double spends, totaling 219,500 ETC (~$1.1 million).
In Aug. 2020, Ethereum Classic suffered three more 51% attacks. The first one resulted in a successful double-spend of 807,260 ETC (~$5.6 million at the time). The second attack occurred less than a week later and exhibited a similar reorg depth (about 4,000 blocks). The final Aug. 2020 attack resulted in a large reorg of 7,000 blocks, but there is no sign of a double-spend attempt as of yet. As for a possible solution, the ETC Cooperative would like to switch Ethereum Classic's hashing algorithm from Ethash to either Keccak-256 or SHA-3, which would mean Ethereum Classic would no longer be a minority chain and would potentially be less susceptible to similar attacks.