If you asked the average layperson to name two cryptocurrencies spontaneously, Bitcoin (BTC) and Ethereum (ETH) would likely be the first two names popping to mind. Interestingly, there are many variants of the former like Bitcoin Cash, Bitcoin SV, and a host of other obscure spin-offs.
However, for the world’s second-largest cryptocurrency, it might surprise many that there’s only one different version of Ethereum named Ethereum Classic (ETC). ETC came to be a consequence of the DAO (decentralized autonomous organization) hack in 2016.
After this occurrence, some participants didn’t want to erase this event from ETH’s history, splitting the blockchain in two. Ethereum Classic is the unaltered version of Ethereum, yet ETH is still much greater in prominence.
According to CoinMarketCap, ETH (ranked #2 overall) and ETC (ranked #38 overall) presently boast market cap figures of $4.8 billion and $482 billion, respectively. Moreover, Ethereum is far more expensive currently at a price of $4028 compared to ETC’s $36.
You may be wondering what the differences between the two cryptocurrencies are. Well, worry not, as this article will thoroughly answer this question.
The ‘OG’ Ethereum
As with most distributed ledgers, Ether or ETH is the network’s utility currency for processing transactions and securing the network.
The concept for Ethereum is credited to the famed Russian-Canadian programmer, Vitalik Buterin, who co-founded this project with a group of other recognized like-minded individuals in crypto like Charles Hoskinson and Gavin Wood.
ETH officially went live on 30 July 2015 and quickly became one of the most popular cryptocurrencies on the market as it pioneered what effectively became second-generation blockchain technology.
However, less than a year after, the protocol probably experienced its most significant shortfall in history, leading to the creation of ETC.
The 2016 DAO hack
In 2016, Ethereum experimented with a then-revolutionary, techno-democratic concept named the DAO (decentralized autonomous organization), which was the most high-profile project on the network at the time.
A DAO is an organization usually based on blockchain or other digital technology and governed by coded rules instead of a recognized central authority. In the context of ether, the DAO’s objective was a novel decentralized business model for investor pool funding or an ‘investor-directed venture capital firm.’
In simpler terms, funds were pooled using Ethereum-built DAO tokens, and members could pitch their business ideas to the community.
The DAO was officially launched on 30 April 2016 with a 28-day token sale which raised more than $150 million in ether less than a month later, making it one of the largest crowdfunded campaigns ever.
During this time, many had already expressed concerns over vulnerabilities in The DAO’s code which might lead to large-scale financial loss for all involved.
Unfortunately, such anxieties ended up becoming a reality. On 17 June 2016, an unknown group or individual exploited a technical weakness that saw them siphoning off with 3.6 million ether (worth about $50 million at the time).
Yet, the funds weren’t effectively gone as the rules of the smart contracts stipulated a 28-day holding period. After much deliberation, over 85% of the Ethereum community had voted for the network to go through a hard fork rolling back ether’s network history to a period before the attack.
Moreover, a recovery address was created for investors to withdraw their funds. This decision was met with backlash as many believed it wasn’t staying true to the concept of blockchains being immutable or the ‘code is law’ principle.
Hence, those who didn’t agree to this resolution remained with the unchanged Ethereum, which was named Ethereum Classic.
Technical differences between Ethereum And Ethereum Classic
Ultimately, Ethereum and Ethereum Classic are similar as they’re both platforms for supporting smart contracts and building dApps. However, Ethereum enjoys far more recognition in the industry and, hence, processes astronomically more transactions daily and boasts a significantly larger community.
Yet, as a plus, mining is understandably less competitive on ETC than ETH. Another difference is that Ethereum’s technology has advanced over the years compared to ETC, which may be, again, attributed to the popularity discrepancies between the two.
ETC has experienced more 51% attacks than its predecessors. While both projects use the proof-of-work model with block creation times of roughly 15 seconds, ETH is set to transition towards proof-of-stake in a few years to make the network more scalable.
A sizable technical difference between the two has to do with each coin’s supply limits. Ethereum has remained a cryptocurrency with no hard cap, while 210.7 million is the peak for ETC.
Similar to Bitcoin’s scarcity dynamics, the mining rewards are reduced for ETC every two years (although by 20% instead of 50%). The current figure is 3.2 ETC per block, which will become 2.56 in 2022.
On the other hand, although Ethereum doesn’t technically have a hard cap, its annual maximum issuance of ETH is meant to be 18 million, which has increased gradually over time.
Enthusiasts regard the DAO hack as an event that shook the Ethereum network. As second-generation blockchains were still in the early days in 2016, many had doubts over whether Ethereum could survive.
Fortunately, while not entirely perfect, ETH has grown from strength to strength to become the most influential crypto project after Bitcoin. Ultimately, Ethereum Classic is the ‘hacker-tarnished’ version of Ethereum.
Aside from a few technical differences, the core distinction between ETH and ETC is ideology. Some participants still see the importance of maintaining the unaltered version of Ethereum, meaning ETC can still be a worthy investment.
Although ETH is more prominent, the value is still close to the all-time high from a price action perspective. On the other hand, ETC is far away from this point, meaning it would be a cheaper buy for investors at this moment.