Definition
Ethereum and Ethereum Classic are two different versions of the same blockchain technology, which split in 2016 due to ideological differences among community members. Ethereum, often referred to as ETH, is the newer blockchain that was formed by the developers who wanted to modify the original Ethereum code to reverse a significant hacking incident known as the DAO attack. Ethereum Classic, or ETC, is the original blockchain where the DAO attack transactions were preserved and continued by developers who believed in the principle of immutability and opposed the hard fork.
Key Takeaways
- Ethereum and Ethereum Classic both originated from the same blockchain platform but diverged after the 2016 DAO hack. Post the incident, Ethereum introduced a hard fork to rectify the issue, which Ethereum Classic did not accept, leading to their split.
- Ethereum (ETH) is now more widely accepted, has larger community support, and is constantly updated with new technological advancements. On the other hand, Ethereum Classic (ETC) follows the original untouched blockchain and places a higher emphasis on transaction finality and the philosophy of immutability.
- From a developmental point of view, the split has given Ethereum freedom to pursue more aggressive innovation, in terms of both functionality and scalability. Ethereum Classic, however, maintains the original blockchain’s principles but experiences slower development and lesser adoption.
Importance
Ethereum vs Ethereum Classic is an essential finance term due to its influence on the landscape of cryptocurrency and blockchain technology.
In the aftermath of a significant hacking event in 2016, the ethereum community split into two divergent groups: Ethereum and Ethereum Classic.
Ethereum agreed to modify their blockchain to recover stolen funds, while Ethereum Classic maintained the original, immutable blockchain.
This schism manifests in different coins (ETH for Ethereum and ETC for Ethereum Classic), and it highlights a critical philosophical debate over the modifiable nature of blockchain ledgers.
Understanding this split is crucial for investors when deciding which crypto asset aligns with their ethos and provides the best potential return.
Explanation
Ethereum and Ethereum Classic are two different versions of the same blockchain network. They serve the same purpose: to allow users to build and execute smart contracts and decentralized applications (dApps) without any interference from a third party.
Both provide a blockchain platform for the execution of programmatically self-executing actions, known as smart contracts, which are essential in facilitating, verifying, or enforcing negotiation or performance of a contract, or in rendering a contractual clause unnecessary. The separation into Ethereum and Ethereum Classic happened after a major hacking event occurred on the Ethereum network in 2016, resulting in a split, or “hard fork,” into two separate networks.
Those who agreed with the decision to step back from the blockchain’s core principle of immutability and intervene to reverse the hack continued with the forked version named Ethereum, while those who chose to stick to the principle of immutability and refused to erase the hack continued with the unforked original version, Ethereum Classic. Despite the split, both Ethereum and Ethereum Classic continue to operate on their respective networks to support developers in deploying smart contracts and dApps.
Examples of Ethereum vs Ethereum Classic
Hard Fork Decision: In 2016, Ethereum underwent a significant change accessible as a ‘hard fork.’ This was in response to the infamous DAO attack where around $60 million worth of Ethereum was stolen. After significant deliberation, the Ethereum community decided to hard fork the blockchain to restore the stolen funds. This resulted in two versions of Ethereum – Ethereum (ETH), which supported the hard fork, and Ethereum Classic (ETC), which continued on the original blockchain that didn’t accommodate the hard fork. This decision also resulted in a split in the Ethereum community, between those who believed in immutability of the blockchain (ETC) and those who believed in a more pragmatic approach (ETH).
Differences in Price and Market Capitalization: Ethereum (ETH) has a much higher market capitalization and price compared to Ethereum Classic (ETC). As of November 2021, Ethereum’s market capitalization is over 450 billion USD while Ethereum Classic’s is just over 6 billion USD. The ETH token is priced at over 4,000 USD per token, significantly higher than ETC’s price of around 50 USD per token. The financial differences indicate that the majority of investors, developers, and users have chosen to support ETH over ETC.
Level of Development Activity: Ethereum (ETH) has seen more updates, improvements, and active development compared to Ethereum Classic (ETC). For example, Ethereum is transitioning from proof-of-work (PoW) to proof-of-stake (PoS) with the Ethereum
0 upgrade, which is intended to improve scalability, security, and sustainability. Meanwhile, Ethereum Classic seems to have less ongoing development and has also experienced several 51% attacks, raising questions about its security protocols. The level of development activity also highlights the contrasting support from developers and the overall community for ETH and ETC.
Ethereum vs Ethereum Classic FAQ
What is Ethereum?
Ethereum is an open-source, blockchain-based platform that enables developers to build and deploy smart contracts and decentralized applications (dApps). It was proposed in late 2013 and development was crowdfunded in 2014, and the network went live on 30 July 2015.
What is Ethereum Classic?
Ethereum Classic is a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third-party interference. Ethereum Classic is a continuation of the original Ethereum blockchain – the classic ‘unforked’ version; free from external interference and subjective tampering of transactions.
What is the main difference between Ethereum and Ethereum Classic?
The main difference between these two platforms is their blockchain. Essentialy, Ethereum and Ethereum Classic are the same platform, but Ethereum underwent a hard fork due to a hacking incident. The Ethereum community decided to create a new blockchain that erased the results of the hack, resulting in Ethereum (ETH). A minority disagreed, insisting that the blockchain should never be altered, and continued to support the old chain, hence Ethereum Classic (ETC).
Is Ethereum more popular than Ethereum Classic?
Yes, Ethereum is more popular than Ethereum Classic. This can be attributed to the broader community support, which includes more developers who build upon its blockchain and a larger user base. Also, the value of Ethereum is much higher than Ethereum Classic, which is reflected in their market capitalization.
Can Ethereum Classic surpass Ethereum in popularity?
While theoretically possible, it is currently unlikely. As it stands now, Ethereum has more backing from the community and is widely recognized as the legit version. However, the future is unpredictable, and dynamics could change depending on various factors, such as changes in governance, technology upgrades, or shifts in user sentiment.
Related Entrepreneurship Terms
- Blockchain Technology
- Cryptocurrency
- Smart Contracts
- Decentralized Autonomous Organizations (DAO)
- Digital Asset
Sources for More Information
- Investopedia: A comprehensive source of financial information and education.
- Cointelegraph: A digital media platform that covers news about bitcoin, blockchain, and cryptocurrencies.
- Coindesk: A leading digital media outlet with its focus on cryptocurrency, blockchain technology, and fintech.
- Crypto Briefing: An independent cryptocurrency news and information site.
