Ethereum vs Ethereum Classic: What’s the difference?
Ever wonder why these two different blockchains have such similar names? This brief explainer answers all your questions around ETH and ETC.
By Mohammad Musharraf
Many who are new to crypto don’t understand the difference between Ethereum and Ethereum Classic. There tends to be a lot of confusion not just around which digital asset is a better investment, but also what differentiates these two blockchains in the first place.
This article provides a detailed side-by-side comparison of Ethereum and Ethereum Classic, highlighting their similarities, differences and future trajectories.
Before diving into a comparative analysis, it is important to understand why two separate blockchains with very similar names exist. To explain that, readers need to revisit one of the most important and controversial events in Ethereum’s history…
The 2016 DAO hack
A brief glimpse into the history of the Ethereum protocol will help readers grasp the implications of the DAO hack. In 2013, Vitalik Buterin first proposed the idea of a programming language for automating on-chain tasks and building applications on the blockchain.
He published the original Ethereum blockchain whitepaper in 2014, bootstrapping $17 million for the network. The original version of the Ethereum network went live in 2015 and everything ran smoothly for a year.
The 2016 launch of the decentralized autonomous organization known as “The DAO”, however, changed things for the new blockchain. The DAO was a decentralized venture capital fund enabling retail investor accounts to crowdfund projects on the Ethereum network. It successfully raised $150 million by selling DAO tokens. Retail clients could use the tokens to vote and pledge their support for decentralized apps (dApps) on the network.
Unfortunately, DAO’s smart contract code had a security vulnerability known as the ‘Split Function’. Originally, the smart contract included this feature to enable investors to withdraw their investment if they weren’t satisfied with a project. If someone invoked the function, users would get their ETH back, and the smart contract would update the public ledger accordingly.
Due to this security flaw, malicious hackers could receive money without updating the transaction history. On June 17, 2016, hackers exploited the code and drained $50 million from the project. This was a big blow to the nascent Ethereum network and the original owners of Ethereum had to do something about their stolen funds.
The consequence of The DAO hack: Ethereum hard fork
Vitalik Buterin and other project developers felt that regaining the confidence of the Ethereum community was necessary. Users could only trust the Ethereum ecosystem again if they retrieved their money.
The network’s developers initially proposed a soft fork so that the current and updated versions are mutually compatible. But this didn’t materialize due to legal and technical issues. Instead, the network arrived at a consensus to hard fork Ethereum, which meant the creation of a new and backward-incompatible blockchain. Ethereum vs. Ethereum Classic thus became an either / or choice.
The decision to hard fork the original Ethereum blockchain led to an ideological debate within the cryptocurrency community. Some argued that “code is law” and the immutability of the blockchain is sacrosanct. The hack should therefore remain part of the transaction history. The counterargument was that retrieving the money is of paramount importance and transactions should be altered if necessary.
After a heated debate, the decision was put to a vote. The community voted in favor of the hard fork and the developers implemented it on July 20, 2016, after the 192,000th block. Thus, a single blockchain forked to become two networks.
The pre-forked version of the blockchain came to be known as the Ethereum Classic Network, which contained the record of the hack. The Ethereum blockchain reversed the hack and returned the money to its users.
Ethereum Classic (ETC) in a nutshell
Ethereum Classic emerged as the unaltered version of Ethereum and derived its name after forking the network. Anonymous developers vehemently upheld the immutability of blockchain technology and convinced others to maintain the transaction record of old Ethereum.
The open-source and decentralized Ethereum Classic interface supports decentralized applications and runs on the Proof-of-Work consensus mechanism. Classic users rely on the native ETC cryptocurrency to power transactions on the platform.
Ethereum (ETH) in a nutshell
Ethereum compromised on the immutability principle to return money to its users after forking the blockchain. Vitalik Buterin and the Ethereum Foundation garnered support for the platform, which eventually became famous in the crypto community. Ethereum supports dApps running on smart contracts and has become the main hub for decentralized finance.
Although Ethereum currently uses the Proof-of-Work consensus protocol, it is already in the process of migrating to a Proof-of-Stake system. The popular cryptocurrency Ether (ETH) powers the Ethereum platform.
Ethereum vs Ethereum Classic: A comparison
Both Ethereum and Ethereum Classic function as a store of value, facilitating trades and exchanges with other cryptocurrencies. They differ, however, on factors like minting limit, market cap, and consensus protocol.
Decentralized blockchain technology
Ethereum continues to be a decentralized protocol similar to Ethereum Classic with its globally distributed blockchain nodes that eliminate single points of failure and process transactions 24/7.
Smart Contract functionality
Both Ethereum and Ethereum Classic automate dApps and financial decisions using smart contracts. A smart contract is essentially self-executing code that can perform actions based on predefined conditions.
Ethereum and Ethereum Classic put great emphasis on protecting the privacy of their users. While public keys are open for everyone, private keys remain under the user's exclusive control. Users are also free to use aliases instead of their name and other details, preserving their anonymity while carrying out transactions.
According to the monetary policy of Ethereum, there is no hard cap on its supply, which can increase indefinitely. However, developers have programmed the supply of Ethereum to increase by 4.5% only every year.
The monetary policy of Ethereum Classic, on the other hand, stipulates a fixed supply of its tokens. There can only ever be 230 million Ethereum Classic tokens, which is meant to ensure a fair price.
At the time of writing, a single ETH costs just under $2,000 (remember that prices are subject to constant change). It is the second-largest cryptocurrency with a market cap of $324 billion and a circulating supply of over 120 million tokens. Ethereum reached an all-time high of $4,892 on November 16, 2021.
Ethereum Classic has a value of just $22 at the time of writing. It ranks 32 by market cap ($3 billion) with a circulating supply of over 134 million tokens. Ethereum Classic reached its all-time high of $176 on May 6, 2021.
Ethereum Classic runs on the Proof-of-Work consensus security mechanism. Through this process, miners solve complex mathematical problems using energy-intensive equipment to gain rights for validating transactions on the blockchain. By successfully validating and adding new blocks, they get ETC tokens as rewards.
Ethereum currently also runs on the Proof-of-Work consensus, but is making a shift toward the Proof-of-Stake mechanism where nodes must stake Ether tokens to become validators. Staking ensures that validators won’t add any dubious transaction to a block. This shift from PoW to PoS is known as the Merge and will take place by Q3/Q4 2022.
Should I invest in Ethereum or Ethereum Classic?
Now that you know the similarities and differences between Ethereum and Ethereum Classic, the obvious question is where to put your money.
As the above section amply demonstrates, Ethereum Classic's valuation is negligible compared to Ethereum’s. Consequently, Ethereum has emerged as one of the most successful blockchains for building DeFi apps and launching NFT projects.
As of April 3rd, the total value locked (TVL) in DeFi rose to $231 billion, with Ethereum dominating the market. Data shows that Ethereum controls over 54% of the DeFi TVL with over $125 billion. An additional $22 billion TVL is in cross-chain bridges to Ethereum.
On the other hand, Ethereum NFTs are also setting new records with a new monthly sale record of over $3.5 billion for April. It has also set a one-day record of $476 million in Ethereum NFTs on the Opensea marketplace.
The data speaks for itself. Ethereum is currently one of the best ecosystems for investment. However, that doesn’t mean Ethereum Classic is no good. With a strong community that firmly believes in the principles of immutability, Ethereum Classic is still a solid asset.
Earning interest in Ethereum and Ethereum Classic
One way to earn interest is to deposit your Ethereum and Ethereum Classic tokens on lending platforms. These platforms use the funds for loans, offering you a competitive interest rate for your deposit. Despite relative stability, however, interest rates may fluctuate depending on the supply-demand ratio.
Ethereum users can also stake ETH to earn interest. You can choose to stake Ethereum independently using an Ethereum wallet or do so on a crypto exchange. You will need a minimum of 32 ETH to independently participate in staking, but for exchanges there is no fixed staking amount since they aggregate the funds from multiple investors.
Ethereum vs Ethereum Classic: Final Thoughts
Ethereum is not the only network to have undergone forking. The Bitcoin community also faced a similar dilemma in 2017 when it forked and Bitcoin Cash was born. The forking of the Ethereum blockchain is therefore not an exceptional incident in crypto history, and it didn’t permanently solve Ethereum’s problems.
For instance, Ethereum suffers from scalability issues and causes environmental damage, and Ethereum Classic has been subject to three 51% attacks in a month, significantly hurting its reputation. Nevertheless, both blockchains have adopted measures to rectify these flaws.
With a better understanding of ‘immutability politics’, Ethereum Classic implemented the Atlantis hard fork in 2019 to improve its compatibility with Ethereum. Soon after, it also implemented the Agharta hard fork to ensure complete compatibility between ETH and ETC.
Similarly, Ethereum 2.0 is working to upgrade to a PoS network for enhanced scalability, speed, low gas, and negligible carbon emissions. With these modifications, Ethereum will become far more efficient than it is right now.
Overall, we can expect better communication and interaction between Ethereum and Ethereum Classic, with both chains contributing to the crypto industry’s future.
How to buy ETH and ETC
Now that you have a good understanding of Ethereum and Ethereum Classic, you might want to buy some.
You can purchase Ethereum and Ethereum Classic directly on MoonPay using a credit/debit card, Apple Pay, Samsung Pay, or Google Pay for as little as $30. Just follow these four simple steps to purchase:
Enter the amount you wish to purchase in ETH / ETC or fiat currency
Enter your wallet address
Verify your email ID and basic personal info
Make a purchase using your preferred payment method