What is Ethereum Classic (ETC)?
As the Ethereum platform is currently undergoing a complete transformation from proof of work to a proof of stake consensus mechanism, this has driven up the prices of ETH as many miners have been booted from the job and gas prices have decreased. This has left many investors wondering instead if they should turn towards the less expensive Ethereum Classic as an investment instead.
Ethereum Classic is a cryptocurrency and blockchain platform that functions in much of the same way as the Ethereum platform. The reason Ethereum Classic exists, however, is a story to behold, leaving many to question whether Ethereum Classic will truly have a space in the cryptocurrency world of the future.
If you are interested in maybe investing in Ethereum Classic, or are just wondering what it is, then keep reading to learn more about it and why it exists.
Where Did Ethereum Classic Come From?
Ethereum Classic is just like the Ethereum platform, and functions in the exact same way. This is because Ethereum Classic is actually just a fork of Ethereum. This fork occurred in 2016, following the hack of the Ethereum blockchain through a dapp known as DAO. When this hack occurred, there was a proposal to roll back the code in order to stop the hack and restore the coins that were stolen. Most of the miners voted to roll back the code. This portion of the blockchain that was rolled back is the current Ethereum blockchain.
There were many miners however who didn’t agree with this roll back. This is because they felt this violated the cryptocurrency policy of immutability. And by not rolling back the code, this caused the Ethereum blockchain to fork, and these people who voted not to change the code are known as the Ethereum Classic fork.
How Does Ethereum Classic Work?
As previously mentioned, the Ethereum Classic blockchain functions in the same way as the Ethereum blockchain does, with one caveat, the Ethereum Classic blockchain won’t be changing over to 2.0. This means that Ethereum Classic functions on a proof of work consensus mechanism and it will stay that way, even as the Ethereum blockchain transforms.
Many users are afraid that the upgrades to the Ethereum blockchain will make it much more user friendly (in cost and time) thus leaving Ethereum Classic behind in the dust. But, on the other hand, if something goes wrong with the Ethereum upgrade, and people don’t take to the proof of stake consensus mechanism as expected, then perhaps Ethereum Classic will have another day in the limelight and rise to take a place right next to Bitcoin.
Another thing that is unique about the Ethereum Classic platform when compared to Ethereum, is that Ethereum Classic has a hard cap on its currency. This cap is 210,700,000 ETC (Ethereum Classic) and it was put in place to attempt to make the cryptocurrency deflationary in the same way that Bitcoin is. Because of this protocol, called Gotham, the proof of work consensus mechanism runs on a program of diminishing block returns. This means that miners running nodes on the Ethereum Classic system will earn less ETC per block as the ceiling for ETC is approached.
Should You Invest in Ethereum Classic?
Because Ethereum Classic is basically just an older version of Ethereum, there is no reason not to invest in it. It is run on a familiar algorithm, with an execution that has proven in the past that it can draw users and find use cases within society. The only problem is, Ethereum Classic doesn’t have the following that Ethereum does. This means that it may never have as much use as the Ethereum 2.0 blockchain and therefore you may never get large returns on your investment.
So basically, if you want to invest in Ethereum Classic, go for it, as an investment in the cryptocurrency could be worthwhile. But you should only do this if you believe that Ethereum Classic will once again be popular and useful in society someday. If you think that Ethereum will always be superior, then it is a much better idea for you to put your money somewhere where you believe that it will increase in value because of the technology behind it.
Where Can You Store Ethereum Classic?
The cool thing about Ethereum Classic is that it is basically Ethereum, and, until recently, you could store it in any wallet that also supported Ethereum. Times are changing however, and many wallets have recently announced that the old protocol Ethereum Classic runs on will no longer be supported by their wallets. The biggest wallet to do so is the main Ethereum wallet, MyEtherWallet.
Don’t panic just yet though, as hardware wallets like Trezor and Ledger are still compatible with this cryptocurrency, as are several app-based wallets like Coinbase, Trust Wallet, and Exodus. So rest assured knowing that your Ethereum Classic can be stored safely in a wallet similar to those you would use for Ethereum.
Problems With Ethereum Classic
Unfortunately for the platform, the DAO hack of 2016 wasn’t the only hack carried out on the Ethereum Classic blockchain, and in 2019, another hack was executed that allowed the perpetrators to double spend the equivalent of $50,000 USD. Because this wasn’t the first attack of the platform, users began to fear that Ethereum Classic was lacking some security features that may be necessary for the platform to move forward. Thus, in 2020, Mess, a critical security update, was added to the Ethereum Classic software.
Hopefully this security update will help protect the platform against future hacks, but if you are a bit nervous about blockchains with security issues, Ethereum Classic’s track record speaks for itself and you should probably consider investing in a different cryptocurrency.
Overall, many alt coins don’t have a good rap in the cryptocurrency world, but Ethereum Classic seems like one of the good ones. Run on a protocol that is already familiar to users, Ethereum Classic could rise to one day be a large player in the cryptocurrency world. But until that day, Ethereum Classic is still a lesser-known alt coin and considered a risky investment—so be sure you vet the project thoroughly before parting with your hard-earned cash on an investment in Ethereum Classic.