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Ethereum (ETH) vs. Ethereum Classic (ETC): The Differences (2021)

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In the world of cryptocurrency, there’s either Bitcoin or altcoins. While Ethereum (ETH) has been thriving, Ethereum Classic (ETC) is not far behind. Of course, cryptocurrencies are volatile. Still, these two popular altcoins remain the preferred choice for many crypto traders and investors. While they both share the word ‘Ethereum,’ they are indeed different. When comparing Etherem vs Ethereum Classic side-by-side, here are the key differences they possess, including the concept, characteristics, purpose, and future projections of ETH and the ETC.

What Is Ethereum (ETH)?

Ethereum represents the world’s most used blockchain-based platform that allows the creation of decentralized apps (DApps) backed by smart contracts. A smart contract is a code designed to automatically execute an action, such as automatically transferring funds whenever specific conditions are met. Ultimately, what distinguishes Ethereum from the rest is its ability to allow developers to write code that controls digital value, runs exactly as programmed.

Proposed by Vitalik Buterin in 2013, the network quickly gained popularity among developers soon after it was launched on July 30th, 2015. Today, Ethereum remains one of the most robust cryptocurrencies, and it continues to expand its horizons for the public without relying on any single authority. 

What Is Ethereum Classic (ETC)?

Ethereum Classic is a hard fork of the source platform Ethereum which occurred in 2016 after the hack of the Ethereum-based Decentralized Autonomous Organization (DAO). The community got split into two opposing camps, and the same happened to the project as well. Let’s take a closer look at how such an event came into existence. 

The History of The Decentralized Autonomous Organization (DAO)

Here’s how ETC stands behind its creation. In 2016, DAO was one of the most popular Ethereum-based hedge funds that attracted numerous investors and startups thanks to the ease of use. 

With DAO, startups are picked based on their potentials, and whoever passed the reviewed process will be white-listed. However, the startup needed to gain at least 20% of the votes to access the funding.

The DAO concept boasts of simplicity and autonomy. Hence, DAO gained traction from the public soon after its roll-out. In the first month since the launch, the fund was raised more than $150 million. 

The DAO Hack and The Community Split

Alas, the general euphoria couldn’t have lasted for too long. On June 17th, 2016, an unknown hacker for a group of hackers discovered and exploited a security breach that allowed them to withdraw $50 million from the fund. As soon as the news spread to the broad publicity, the cryptocurrency market’s overall capitalization dropped from $15 billion to less than $11 billion in a few days.

In fact, some people believe that the attack could hardly consider a hack as it’s so flawed and vulnerable to exploits with some basic technical skills. For those investors who wanted to exit the DAO, the so-called “Split function” exposed an enormous loophole in the whole system. Instead of simply requesting a refund, the hacker launched a recursive function that repeated the request before the initial transaction was registered on the blockchain.

The community was furious and demanded Vitalik Buterin, Ethereum’s creator, to resolve the situation. Eventually, he gave in to the pressure and reverted all the transactions after the first theft occurred. 

Ethereum Classic

The Birth of Ethereum Classic

The reversal of the Ethereum network was unprecedented in the whole history of cryptocurrencies. What Vitalik did indeed go against the main idea of blockchain, which implied the irreversibility of transactions

Of course, the hacks may be disastrous, but it paved the way for the idea to create a hard fork via Ethereum split. By gathering the developers internationally, they managed to come together and develop the concept further. And that is how Ethereum Classic was born. “Code is law” – this is the motto that ETC creators kept in mind.

On the contrary to any other projects, the community fully managed the project from the very beginning. A week after the official website was launched, the ETC was listed by Poloniex exchange, signifying that other crypto markets officially acknowledged the new cryptocurrency. 

The Main Purpose of ETH and ETC

When comparing Ethereum vs Ethereum Classic, Ethereum positions itself as a global, open-source platform for decentralized applications. It aims to get adopted at a larger scale and to improve the network to serve the ever-growing number of users.

Ethereum Classic, on the other hand, aims to provide a permissionless way to manage digital assets and enable money transfer by smart contracts in the same way that Ethereum did at its early stages. Unlike the father chain, ETC’s goal is to preserve the systems in the classic state without any significant changes.

Technical Characteristics of Ethereum Classic

When comparing ETC vs. ETH, it’s worth noting the following technical aspects of the first coin. Launched as a hard fork of Ethereum, its derivative Ethereum Classic bears the same characteristics that the platform had in its initial version. The platform is still relies oon smart contracts that automatically transfer funds from one party to another. But only once the deal’s prescribed conditions are met. 

The new blocks of the network are generated with the Proof of Work (PoW) consensus algorithm. That miners receive rewards for their contribution. To initiate the transaction from one user to another, the sender must pay the gas fee to the network. 

The Attacks on Ethereum Classic

Throughout its history, Ethereum Classic has become a victim to a 51% attack several times. Such a type of attack implies taking control of more than half of the network, allowing attackers to double-spend the funds. 

In early 2019, Ethereum Classic experienced the first 51% attack. The group of entities managed to double-spend almost $500k worth of ETC at that time. In August 2020, the same attack happened not once but three times in a row and prompted the developers to step away from the ‘classic’ version finally. Subsequently, the network implements Mess Network Security Solution as a means of defense. The innovation was implemented on October 11th, 2020, at the block height of 11,380,000.

Ethereum vs Ethereum Classic: The Retrospective

As Bitcoin still dominates the market by its capitalization, all the cryptocurrencies, including ETH and ETC, both follow its pattern, simplifying their price prediction. At the end of 2017, Bitcoin was charging towards its historical at that time. While the same happened to Ethereum and Ethereum Classic.

Ethereum all-time price chart. Source: CoinMarketCap

Bitcoin reached its maximum of almost $20k for 1 BTC on December 17th, 2017. Ethereum and all other altcoins were a little bit behind and reached their peak only on January 13th, 2018, as 1 ETH went at a price of more than $1,432. Ethereum Classic reached its historical maximum on December 21st as the coin was traded at $47 on that day. Until late 2020, Neither ETH nor ETC had ever hit its record since that point. However, ETH’s price rallied after its roll-out of Ethereum 2.0, reaching an all-time high of just over $2,000 in February 2021.

What is Revolving Around ETH and ETC Now?

The ICO boom in 2017 revealed the lack of scalability as the main problem of Ethereum. With the maximum capacity of 19 transactions per second and the security issues that the platform faced in the past, it could no longer meet the market demand and provide the required security and decentralization level. That prompted Vitalik Buterin to set a new goal to switch Ethereum from PoW to PoS consensus. Mainly to resolve the scalability and sustainability issues.

Beyond Vitalik’s support of sending $1.4M Ether to support the ETH2.0, a few other teams such as Parity Technologies and Pegasys, Ethereum Foundation has been steadily moving towards its goal. And finally upgrading from ETH1.0 to Ethereum 2.0 at the end of 2020. Ethereum 2.0 Phase 0 was released on December 1st 2020, with the Beacon chain as the key innovation enabling staking. And the subsequent Phase 1 will go live somewhere in 2021. A few days after the launch, more than 1 million of ether was staked in the system.

Ethereum Events and Upcoming Projects

The next phases in Ethereum 2.0 development moving on from Phase 0 to Phase 1, and 2 would mean the final switch to the long-awaited stage called “Serenity.” This upgrade aims to resolve the scalability problems that Ethereum struggled with and contribute to the system’s security and efficiency. 

Once it comes to Phase 1, the ‘sharding’ technology will then be available for developers. It implies breaking the network into small parts or shards that will process many more transactions in parallel.

The final Phase 2 of state execution would help to merge Ethereum 1.0 with shards, and the Beacon chain is called ‘Docking.’ After the last phase, Ethereum’s last switch to a totally different consensus will be complete. And smart contracts will be reintroduced.

Ethereum Classic Projects

Despite the adherence to the classic unalterable version of Ethereum, the team standing behind ETC implements some improvements to their project’s security. In addition to the ‘Mess,’ Ethereum Classic also added the ‘Thanos’ upgrade in November 2020. It aims to adjust the mining algorithm from Ethash to Etchash.

In March 2020, the project partnered with Chainlink to integrate decentralized oracles into Ethereum Classic. Making it possible for the network to operate with the outside world’s data.

Ethereum vs. Ethereum Classic: The Differences

The only thing that is now similar for both projects is their decentralized essence, as both are based on blockchain. The differences are as follows:

Coins supply

Now that Ethereum has switched to the Proof of Stake consensus algorithm. Thus, its maximum supply is no longer limited by the mining processes. The total supply of Ethereum is equal to its circulating supply and is continuously changing as block producers release the new coins.

Ethereum Classic’s maximum supply has a limit of 210,700,000 coins.

Mining

As Ethereum Classic is based on the Proof of Work consensus algorithm, new coins are produced by mining. With the Proof of Stake consensus, Ethereum’s new coins are produced by minting.

Fees

The average transaction fee on Ethereum equals 0.0026 ETH while Ethereum Classic charges 0.0001 ETC.

Transaction speed

The block speed on Ethereum equals 13 sec while Ethereum Classic shows approximately the same results.

What Should Investors Consider for ETH and ETC?

If you think of investing in either of the two projects, you should consider the following aspects that significantly impact Ethereum Classic and Ethereum prices.

Scalability and Sustainability

Ethereum has a great community, and a few companies standing behind its development interested in improving its scalability. Once the final switch with Ethereum 2.0 is over, the platform will finally scale and serve the ever-growing demand from the end-users. The Ethereum 2.0 is expected to perform 100,000 transactions per second (TPS). And it’s possible through the implementation of shard chains.

Ethereum Classic, on the contrary, has never had such an intention as it remains in the same state that it was before the DAO hack. Its throughput index is still limited by 19 transactions per second. In which, it complicates its adoption, negatively influences the price, and makes Ethereum Classic’s future doubtful.

Public Acceptance

Ethereum remains one of the most popular blockchains due to its efficiency and deliverables for developers worldwide. However, Ethereum Classic doesn’t have such broad acceptance. Only a small part of the community has decided to move on with the classic approach while the others stood against it.

Market Capitalization

As of early 2021, Ethereum has been steadily keeping the 2nd position by the market capitalization giving away the first place to Bitcoin for the past few years. As many investors see the great potential of the project, they continue supporting it.

At the time of writing, Ethereum Classic is less popular as it hovers somewhere between the 60th and the 70th position. However, this could all change in the future.

The long or short term investment

With all the benefits that Ethereum 2.0 will provide developers, it has a much better chance for future growth. On the contrary, Ethereum Classic can be a better option for long-term investment. ETC price closely follows Bitcoin’s trail, which has slight opportunities to grow for any reasons apart from the overall market movements.

The Risk of Investing in ETH and ETC

Yes, Bitcoin is still dominating the crypto industry. That means that the prices of both ETH and ETC will closely follow its pattern. However, Ethereum has higher chances for mass adoption thanks to PoS and Sharding, which makes it a less risky asset.

Ethereum Classic, on the other hand, has repeatedly encountered blockchain attacks. And there are no promises that it completely steers away from the prying eyes. However, the plan for ‘Thanos’ hard fork on the network could be a much looking forward upgrade to mitigate some of the risks it possesses.

Is Ethereum a Better Investment than Ethereum Classic?

If you are looking for a long-term investment, Ethereum is definitely a better option. With the abundance of catalysts that could push ETH value upwards, including the increasing demand of the Decentralized Finance (DeFi) market, a decentralized exchange (DEX); ETH will still be a bullish trend, despite the stagnant against Bitcoin it may possess. 

However, Ethereum Classic may still be a good investment if you intend to diversify your crypto investment portfolio. Ultimately, the question you should be asking if ‘How much you’re willing to invest, how you want to invest, and what’s your ultimate goal?’

The Future for ETH and ETC in 2021

As Bitcoin hit new heights in early 2021, Ethereum did the same before consolidating slightly. However, with the bull run showing no sign of slowing down anytime soon, all other altcoins, including ETH and ETC, have high chances to follow the bullish trend.

The Bottom Line

Taking a closer dive on the difference between Ethereum vs Ethereum Classic does protrude a difference. Having emerged as a hard fork of Ethereum, its classic version has inherited its weaknesses. As the community runs the project, the chances for any significant improvements are minimal. Hence, making Ethereum a much better option for long-term investors.

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Disclaimer

This article is intended for and only to be used for reference purposes only. No such information provided through Bybit constitutes advice or a recommendation that any investment or trading strategy is suitable for any specific person. These forecasts are based on industry trends, circumstances involving clients, and other factors, and they involve risks, variables, and uncertainties. There is no guarantee presented or implied as to the accuracy of specific forecasts, projections, or predictive statements contained herein. Users of this article agree that Bybit does not take responsibility for any of your investment decisions. Please seek professional advice before trading.

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