What is Ethereum Classic (ETC) and How Does it Work?| KuCoin Crypto Gem Observer

2022/07/19 09:38:24

The crypto space has come a long way since the launch of Bitcoin (BTC), which offers decentralized peer-to-peer payments. Ethereum took this technology a notch higher after introducing smart contract functionality. However, the network underwent an incident that forced it to change its foundational principles.

Nonetheless, this change gave rise to the Ethereum Classic network, which maintained the original properties of Ethereum, making it a hybrid of sorts because it features the best properties of the Bitcoin and Ethereum networks.

What is Ethereum Classic?

Ethereum Classic is a global, open-source blockchain protocol that supports decentralized applications (dApps). While many might consider Ethereum Classic a clone of the second-largest crypto network, Ethereum (ETH), it is not. Ethereum Classic is the continuation of the original Ethereum blockchain, which Vitalik Buterin launched in July 2015.

Following the launch of Ethereum, users got excited about the network’s promise to support new applications and business models. Slock.it, a blockchain and Internet of Things (IoT) company, created a decentralized autonomous organization dubbed “The DAO” in April 2016. The DAO allowed users to contribute (ETH) to earn voting rights and a stake in the organization.

While The DAO quickly rose to prominence, it suffered an attack in June 2016, losing $60 million worth of ETH. As a result, the price of ETH plunged 50%, forcing the Ethereum Foundation to fork away from the original version of its blockchain on July 20, 2016.

Ethereum as we know it continued with the new version of the blockchain, which did not recognize the attack. While many believed the original blockchain would crash, it gained support from people that believed in preserving it for philosophical and economic reasons. The supporters rebranded the network to Ethereum Classic.

How Does Ethereum Classic Work?

Ethereum Classic is based on the principle “Code is Law.” Applications on the protocol are unstoppable because they run as programmed without downtime, censorship, or third-party interference.

By engaging with such applications, users accept the outcome that smart contracts deliver. To this end, the network has to compensate parties unsatisfied with a given outcome if the contract is poorly written or has a flaw. Ethereum Classic does not have bailouts, refunds, or do-overs, unless pre-programmed.

Ethereum Classic runs on a Proof-of-Work (PoW) consensus mechanism like BTC. The network’s security lies in the hands of miners who process transactions and generate blocks. Miners currently get 2.56 ETC for producing a block. Ethereum Classic slashes the mining reward by 20% after every 5,000,000 blocks.

Unlike Ethereum, which has started the process of migrating to a Proof-of-Stake (PoS) model, Ethereum Classic intends to leverage PoW indefinitely. Through this approach, the network hopes to maximize decentralization.

Who Created Ethereum Classic?

Ethereum Classic is the work of the Ethereum Foundation, a Swiss non-profit organization that focuses on supporting Ethereum and related technologies. At the time, the organization’s members included Vitalik Buterin, Mihai Alisie, Amir Chetrit, Charles Hoskinson, Anthony Di Iorio, Dr. Gavin Wood, Joseph Lubin, and Jeffrey Wilke.

Following the hard fork, Ethereum Classic supporters created Ethereumclassic.org to serve as a source of information. Five teams are responsible for maintaining the network. These are Ethereum Classic Consortium, ETC Cooperative, ETC Core, ETC Labs, and Gödel Labs. Other contributors include Parity Technologies, Grayscale, Commonwealth, POA Network, Chainsafe, Core Paper, Second State, and PegaSys.

What is ETC Used For?

ETC is the native token of the Ethereum Classic network. The coin currently ranks as the 29th-largest crypto by capitalization with a market cap of $1,997,823,572.

Through its fixed supply limit, ETC has the potential to serve as a digital store of value, similar to BTC and precious metals. By serving as a store of value, the token automatically positions itself as an inflation hedge.

Moreover, the token boasts features like scarcity, divisibility, fungibility, portability, verifiability, and recognizability, which optimize it for payments. ETC serves as the primary payment token within the Ethereum Classic ecosystem.

What Makes Ethereum Classic Unique?

While Ethereum and Ethereum Classic support smart contracts and run on the same base code, Ethereum Classic stands out because it runs on the foundational principles of Ethereum. These are immutability and decentralization.

Although Ethereum is transitioning to a PoS consensus model, Ethereum Classic intends to use PoW indefinitely. The protocol believes PoW is a true and tested consensus mechanism that offers Sovereign Grade Censorship Resistance.

Additionally, ETC has a fixed supply like BTC. On the other hand, ETH has a yearly limit of minting 18 million coins. However, it does not have a definite supply cap over time.

Closing Thoughts

Ethereum Classic’s allure is evident. The network features the same decentralization and immutability as Bitcoin. It also boasts smart contract functionality. As the world continues embracing decentralization, Ethereum Class has the potential to become the go-to blockchain network. ETC’s limited supply also positions the network for exponential growth as more people continue warming up to cryptocurrencies with real-life use cases.