"What's the difference between Ethereum and Ethereum Classic?" is the question dominating Google search as Ethereum Classic (ETC) suddenly jumps to unprecedented heights.
Ethereum Classic is not to be confused with Ethereum (ETH). They are similar, but they're not the same. Ethereum Classic is an offshoot of Ethereum. Interestingly, Ethereum Classic was born out of a contentious 2016 debate after a malicious hacker stole $60 million worth of ether.
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After plateauing for several years, Ethereum Classic skyrocketed to a whopping $114 on May 5. For years, ETC was outshone by its pricier twin ETH, but now, Ethereum Classic is getting a wave of media attention for its sudden spike in price.
Perhaps you've spotted Ethereum Classic on Coinbase and you're confused about how it differs from Ethereum. Or maybe you've seen it trend on Twitter and you have no idea what ETC is. Either way, if you're interested in Ethereum Classic, but are unsure how it differs from Ethereum, stick around for this in-depth explainer that elucidates their dissimilarities.
What's the difference between Ethereum and Ethereum Classic?
Ethereum Classic is a spin-off of Ethereum. Ethereum Classic sprouted from Ethereum as a result of the Decentralized Autonomous Organization (DAO) hack. The DAO, launched on the Ethereum blockchain in 2016, was a project that operated liked a venture-capital fund for the crypto space.
The main concept of the DAO is that investors' funds could be pooled together with Ethereum-based DAO tokens, and folks could submit and pitch their ideas to the Ethereum community.
"If a proposal is approved by a quorum of 20% of all tokens, the DAO automatically transfers Ether to the smart contract that represents the proposal. Any Ether generated from the proposals funded by the DAO would be returned to participating investors as rewards," blockchain expert Osman Gazi Güçlütürk said.
Many believed DAO was a revolutionary concept; it raised $150 million worth of ETH during a crowdfunding effort. Shortly after, a hacker stole $60 million worth of ETH from DAO. Ouch! As a result, the Ethereum community was split on how to move forward from the devastating cybersecurity disaster.
Two schools of thought were formed. One faction wanted to reverse the transaction on Ethereum's hacked blockchain. The other side said hell no — reversing the transaction counteracts one of the core maxims of blockchain technology, which condemns tampering. In the end, Ethereum shareholders voted to reverse the transaction; this blockchain is today's ETH.
There was also a subset of the Ethereum community that wanted to keep the ETH blockchain as is — hacker-tarnished and all. This fork is now known as Ethereum Classic.
Another difference is, of course, their price tags. As of this writing, Ethereum has surpassed $4,000 and Ethereum Classic is $122. As such, as Ethereum's popularity grows, some are pivoting toward ETC since it is almost 30 times cheaper.
How are Ethereum Classic and Ethereum similar?
Developers can use Ethereum Classic and Ethereum to run decentralized applications (dApps). What are dApps? They're digital applications or programs that run on the Ethereum blockchain. Decentralized apps are a new trend in the cryptocurrency world that use a peer-to-peer network of computers to host apps while kicking out dominating central entities (e.g. Google) that attempt to control everyone and anything.
Decentralized apps also use "smart contract" technology, which is featured on Ethereum Classic and Ethereum. A smart contract is a line of code designed to carry out a set of instructions once certain terms and conditions are met. The heart of smart contract code lies in the following statement: "If this happens, then do this."
Smart contracts technically exist on other platforms. For example, if you want to purchase a scarf on eBay, your bank's software will only release the funds if the amount in your bank account is greater than the price of the scarf. The same process occurs with Ethereum's smart contracts, except there is no middleman (e.g. a bank, governmental body, central authority). It all falls on the blockchain — the peer-to-peer network.
"Smart contracts are designed to enforce the terms of an agreement—whether this is an exchange of cryptocurrencies, tokenized rights, proof of identity, or practically anything else," Ethereum founder Vitalik Buterin explained.
The core difference between Ethereum and Ethereum Classic is ideology. The latter is committed to preserving the core code of the original Ethereum blockchain. For those who see value in safeguarding the unadulterated historical record of Ethereum, they believe that Ethereum Classic is a worthy investment.
Note: This is not financial advice. Digital assets are extremely volatile, so buy at your own risk.