There are two types of Ethereum on the market: Ethereum and Ethereum Classic. Ethereum was proposed in late 2013 by Vitalik Buterin, and the system went live on July 2015. Due to a hack, the community split into two distinct camps which led to the formation of the two separate blockchains.
What Is Ethereum?
Ethereum is a blockchain forked from Ethereum Classic, which is a platform for application development and smart contract deployment.
A smart contract is a script stored in the blockchain which self-executes the contract’s terms. The execution process is controlled and enforced by the blockchain. These smart contracts enforce and automate transactions and applications that run on Ethereum. These applications, known as dApps (decentralized apps) can be used for a variety of functionalities and purposes.
What Is Ethereum Classic?
Ethereum Classic is an open-source, public, blockchain that has the same deployment features as Ethereum. The currency resulted from a fork that occurred on the original Ethereum after The DAO hard fork in 2016, which took place one year after Ethereum launched.
Ethereum Classic also runs a decentralized, Turing-complete virtual machine, the Ethereum Virtual Machine (EVM) as well as smart contract development and functionalities.
Ethereum Classic, known as “classic Ether”, can be purchased nowadays on most cryptocurrency exchanges. Gas is an internal transaction pricing mechanism used to mitigate spam on the network and distribute resources correspondingly to the incentive offered by the request.
The Origins of ETH- The DAO Hack
In May 2016, The DAO, a venture capital fund created on Ethereum, raised a huge sum of money- $168 million- which was to be used in smart contract development.
To exit the DAO, the user had to send a request and the splitting function would then give back to the user their Ether in exchange for their DAO tokens, afterward updating the ledger with the transaction and the internal token balance.
A hacker exploited a vulnerability and created a recursive function in the request, allowing him to repeat the request multiple times for the same DAO tokens before the transaction got a chance to be registered and updated.
In June, the hacker managed to steal 3.6 million Ether (~ $50 million at that time) from The DAO. At the time, the DAO had a percentage of nearly 14% of the total supply of Ethereum. But the hacker couldn’t access the funds immediately, as DAO’s smart contract didn’t allow any invested money to be transferred for 28 days.
Nearly a third of the DAO’s initial funds were stolen, which prompted the community to look for a quick solution to solve this problem.
The proposed solution was a fork, or to stop the blockchain and create a new one from zero. The new blockchain is now known as Ethereum with its coin ETH. Ethereum Classic is the first Ethereum which still uses the original blockchain.
The decision to fork caused a rift in the community, and even though most of them voted for the fork, a small percentage (roughly 10%) of people refused to make the upgrade. Thus, the Ethereum chain forked, and the new ETH users were able to have the $50 million refunded.
Ultimately, all of Ethereum’s developers – including founders Vitalik Buterin and Gavin Wood – left the original blockchain and moved to Ethereum.
Nevertheless, Ethereum Classic is still supported by those who believe in the immutability of blockchain technology, among them being Barry Silbert, the CEO of Grayscale.
ETC vs ETH – The Differences
Ethereum runs on a brand new blockchain, and the vast majority of miners, users, and protocol from the previous version of Ethereum use this new version.
Ethereum Classic functions on the same protocol having similar functionalities, but it does have some distinct differences in its community.
Ethereum has a different ideological approach, as it wants to grow and possibly have more hard forks in the future, whereas the ETC community believes in the immutability of blockchain above everything else.
The leaders of the ETH community are far more public as opposed to those that back up ETC. The Ethereum Alliance, which is comprised out of high-profile firms such as Accenture, JP Morgan, Microsoft, and UBS, has given more credibility to ETH than ETC.
The main issue with Ethereum Classic is that it lacks backward compatibility with the Ethereum hard fork. All of Ethereum’s main developers and founding team still develop updates and lead marketing for Ethereum, leaving ETC out of the loop.
Another major difference lies in their consensus protocol. Ethereum switched from its initial proof of work (PoW) to a proof of stake (PoS) algorithm, while ETC keeps using its PoW algorithm.
It can be debated that both ETH and ETC have their strengths and weaknesses, but ETH is definitely in the lead as it has a market cap of nearly $21 billion, whereas ETC has one of around $1 billion.
Ethereum is the forked version of Ethereum Classic, but even though they have many of the same features and use cases, ETH has managed to gain more support and traction than the original blockchain.