The Event which Led to the Creation of Ethereum Classic (ETC)

• Ethereum and Ethereum Classic resulted due to a hard fork of the main chain in 2016.
• The hard fork was due to a compromise in the security of Ethereum’s DAO.

Back in July 2015, the Ethereum network was launched with the ambitious goal of overcoming the limitations of Bitcoin, which was then the largest cryptocurrency.  Ethereum’s visionary developer, Vitalik Buterin, decided to develop a platform that will have the capabilities of decentralised apps (dApps) and smart contracts.

With the introduction of the Ethereum Virtual Machine (EVM), developers gained access to a global computer that allowed them to write, test, and deploy their apps. The concept of smart contracts allowed them to automatically execute transactions when the conditions are met. This led to the creation of the billion-dollar worth of DeFi ecosystem which, with its ongoing innovations, continues to attract a growing user base and poses a potential threat to traditional financial systems.

The Emergence of Ethereum Classic

The Ethereum network we see at present was a result of a hard fork in the original chain, which led to the creation of two independent chains: Ethereum classic and Ethereum. Despite sharing the same underlying code, these chains display significant differences in terms of development and community support.

In 2016, the Decentralised Autonomous Organization (DAO) was launched, becoming a massive repository of Ethereum’s funds. Here, users could invest some of their ETH tokens and earn DAO tokens, which could be used in the governing process and influence the decisions of the ecosystem. At its peak, the fund had approximately $150 Million worth of ETH invested. 

A critical flaw in the DAO’s design allowed some malicious actors to exploit a loophole. They invested a small amount, requested a withdrawal, and repeated this process multiple times before the initial withdrawal was processed. This loophole enabled them to siphon off $50 million from the DAO funds, posing a severe threat to the entire Ethereum ecosystem.

However, this decision faced opposition from several community members who believed that altering the original ledger would violate the core principles of Ethereum. They argued that the malicious transactions should remain intact. The lack of consensus led to a hard fork, effectively creating two branches of the original chain.

The chain resulting from the hard fork was named Ethereum and had the support of the platform’s developers. In contrast, the original chain was given the name Ethereum Classic (ETC) to emphasise its adherence to the developers’ original vision. Consequently, the forked coin was referred to as ETH, and the original retained the ticker ETC. 

Since most of the developers fled to the forked chain, the classic remained underdeveloped. Although it has the same capabilities for NFTs, dApps, and smart contracts as the forked chain, the lack of community support has left it underdeveloped. 

Ethereum adopted the eco-friendly Proof of Stake (PoS) mechanism through The Merge in Sept 2022, however, Ethereum Classic still runs on the Proof of Work (PoW) mechanism. The total supply of Ether is not defined and there is no limitation on the number of tokens that can be minted, however, a restriction of 4.5% growth per year is imposed. ETC tokens have a maximum supply of 230 Million. 

Conclusion

Presently, Ethereum stands as the central hub of DeFi, hosting over 3000 dApps on its platform. In contrast, Ethereum Classic lags behind, with fewer than 100 dApps, and many of them are replicas of the original Ethereum dApps. The difference in community support and user adoption has led to Ethereum’s reputation as a highly secure network, while Ethereum Classic has already experienced several 51% attacks.