Ethereum Vs Ethereum Classic
Should I invest in Ethereum or Ethereum Classic?
Ethereum vs Ethereum Classic. This is a decade-old debate that started after an ideological rift that split the second most popular cryptocurrency into two rival communities. While the story of Ethereum has somehow been shrouded by its current success, it still remains one of the most interesting events in cryptocurrency history.
The two terms might be confusing if you are new in the market. Why do the two coins use the same name? Are there any differences between the two? Which is the better investment?
In this guide, we will explain as simply as possible how two rival cryptocurrencies came to use the same name and which is the better addition to your investment portfolio.
Before that, let’s journey back to the beginning, where it all started.
Ethereum Vs Ethereum Classic: The Original Story
As you might have already guessed, Ethereum and Ethereum Classic were once one cryptocurrency. The Ethereum Platform came into existence around 2013 when the founder Vitalik Buterin felt the need to have a cryptocurrency that uses smart contracts and allows other developers to build applications based on its blockchain.
Vitalik pitched this idea to Bitcoin, but he was not taken seriously, so he decided to develop an alternate cryptocurrency known as Ethereum. To get started, Vitalik held one of the largest crypto fundraisings. He was able to raise 25,000 BTC at a time when Bitcoin’s market cap stood at a mere $17 million.
Now, the real story begins in 2016 when a crypto hack that would forever change the course of Ethereum occurred. The hack was caused by a popular yet highly vulnerable feature of Ethereum known as the DAO.
About the Decentralized Autonomous Organization (DAO)
To understand how the hacker(s) capitalized on the DAO vulnerability to steal millions of Ether from Ethereum, let’s revisit the idea of smart contracts.
After the successful 2014 crowdsale, Vitalik was able to actualize his idea of a platform running on smart contracts and where other developers could create what is now known as decentralized applications. Since the crypto market was still young at the time and not many mainstream investors were willing to bet their money on the highly volatile crypto market, the Ethereum community came up with a way to fund new dApps created on their platform.
That is when the Decentralized Autonomous Organization was born.
How the DAO Worked
The DAO was ideally a decentralized crowdfunding platform that allowed investors to back and reap from the success of dApps built on Ethereum. The Kickstarter was built on the Ethereum blockchain and was run using a set of smart contracts.
In July 2016, the DAO raised $150 million, which was equivalent to about 12.7 million Ether tokens. Now, to take part in the DAO fundraising, you first had to buy DAO tokens using Ether. You could then use your tokens to support a dApp that you thought would be more successful.
Only applications that were supported by more than 20% of the Ethereum community were eligible for funding. These applications would then be given a share of the funds raised through the DAO to help develop themselves further.
Obviously, the DAO was an alluring idea and one that significantly helped Ethereum grow in the early days. However, the project had several glaring security flaws that are essentially the genesis of the now-famous Ethereum split.
The problem was with a DAO feature known the the “Split Function”. This function was created to enable investors who decided that they no longer wanted to back a particular project to withdraw their support. After withdrawing your support, you would be refunded your Ether investment and had the option to create a smaller version of the DAO called “Child DAO”.
However, there was a small catch. After the refund, you wouldn’t be able to access your funds for 28 days, even though the public ledger was updated to indicate the refund. Everything went well until a hacker decided to exploit a flaw in the Split function and stole 11.5 million ETH, which was worth about $50 million at the time.
The Problem with DAO
Here is what happened…
As we already mentioned, the refund recorded in the public ledger even though the owner couldn’t access it for 28 days. The hackers exploited a loophole in DAO’s code whereby the same DAO tokens were repeatedly refunded without the transaction being recorded in the public ledger.
For some reason, the DAO developers didn’t factor in the possibility of a recursive call triggered by the refunds. This allowed the hacker to repeatedly trigger the split function and cause the network to repeatedly refund Ether for the same DAO tokens without recording the transaction in the public ledger.
Now, the probable fix for this problem is what brought about the split that led to the existence of both Ethereum and Ethereum Classic. The community split into two, each with its own solution:
- The first group wanted to implement a hard fork that would reverse the illegitimate transaction and give the stolen Ether back to their rightful owners.
- The second group wanted to do nothing. This decision was based on the fact that cryptocurrencies were immutable and should not be manipulated. A hard fork would rubbish the very essence of decentralization and cause a moral hazard that would be the backbone of future illegal hard forks.
After a heated disagreement between the two groups, a vote was taken on July 15, 2016, and 87% of the Ethereum community voted in favour of the hard fork. To prevent further rivalry between the two groups, the Ethereum network was split into two; the original became Ethereum Classic while the rival group became just Ethereum.
Most of the community followed the new Ethereum leaving the original Ethereum Classic in the cold.
Ethereum Classic Vs Ethereum: What are the Differences?
While the two cryptocurrencies are based on the same technology, they have a few differences based on the way both have developed over the years. In the early days after the split, choosing between ETH and ETC was largely informed by an ideological debate.
However, after many years of operating independently, the two coins have developed differing features making it easy for investors to choose. Generally, ETH and ETC are still similar on a functional level since they are built on the same blockchain structure.
However, the following differences have emerged after the hard fork:
- Community - After the split, most of the community members chose ETH over ETC. The Ethereum community has grown even bigger while that of ETC continues to reduce.
- Supply and Distribution - Although the exact number of Ethereum supply is unknown, close sources say it is about 112 million ETH. On the other hand, ETC has only about 118,000 tokens in circulation, according to data from CoinMarketCap.
- Transaction speeds - Both tokens are faster than Bitcoin at less than 15 transactions per second speed. However, the ETH 2.0 update makes Ethereum much faster than ETC.
- dApps Support- Ethereum allows the creation of dApps on its platform while the original ETC does not, after many developers abandoned it for the much vibrant ETH.
Ethereum Classic Vs Ethereum: Which is the Better Investment?
To some people, the question of which to invest in between ETH and ETC is obvious. To others, it is still a dilemma. As we have seen from the story above, the rival Ethereum is the more powerful of the two. That makes it the obvious choice when it comes to investment.
However, there are other factors beyond superiority that might make ETH less appealing as an investment when compared to ETC. While ETC has largely been deserted, there is still a small group that believes the hard fork betrayed the original quest of the blockchain technology; to prevent third-party manipulation.
According to this group, such hard forks will inspire more illegal updates for personal gains. On the other hand, the Ethereum community still believes that the hard fork was the right course of action since the hack would completely destroy investor confidence in Ether.
While the hard fork was hugely controversial, the ETH community drove a hard bargain and has emerged as the more popular option for investors. It is now solidly supported by the Enterprise Ethereum Alliance. The alliance comprises more than 200 members, mostly financial big fish like Citi Group and JP Morgan.
In 2017, Ethereum hosted a plethora of ICOs, which boosted its value further. The coin is supported by all major exchanges and is now at the epicentre of decentralized finance.
In comparison, ETC has seen a significant decline both in terms of community support and market capitalization. In February 2021, it was valued at around $890 million, while ETH stood at a staggering $164 billion valuation. This value is shaped in part by ETC’s decision to cap the supply of its coins at around $210 million while ETH has no limit on the amount of Ether that can be mined.
The Ethereum chain is also planning to update from proof-of-work (PoW) to proof-of-stake (PoS) algorithm in the Ethereum 2.0 update. This will make it faster and more efficient than ETC.
From these points alone, you can already see that ETH is the better investment. However, to further solidify your decision, let’s look at the price history and future price predictions of both coins.
Ethereum vs Ethereum Classic: Price History
Being the second-largest cryptocurrency in the world, Ethereum price is one of the most analyzed. Comparing these two coins is a bit interesting because there is a huge price gap from when they split.
Towards the end of 2015, Ethereum was trading at about $0.8757, according to data from CoinDesk. ETH then reached above $11 by the end of 2016 before finishing 2017 above $700.
In mid-January 2018, ETH attained an all-time high of $1,400 before crashing to below $100 at the end of the year. It grew back steadily and gained parabolic momentum in 2021 that drove it above $2000 in February.
As you can see, ETH has had one of the most dramatic growth over the years. The coin grew much quicker compared to other altcoins and was able to significantly grow against predictions.
This growth was in a big part powered by the excitement surrounding ICOs back then. As wannabe investors rushed to back the next big thing, the Ethereum platform became the center of attention as it was holding most of these ICOs.
ETC, on the other hand, has wandered away from its current all-time high of $44 and doesn’t seem to be ready to go back there any time soon. In mid-June 2018, as ETH was shining above $500, ETC was trading at around $15. By December 2018, it had plummeted to about $3 then grew again to almost $10 by June 2019.
From there, it dropped again to $3 before climbing to above $12 in January 2020. However, from March to December 2020, ETC traded below $8, then jumped to $15 in mid-February 2021.
As you can see, ETH has had more promising growth over the years compared to ETC. While ETC also joined the market-wide bull run that started in January this year, it still wasn’t able to go beyond its current all-time-high.
Ethereum Classic Vs Ethereum: Price Predictions
There is a glaring difference between the price predictions of ETH and that of ETC. While most experts believe that ETH will go above $35,000 in the coming years, ETC barely makes it past $50. With the current price of around $12, experts believe that the price of ETC will either rise very slowly or drop.
According to data from Longforecast.com, Ethereum might close this year at above $4,000 and go as high as $7,000 in mid-2022. Industry experts such as James Todaro and Simon Dedic believe that the coin will hit $9,000 sometime soon.
Brian Schuster is even more optimistic and believes that Ethereum will cross $100,000 by 2024. ETC, on the other hand, is expected to have a rather dismal growth. Longforecast.com predicts that the coin will be worth around $15 by the end of this year and less than $10 by the end of 2022.
There won’t be much difference between 2023 and 2025 as the price bounces between $7 and $15. Coin Price Forecast is a bit optimistic and believes that ETC will close this year at around $24 and even go as high as $52 by the end of 2025.
All in all, we can see there is a huge price difference between ETH and ETC both in terms of price history and predictions.
So, if you are looking for a more profitable option to invest in, Ethereum would be the obvious choice. For now, ETC looks like a big gamble, especially if you don’t have a lot of money to risk. While the growth of ETH is guaranteed, ETC might keep dropping as more people abandon it for the more promising Ethereum.
Ethereum or Ethereum Classic: Where Do Both Projects Stand Today?
From what we have already seen, it is evident that ETC is falling out of luck in the cryptocurrency market. As its user base and market cap continue to shrink, most people are now looking up to ETH as a better investment.
According to data from CoinDesk, ETC currently has a market cap of about $1.5 billion compared to ETH’s $207 billion. Newer smart contract projects like Cardano (ADA) and EOS have even surpassed ETC in terms of market capitalization.
While developers have largely deserted ETC and no successful dApps are built on it, ETH has helped several dApps attain profitability. According to the State of the DApps, there are currently 3,499 decentralized applications. 2,778 of these are running on Ethereum. On the other hand, Dapp.com reports that there are currently only eight dApps running on Ethereum Classic.
Ethereum is currently also ahead in terms of daily transaction volumes, with about $32.6 billion in the last 24 hours (at the time of writing) compared to ETC’s $1.05 billion.
All things considered, Ethereum emerges as the stronger project between the two. If the coin succeeds in transitioning to the proof-of-stake consensus, it will see even wider adoption and allow it to dramatically scale its transactions. ETC has no magnetic innovations to attract investors and will remain largely deserted.
Conclusion: What’s Next for Ethereum and Ethereum Classic?
Ethereum is set to achieve new milestones these coming years. The crypto is already partnering with major financial players in a bid to boost its adoption and probably double the valuation in the next two years.
Visa recently announced that it would start settling transactions with crypto partners in USDC via the Ethereum blockchain. Additionally, the Chicago Mercantile Exchange (CME) officially launched Ethereum futures in February. This is a big deal for the future of Ethereum, considering that CME is the largest derivatives platform in the world. This will allow investors to trade on the future price of the Ethereum asset without the need to buy and own it.
The future of Ethereum Classic is still murky and unpredictable. After a series of 51% attacks, the ETC community keeps shrinking. Developers are running away, and the once vibrant cryptocurrency is left to wander alone in the dark. However, all might not be lost for ETC. Just recently, Grayscale Investments, the digital currency asset manager, announced that it would be adding Ethereum Classic to its investment products. So, maybe there is still a ray of hope for the ETC.
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