Ethereum Classic (ETC), like the legacy Ethereum, is an open-source, decentralised blockchain-based computing network that allows smart contracts to be executed without the need for censorship or third-party intervention.
It is clear from its name that Ethereum Classic has a connection to the more well-known Ethereum network, which necessitates a trip back in time to learn more about how they both came to be.
History of Ethereum Classic
By the time the proprietary Ethereum network launched in 2015, it was faced with a decentralised autonomous organisation (DAO) controversy as a result of a hack carried out on the network. Consequently, an improved version termed Ethereum Classic was forked from the main Ethereum network; it was dubbed ‘the DAO fork’.
For context, the DAO happens to be an Ethereum-based venture that managed to raise about $150 million through the sales of Ether during an initial coin offering (ICO) back in April 2016. Sadly, three months after the fundraising, an attacker leveraged a bug present in one of the DAO’s smart contracts and took advantage of the situation by stealing about 3.4 million Ether worth approximately $50 million at the time.
However, the Ethereum blockchain was eventually hard forked to recover the stolen funds, but not all parties agreed with this decision, which forced the network to split into two separate blockchains: Ethereum and Ethereum Classic.
As a matter of fact, Ethereum Classic was designed as a replica of the Ethereum main network, albeit, with a more defined monetary policy and inflation schedule. So what is Ethereum Classic?
What is Ethereum Classic?
Ethereum is an open-source decentralised blockchain network capable of hosting decentralised apps (dApps) and executing interfacing smart contracts.
Despite its scaling effort so far, ETC has to deal with various concerns, some of which include the fact that it is touted as the less authentic version of the two Ethereum variants.
Despite undergoing several software upgrades, ETC is still struggling with scalability issues. Notably, the network still maintains a throughput rate of 15 transactions per second (TPS), the same as the other variant before it was later upgraded.
Furthermore, while it prefers to uphold its decentralised attribute with a relatively average throughput rate, ETC is still faced with security challenges and has been hacked on three different occasions since the 2016 DAO fork.
How does Ethereum Classic work?
Ethereum Classic (ETC) operates almost exactly like the original Ethereum network itself as it retains most of the technical features and underlying infrastructure. Similarly, ETC relies on a blockchain that doesn’t only facilitate cryptocurrency transactions, but can also host other dApps.
Also, like its sister chain, ETC features an execution engine known as the Ethereum Virtual Machine or EVM that is optimised for processing smart contracts within the network rather than external as in the case of Bitcoin’s UTXO model.
Notably, every operation on the EVM requires computational effort and memory, which is where node operators and miners sweep right into the scene. Specifically, they contribute to the ETC network by making these resources available to application developers and network users in exchange for gas, which represents the transaction cost.
However, unlike the main Ethereum network, which has upgraded to proof-of-stake (PoS) from the default proof-of-work (PoW) consensus mechanism, ETC still uses a proof-of-work (PoW) consensus system, which contributes greatly to its scalability issue. Specifically, ETC uses Ethash as its Proof-of-Work (PoW) algorithm.
This way, it is able to generate a new block every 15 seconds on average. Currently, miners are rewarded with 3.2 ETC tokens for each new block generated, an amount that is lowered by 20% once the network has generated a total of five million blocks.
Ethereum Classic governance
All modifications or improvement on the ETC network undergo a process that is known as Ethereum Classic Improvement Proposal or ECIP. The ECIP is the standardised model for proposing changes to the ETC network.
That said, anyone can submit code changes dubbed ECIP which, like the EIP and BIP systems used in Ethereum and Bitcoin respectively, aim to modify the core protocol or the governing process itself.
When a proposal is submitted, the author must champion it to the point of success, which includes responding to questions asked by the network stakeholders.
Interestingly, unlike the majority of the blockchain system out there, ETC does not require on-chain voting to make changes, implying that there is no need to stake any token for the same purpose as with most decentralised networks.
Ethereum Classic token – ETC token
ETC token is the native currency of Ethereum Classic, and it is used to pay for the decentralised computation when using the network. The ERC-20 token also facilitates the execution of smart contracts in the form of gas fees paid by developers and end-users.
Furthermore, unlike the main Ethereum, the ETC token is less susceptible to inflation since it implements a monetary policy that establishes a predictable, deflationary emission schedule with a fixed supply cap. These attributes are intended to make ETC a store of value (SoV) rather than just another highly volatile cryptocurrency.
Ultimately, Ethereum Classic embraces the basic principles of blockchain technology, the majority of which are inherent in the interchangeability of cryptocurrencies and the immutability of their blockchains.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.