Ethereum is a blockchain-based platform. Its purpose is to enable decentralized application development.

There are now two different versions of this platform in existence. The first version is known simply as ‘Ethereum’ (ETH). This is the ‘official’ version, and more commonly known. It is maintained by its original developers, including Vitalik Buterin.

However, there is now a secondary version of Ethereum known as ‘Ethereum Classic’ (ETC). While this shares many similarities with the original version of Ethereum, it also has some fundamental differences.

It is also managed and maintained by a completely different team of developers.

What Led to the Creation of Ethereum Classic (ETC)?

In June 2016, the Distributed Autonomous Organization (DAO) was hacked.

The DAO was the most notable Ethereum project of its time. The aim was to provide a new decentralized business model. It worked by allowing investors to send money to the DAO and sending them voting tokens in exchange. The investors could then use these tokens to vote in a democratic system that would decide how the funds would be invested.

In a public crowdsale, the organization managed to raise a massive $150 million worth of ether.

However, just as voting was about to begin, the DAO was hacked, and over $50 million were stolen. After much discussion, the Ethereum community agreed that they would vote to decide what would happen next. This vote revealed that most of the network wanted to change the code of Ethereum to send the funds back to the investors - and away from the hacker.

However, a noticeable proportion of the community disagreed with this action. They vehemently argued that immutability is one of the major qualities of the blockchain and that it should not be changed under any circumstances.

So when the majority of the community accepted the switch and began to use the new blockchain, these members decided to continue using the original Ethereum blockchain. It was renamed to what we now know as ‘Ethereum Classic’ (ETC).

The creators of Ethereum Classic commented:

“Ethereum Foundation responded to the DAO debacle in the worst way possible...we believe in the original vision of Ethereum as a world computer you can’t shut down, running irreversible smart contracts.”

While the Ethereum blockchain was changed to allow the funds to be moved back to the investors, this was not the case with the Ethereum Classic blockchain - it remains in its original, untouched state.

How Does Ethereum Classic (ETC) Differ From Ethereum (ETH)?

Ethereum Classic is essentially a clone of Ethereum - but with some major differences. The main difference is that while Ethereum Classic runs on the original blockchain, Ethereum now runs on a different blockchain. The vast majority of miners and users made the switch to this version of Ethereum.

Ethereum is still valued much higher than Ethereum Classic. While the market cap of Ethereum Classic currently hovers around $1.7 billion, the market cap of Ethereum is almost $40 billion at the time of this writing.

This is majorly because Ethereum is still the ‘main’ blockchain, meaning it receives many more developments and upgrades that are not supported by Ethereum Classic.

In addition, Ethereum also has backing from the Ethereum Alliance, which includes support from huge multi-billion dollar firms such as JP Morgan and Microsoft.

One of the biggest issues with Ethereum Classic is that it isn’t backwards compatible with the Ethereum hard fork, meaning that users of Ethereum Classic won’t be able to make use of the updates being built on Ethereum.

One example of such an update is the major transition from the Proof of Work model to the Proof of Stake model. Whilst Ethereum is set to make this change in the near future, Ethereum Classic will receive no such updates.

Ethereum Classic has also moved away from Ethereum’s inflationary monetary policy. It now has a deflationary monetary policy, meaning that block reward is decreased for miners over time.

The first reward reduction will be implemented at block number 5 million. An additional 20% reduction will be implemented every 5 million blocks after this. This will result in a maximum cap in the range 210-230 million ETC. Meanwhile, there is no cap on the production of ETH.

Developers of ETC have stated that the decision for the cap is the best decision for the long-term interests of developers, investors, businesses, and most notably, the network.

Today, much like most of the altcoins in existence, most of the value assigned to Ethereum Classic comes from the speculator market.

The Future of Ethereum Classic (ETC)

However, it isn’t all bad news for Ethereum Classic. Although it won’t be as revolutionary as Ethereum, it does have some advantages.

The biggest issue with Ethereum that could be a cause for concern for many users is that the hard fork seal has now been broken. Now that there has been one hard fork, some have speculated that there could be an increased chance of another hard fork in the future.

Some have even worried that leaders in the community could even manipulate a hard fork in the future for their own game.

As a result, this risk adds some uncertainty and volatility to the long-term price of Ethereum.

While the market cap of Ethereum Classic still lags behind Ethereum and is likely to continue this way for the foreseeable future, its value has increased by 6.2% in the past week alone.

It might not be able to complete with Bitcoin, Ethereum, or Bitcoin Cash, but Ethereum Classic is still holding steady as the world’s 11th largest cryptocurrency.