Ethereum and Ethereum Classic – beginners in cryptocurrency trading mistakenly take them as the same. They have a shared history but are poles apart in many aspects. What sets the two cryptos apart? PCEX Member has the answer to this and many more questions to help you trade wisely.
Ethereum was born
Ethereum is the brainchild of Russian-Canadian Vitalik Buterin. The world came to know about the concept of Ethereum in 2013 through a whitepaper by the inventor. What made Buterin to invent Ethereum? Prior to working on the Ethereum project, he co-founded and wrote for the Bitcoin Magazine news website. While working there, Buterin made a case for Bitcoin to create a new programming language that could automate tasks and allow apps to be built on top of its blockchain. However, he couldn’t find any takers for his pioneering thoughts, and this made him think of developing Ethereum as a smart contract platform.
Buterin worked with two other co-founders to make a decentralized open-source blockchain system along with its cryptocurrency, Ether (ETH). The ability to trigger and create decentralized smart contracts was a uniqueness of the platform. Smart contracts were set on automation based on the fulfilment of some predefined conditions. The combination of blockchain’s immutability, teamed with its open-source functionality, makes smart contracts very appealing to many businesses. Along with ETH, it was made to support other cryptocurrencies as well.
The goal of Ethereum was to become a global platform for decentralized applications, allowing users from all over the world to write and run software that is resistant to censorship, downtime, and fraud.
The project was crowdfunded in the summer of 2014 and Ethereum was officially launched on July 30, 2015.
Shared history of ETH and ETC
Everything went smooth for a year in the Ethereum family until the summer of 2016. The platform’s built-in feature was exploited through DAO (decentralized autonomous organization) by some for their vested interests. It was the most dramatic crypto attack in history that changed the course of Ethereum forever. What was it? The vulnerability triggered the demand for the upgrade. Most of the developers chose to upgrade Ethereum, leaving behind the original Ethereum, which later renamed as Ethereum Classic, on its condition.
What is DAO and How was it Abused?
The Decentralized Autonomous Organization was a highly sophisticated and advanced smart contract. It also served as the parental ecosystem to nurture future DApps (Decentralized Applications). It backed innovators, entrepreneurs, and would-be investors interested in DApps. The stakeholders of DApps were required to purchase DAO Tokens in exchange for Ether. DAO Tokens would show that you’re a part of the DAO ecosystem.
DAO had a noble purpose but its “Split Function,” feature was abused to an extent that it couldn’t survive. Split Function was introduced in DAO to allow investors to withdraw their support from a project. Once you decided to withdraw your investment, you would get your Ether back and have the option to create a “Child DAO.” The processing time (during which the public ledger was updated) was set to 28 days during which the funds were inaccessible.
On June 17, 2016, the feature was abused and some stakeholders drain the DAO of 11.5 million ETH worth $50 million at the time. The amount taken represented about a third of the DAO’s Ether. The exploiters took undue advantage of a loophole in the blockchain code to make the network repeatedly refund the same DAO tokens — without the transactions being registered on the public ledger.
These cyberattacks led the community to apply hard forking on Ethereum that resulted in the formation of Ethereum and Ethereum Classic. The community agreed to refund the lost Ether of the affected token holders in their original accounts. Hard forking goes against the basic principle of the blockchain and the attempt has received criticism. However, Ethereum is not the only cryptocurrency to endure it. You are familiar with Bitcoin (BTC) and Bitcoin cash (BCH), and later Bitcoin Cash Node (BCHN).
Now Ethereum Classic remained as the original chain, with the tokens unexpectedly taken from the DAO left untouched with the exploiter. Ethereum, on the other hand, was the chain that returned the tokens.
A Better Choice: ETH Vs ETC
If we go by ethics, ETC has an upper hand. It has shown its integrity towards the fundamental principle of blockchain. You have learned that Ethereum received criticism for being hard forked.
However, when it comes to valuation, ETH is miles ahead of ETC.
The current value of ETH stands at $1,797.08; its market capitalization is close to $206,841,646,159. Its value has almost tripled in the last one year, and many experts see ETH as a formidable competitor to bitcoin.
Comparatively, ETC has a long way to go to capture its sibling. Its current value is $12.38 and market cap close to $1,442,045,113. In the last one year, cryptocurrency has gained by around 20%.
From an investment diversification point of view, it’s wise to invest in assets valued differently. You may not gain much in investing in ETC, citing the current situation, it’s true, but the risk probability is lower than ETH. Discover technical analysis techniques and tools with PCEX Member’s Knowledge Bank to make the best of different crypto investment instruments and opportunities.
Happy crypto trading!