Putting the ‘class’ in ‘classic’
If you were allowed to reverse a hack at the cost of a blockchain’s perceived decentralization, would you do it? This was the question the Ethereum community faced in 2016 after a crippling attack on the network stole $50 million in ETH.
The Ethereum Classic community is on the side of the argument that “Code is Law” and believes that users should accept the code’s flaws as part of the blockchain’s immutability. This isn’t about money – it’s about principle.
Set in stone, yet evolving.
Ethereum Classic offers all the functionality of the Ethereum blockchain before they forked from each other. ETC holders rejected the idea of networks reversing hacks, and believe that no participant should be allowed to make changes once something is committed to the blockchain.
The funds were returned on the now main Ethereum network, and the chain left behind was later renamed Ethereum Classic. The Ethereum Foundation
Over the years, the project has updated the system to meet modern requirements. While Ethereum 2.0 has moved to a Proof-of-Stake consensus model, Ethereum Classic will continue to use Proof-of-Work.
Classic crypto conduct
Ethereum Classic was launched in 2015, and its token, ETC, rose to a value of a couple of dollars by mid-2016. In 2017, ETC prices ramped up, touching a peak value of nearly $44 in January 2018.
At the time, its market capitalization had been worth around $700 million, and even though that isn’t a lot by crypto standards, it’s still a considerable amount. In both 2019 and 2020, the Ethereum Classic network was hacked, allowing attackers to double-spend ETC through 51% attacks.
This has discouraged many development efforts for the platform and is a huge red flag from a security standpoint. However, Gitcoin, a popular development funding platform, recently announced support for bug bounty payments in ETC.
In November, Ethereum Classic implemented its Thanos upgrade to recalibrate precise metrics, tighten security, and provide better stability.
Identical twins, different minds
After the DAO hack, the Ethereum mainnet was rolled back to return the stolen funds to victims. This proposal was mostly met with agreement, especially since there was $50 million worth of tokens on the line.
The Ethereum Foundation soon applied its trademark to the new, altered blockchain, and the majority of the network continued to mine on it, while the original chain was renamed to Ethereum Classic. This means that ETC and ETH, at least in their current forms, are practically identical.
Like Ethereum, ETC can also pay gas fees and run smart contracts on the blockchain. It even has its own version of the Ethereum Virtual Machine and supports Ethereum-based tokens like ERC-20.
Immutability is a strong ethos for Ethereum Classic, whose motto is that “Code is Law.” Developing applications for decentralized networks is tricky. Changes cannot be made once code is deployed on the blockchain, making bug fixing and error correction tedious and confusing.
Unlike many cryptocurrency projects out there, a central team does not maintain Ethereum Classic. Instead, a decentralized network of enthusiastic developers collaborates to bring a blockchain that will truly be protected from third-party interference.
The two 51% attacks on the network make this ambition seem impractical. As more developers regain confidence in the platform through stability and security updates, this could be a project to watch, especially with Ethereum 2.0 just around the corner.
Stubborn ideals, open innovation
One advantage most blockchain-based projects have over Ethereum Classic is that they usually start with an ICO. In the case of Ethereum, its ICO funds were allocated to The Ethereum Foundation, which quickly pledged support towards its main chain.
While the foundation does contribute to Ethereum Classic, the network still does not have any way of funding its own development. In August 2020, Cardano’s founder and a co-founder of Ethereum, Charles Hoskinson, proposed a shift in Ethereum Classic’s block reward distribution.
Soon after the 51% attack, Hoskinson chimed that the best defense against such events is innovation. He claimed that IOHK, a company led by Charles himself, had developed a technology to prevent future 51% attacks on the Ethereum Classic network.
He proposed that 20% of block rewards should be allocated to a new decentralized treasury, which could finance the ecosystem’s future development. Some perceived this to be an attempt at a hostile takeover by IOHK, and notable members of the ETC community, like James Wo, CEO of Digital Finance Group, spoke against the proposal.
From greater regulation over hash power marketplaces to introducing a new hashing algorithm, the Ethereum Classic community is headstrong about finding a solution. Regardless of how long it takes, the community’s determination and discipline towards its ethos is, if nothing else, astonishing.
In December 2017, the total ETC supply on Ethereum Classic was hard-capped to 210.7 million tokens through the Gotham hard fork upgrade. This also added a Bitcoin-like halving event known as 5M20 or “the fifthening,” which reduces the block reward for miners by 20% every 5 million blocks.
Since ETC is now on a deflationary supply schedule, it could become much more scarce, thereby appreciating with time.
A classic example
Ethereum Classic faces competition from a myriad of smart contract blockchain networks like NEO, Tezos, Cardano, and especially Ethereum. However, despite being its younger (slightly stubborn) sibling, Ethereum Classic developers maintain that it has something unique to share.
In a recent tweet, Ethereum Classic claimed that there were more active accounts on its network than Cardano, Bitcoin Cash, Zcash, Dash, Monero, and NEO combined, despite its substantially lower market cap.
According to a report from Grayscale, Ethereum Classic has “a growing base of developers, business operators, non-profits, and active community members,” driving the development and adoption of the network.
Mining ETC is a lot easier than other cryptocurrencies and is much more accessible to miners with limited capital to invest in equipment, electricity, and additional operating costs. However, Ethereum Classic still faces the same crippling problem as the Ethereum main chain – scalability.
Ethereum Classic does receive upstream developments introduced on Ethereum, with interoperability improving after each update. However, with most blockchain networks moving to a Proof-of-Stake model to improve transaction validation times, Ethereum Classic’s more traditional approach may leave them behind.
Terry Culver, CEO of ETC Labs, a blockchain and digital assets funding startup and one of the most significant contributors to the Ethereum Classic ecosystem, claims that he was “comfortable with how [PoW] works” and that they could address its challenges over time.
It’s still uncertain how this will play out, especially with new developments in the smart contract arena popping up every single day. As the Ethereum Classic community strives to perfect its version of the Ethereum blockchain, only time will tell whether code will remain law.
Birth of a classic
Ethereum Classic has been the subject of many attacks since its inception in 2015. On August 10, 2016, the Robin Hood Group transferred 2.9 million stolen ETC tokens to the Poloniex exchange after being advised to sell them for ETH by Bitly.
86% of the transferred funds were promptly frozen by Poloniex, after which they set up a refund contract on the ETC network to return the stolen tokens to its rightful owners. Just before this, the DAO fork created a replay attack through which a transaction was broadcast to both the ETH and ETC network.
A year later, Ethereum Classic tweeted that its Classic Ether Wallet had been compromised and released details about the vulnerability. In response, the ETC team collaborated with Cloudfare to place a phishing warning on the compromised domain. While these issues have since been resolved, the news of the two 51% attacks in 2019 and 2020 does not strike confidence in investors’ minds.
Nevertheless, Ethereum Classic is a project that, even if no one else does, believes in itself. The stubborn reluctance to tarnish its decentralization and its persistent and rigid ethos towards blockchain development is inspiring and could lead to advancements in the blockchain ecosystem as a whole.