Ethereum is the second largest cryptocurrency by market capitalization, trailing only to Bitcoin. It is the most widely adopted smart contracts platform, playing host to over 3,000 decentralized applications (dApps). Ethereum classic emerged alongside Ethereum as a result of hard fork in 2016. This guide will compare Ethereum and Ethereum classic, covering how they differ and why the two exist, however, to understand this we first must explain the concept of hard forks.
What is a hard fork?
A hard fork refers to when a blockchain is permanently split in two, leading to two different version of the network that run completely separately.
They can occur for a number of reasons; however, the most common reason is to resolve a disagreement within the blockchain’s community.
Blockchains operate without a central authority. This means any governance decisions related to a blockchain are finalized through a community vote. If members of the community disagree on potentially upgrading or changing the protocol, a hard fork may be proposed. This typically results in a version of the old blockchain running separately to an upgraded version. This means another cryptocurrency is created in the process.
Several hard forks have occurred since the creation of cryptocurrency. Most notably, the Litecoin, Bitcoin Cash and Ethereum Classic hard forks.
The Ethereum Classic hard fork
One years after its launch in 2015, Ethereum co-founder Vitalik Buterin proposed to bring self-executing smart contracts to Ethereum to enable the development of dApps. A Decentralized Autonomous Organization (DAO) was created with the intention of funding the development of dApps on Ethereum.
Unfortunately, hackers were able to exploit a loophole within this DAO, draining it of $50 million dollars. This was over a third of the funds stored within the DAO smart contract. The rules of the DAO only permitted the funds to be withdrawn after 28-days.
At that time, the Ethereum community went into panic mode as it looked for measures to set things right. A portion of the community wanted to move on and keep the ethics and ideologies of the platform intact as they believed the hack was unethical but valid. They expressed that reversing the $50 million transactions would be against the very motto of decentralization through blockchain.
On the contrary, more than 87% of the community members agreed upon a hard fork that would recover the stolen funds before the 28-day lock up period ended. This conflict resulted in the split of the Ethereum network. The hard fork supporters attained a majority and made changes to the network to recover the funds. The modified version of the Ethereum network kept the name, Ethereum (ETH).
Whereas around 13% of the community that did not agree with the hard fork kept operating the older version of the network under its new name, Ethereum Classic. Its native cryptocurrency was named ETC.
Did You Know?
Ethereum was the first blockchain that enabled the development of decentralized applications (dApps). This was done to expand Ethereum’s use cases beyond just transactions.
Ethereum vs Ethereum Classic
Despite being two completely separate blockchain networks, Ethereum and Ethereum Classic share similar features. Though Ethereum remains the much bigger, more adopted blockchain, they both provide a platform for developers to use smart contracts to build dApps. There are, however, a few notable differences.
Consensus protocol
Ethereum, which was originally designed as a Proof of Work (PoW) blockchain, is in the process of transitioning to Proof of Stake (PoS). This was because PoS can offer greater scalability and speed whilst reducing the cost of gas fees on the network. Ethereum initiated this transition from PoW to PoS in December 2020 while Ethereum Classic has not announced any transition plans and is expected to remain as a PoW blockchain.
Adoption and usage
When it comes to developing dApps or investing in cryptocurrencies, Ethereum is far more widely adopted than Ethereum Classic. This is evident in the market capitalization of both networks native cryptocurrency’s (I.e. ETH and ETC). ETH typically has a market cap 300x the size of ETC’s, though this can fluctuate due to market volatility. Additionally, Ethereum handles roughly 40 times as many transactions on its network compared to Ethereum Classic.
Security
Blockchain security is typically determined by the numbers of nodes that operate a particular network. More nodes translates to greater security. Ethereum Classic has a small community and a small number of blockchain nodes that operate the network. This lack of security led to three 51% attacks on the Ethereum Classic network in August 2020.
In contrast with that, there have been no serious threats on attacks on the Ethereum network itself, meaning the Ethereum blockchain network is far more secure than Ethereum Classic.
Interesting Fact
Following the three consecutive 51% attacks on the Ethereum Classic network, several major exchanges considered delisting ETC from their platform due to security concerns.
How to invest in ETH and ETC
You can buy and sell Ethereum and Ethereum Classic on Swyftx. Swyftx is an Australian-based crypto exchange within Australia and New Zealand. You can easily invest in 300+ cryptocurrencies through our mobile and desktop trading platforms.
Conclusion
When the founders of Ethereum along with 87% of its community voted in favour of the hard fork, it was evident that Ethereum would achieve greater success than Ethereum Classic. And it did. Ethereum is today the largest smart contract and dApps platform and is also the second-largest blockchain network, second only to Bitcoin. Ethereum Classic, on the other hand, remains a much smaller blockchain with far less adoption and investment.
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