Ethereum vs Ethereum Classic? Why are there two Ethereums?
The reason for two similarly named (and similarly functioning) technologies comes down to an irreconcilable difference of opinion.
Ultimately, when the hard fork or ‘splitting of the chains’ occurred in June 2016, two philosophical camps existed.
One argued camp that, no matter what, the Ethereum blockchain had to be immutable, even after a cyber attack. Those in this ‘purist’ camp branched off and created Ethereum Classic.
The other camp, in light of the hack that had recently occurred, thought it best to be more flexible and allow for changes to the blockchain in situations involving major extenuating circumstances.
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Ethereum vs Ethereum Classic
The Birth of Ethereum
In 2013, a teenage Vitalik Buterin proposed his vision to the Bitcoin community to little fanfare: a new programming language that would allow users to automate tasks and build apps on top of its blockchain.
Undeterred by the community’s response, Buterin decided to start a two-month crowdfunding campaign in June 2014. He raised historic numbers: 30,000 bitcoin, or $1.7 billion now and about $15 million then. Equipped with millions in funding, Buterin committed to what would be dubbed Ethereum: a single blockchain that had the functions Buterin had first proposed to the Bitcoin community
What are Ethereum, Ethereum Classic, and Smart Contracts?
In reality, the same technology underpins Ethereum and Ethereum Classic. Both technologies are public, community-built technologies designed around smart contract functionality. The platforms automate tasks and allow developers to build decentralized applications (Dapps) on top of it.
The Ethereum network has Ether (ETH) as its currency. Ethereum Classic has ETC. Both currencies go to paying the ‘gas fees’ needed to deploy smart contracts on the Ethereum blockchain. These networks also allow developers to build decentralised smart contract applications on top of it.
Understanding smart contracts is crucial to understanding Ethereum in general, but also the debate of Ethereum (ETH) vs Ethereum Classic (ETC). Smart contracts refer to an agreement (e.g. a purchase on an online retailer, a real estate deal, etc.) between two parties written in lines of code. If and when both parties satisfy the conditions of the agreement, the deal automatically gets processed by the blockchain, a public, permanent, and unchangeable (more on this one later) ledger. Due to the code, smart contracts (ideally) eliminate the need for external oversight by a central authority.
“Code is law,” in other words.
What are the Differences?
As of March 2021, Ethereum has a market cap of around $200 billion. Ethereum Classic, on the other hand, comes in at a fraction of that amount, achieving only $1.44 billion. A major reason for the disparity in market cap comes down to ETC’s issuance cap currently set at 210 million. Ethereum, although it is mined at a steady rate, does not have a hard issuance limit.
Functionality-wise, as you can see from the section above, little differences exist. Nevertheless, with the development and implementation of Ethereum 2.0, Ethereum will shift away from the proof-of-work consensus mechanism (which Ethereum Classic uses) to a proof-of-stake algorithm. Proof-of-stake is said to make transactions much more efficient and faster.
Finally, rather than a difference in the technologies themself, users in the two camps have different philosophical views about the Ethereum blockchain. These conflicting perspectives emerged when the DAO debacle occurred and led to the formation of a completely independent blockchain from Ethereum: Ethereum Classic.
If you’d like to learn more about the debacle and debate, read on!
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The Source of the Split: DAO
The debate of Ethereum vs Ethereum Classic came to the fore after the disastrous launch of the Decentralized Autonomous Organization (DAO) in June 2016. Note: Before we continue with the article let’s make one distinction clear. The hack happened because of an issue in the DAO not because of any issues in the ethereum itself. ethereum runs in the background while DAO runs on it.What is DAO?
In this context, DAO essentially refers to a decentralized venture capital fund built on the Ethereum blockchain and its smart contracts. Many believed it would provide an opportunity for potential investors and entrepreneurs to pitch and fund business ideas and Dapps without any middleman or managerial blockages.
The potential of the DAO and the flexibility, control, and complete transparency that it offered was unprecedented; people leaped in to get their share of the pie. Within 28 days of its formation. In a matter of weeks, the idea generated $250 million in funding. That goes to show just how much support DAO had garnered prior to its launch.
How did DAO work?
Instead of directly using crypto to fund projects, participants had to first purchase DAO tokens with Ether. You used these tokens to vote on the Dapps you wished to support. On the developer side, every Dapp needed to get whitelisted by curators, i.e. respected figures in the ethereum world, before the community could vote on it.
If a Dapp received approval from the curators and 20% of the community, its developers would receive the necessary funds to start making it a reality.
Developers of the DAO made sure to provide participants an ‘exit’ in cases where they wished to back out after a Dapp had been approved. They called this the ‘Split Function.’ You would not only receive the Ether you’d invested but also get the option of creating a ‘Child DAO’ on your own or with other token holders.
The Problem of the Split Function
Dino Mark, Vlad Zamfir, and Emin Gün Sirer famously raised numerous concerns they had, at one point suggesting the DAO’s launch get postponed. Many supported the move, but others (most importantly, the developers) were eager to get the ball rolling.
Three major problems in DAO’s smart contracts spelled its end:
- The 28-day suspension of the funds after creating a Child DAO
- Recursive Call
- Refunds were issued before the internal token balance got updated
Let’s look at how a hacker exploited the above problems to disastrous effect.
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The DAO Debacle
On 17th June 2016, one-third of the total DAO’s funds got siphoned. That was around $50 million dollars. Gavin Wood, the co-founder of Ethereum puts it, blaming ethereum for the DAO hack is like saying “The Internet is broken” every time a website goes down.
The hacker essentially created a recursive call in the withdrawal request, messing with the splitting function. They took the DAO tokens from the users and returned the requested Ether. But before the return could get properly registered on the blockchain, the recursive call made the code cycle back and transfer more Ether for the same DAO tokens. These ‘transactions’ did not appear on the blockchain, as they were logged as part of the single withdrawal.
The hacker could not access the funds, though. They could not figure out how to circumvent the suspension period.
FURTHER READING
Do you know about businesses that are harnessing blockchain technology to revolutionize industries? Check out our article on blockchain companies to learn all about the future of technology.
DAO Attack
Although Ethereum itself did not experience a security breach, the exploitation of DAO’s smart contracts seriously harmed ETH’s value. It dropped from $20 to $13, as public confidence reached a low.
The way forward seemed murky, hard to figure out. Out of the bitter conflict came the realization that two camps existed: those who wanted to keep the public ledger as is, and those who wished to change it on the other.
After a vote, the community concluded that they would ‘hard fork’. This created two separate blockchains: Ethereum and Ethereum Classic. On Ethereum, the hackers’ actions got struck from the record, and victims received their refunds. Ethereum Classic’s public ledger, however, left everything the same, with the hacker eventually getting the funds they’d siphoned.
Why ZTM Uses Ethereum Classic Rather Than Ethereum
It’s pretty simple. Ethereum Classic provides the same functionality (smart contracts) with lower gas prices than Ethereum. As a budding organization, price efficiency sometimes has to take priority. The debate of Ethereum vs Ethereum Classic, at least in terms of philosophy, did not play a particularly significant part in our decision-making. With the proof-of-work system coming with ETH 2.0, we will have to reevaluate then. But for now, we will continue to use Ethereum Classic.
What’s the Zero Theft Movement anyway?
The Zero Theft Movement has built a blockchain voting platform to empower you against the rigged economy and crony capitalism. Blockchain allows us to provide a decentralized hub with a public, permanent, and unchangeable ledger. That means there are no hierarchies, no concentration of power.
Our community works together to investigate and debate specific areas of the economy where it might be rigged against the public. Through you decide whether (1) theft is or isn’t occurring in a specific area of the economy, and (2) how much is being stolen or possibly saved. On any given issue, you have a vote. The founders have a vote each. Donors have a vote. That’s our one-citizen-one-vote policy, and we strictly adhere to it
We democratically decide where the problem areas are, and can then start working on informing Congress to get them fixed.
Standard Disclaimer
The Zero Theft Movement does not have any interest in partisan politics/competition or attacking/defending one side. We seek to eradicate theft from the U.S economy. In other words, how the wealthy and powerful rig the system to steal money from us, the everyday citizen. We need to collectively fight against crony capitalism in order for us to all profit from an ethical economy.
Terms like ‘steal,’ ‘theft,’ and ‘crime’ will frequently appear throughout the article. Zero Theft will NOT adhere strictly to the legal definitions of these terms (since congress sells out). We have broadly and openly defined terms like ‘steal’ and ‘theft’ to refer to the rigged economy and other debated unethical acts that can cause citizens to lose out on money they deserve to keep.