Ethereum Classic Explained: Code is Law & DAO Hack Legacy

Ethereum Classic Explained

What is Ethereum Classic

Smart contracts are used by Ethereum Classic (ETC), a distributed cryptocurrency platform that is decentralized and open-source. In order to operate self-executing smart contracts, it functions as a distributed computer. By preserving the Ethereum network’s original, unchangeable history, ETC demonstrates its unwavering adherence to the tenet that “Code is Law.” Ether is another name for its native token, which is represented by the sign ETC.

Ethereum Classic Features

Smart Contract Platform: A programmable blockchain that facilitates smart contracts and decentralized apps (dApps), ETC is similar to Ethereum. with the ETC network’s interoperability with EVM, developers may create and implement a variety of dApps.

Ethereum Virtual Machine (EVM): Solidity and other Ethereum-specific tools and languages may be used with ETC as it uses the Ethereum Virtual Machine (EVM) to run smart contracts. Although Ethereum Classic’s development usually proceeds more slowly than that of ETH, it nonetheless maintains protocol compatibility with the larger EVM standard.

Proof-of-Work (PoW): The fact that Ethereum Classic has maintained a Proof of Work (PoW) blockchain is one of its fundamental differences from Ethereum (ETH) after the merger. In exchange for ETC, miners employ their processing power to protect the network and validate transactions. When it comes to agreement, the ETC community believes that PoW is more decentralized and resistant to censorship than Proof-of-Stake. The biggest and safest Proof-of-Work blockchain with smart contract capability was Ethereum Classic when Ethereum switched to Proof of Stake in 2022.

Fixed Supply: Ethereum Classic’s maximum supply is set at 210,700,000 ETC tokens, in contrast to Ethereum’s (ETH) infinite supply (but with a regulated growth rate). The Gotham hard fork update on December 11, 2017, hard-capped this capacity. Like Bitcoin’s halving, this monetary strategy, called “5M20,” lowers the block reward by 20% every 5,000,000 blocks, a phenomenon known as “the fifthening.” The payout dropped to 2.048 ETC after the most recent fifthening in June 2024.

Native Cryptocurrency (ETC): The native cryptocurrency is called ETC, and it is used to reward miners and cover transaction costs (gas). Network transaction fees or other assets, commodities, currencies, goods, and services can be traded for ETC on a number of cryptocurrency exchanges.

IoT Focus: The Ethereum Classic community has shown a special interest in the Internet of Things (IoT) field, seeing it a good fit for developing decentralized, immutable applications for linked devices, such device identification or supply chain monitoring.

Addresses: 40 hexadecimal digits make up Ethereum Classic addresses, which are made up of the prefix “0x” concatenated with the rightmost 20 bytes of the Keccak-256 hash of the ECDSA public key. They may thus be used with a wide range of Ethereum wallets that are currently in use.

Improvement Proposal Process (ECIP): ETC, like Ethereum, features an improvement proposal procedure (ECIP) that lets community engineers and computer scientists suggest changes, enhancements, or repairs to the protocol. A community-driven approach to the ECIP process’s development is ensured by the fact that any GitHub user can contribute.

Origin: The DAO Hack and the Hard Fork

The DAO Project (2016): The establishment of Ethereum Classic occurred in 2016 as a result of the crucial DAO attack. On the Ethereum blockchain, the DAO (Decentralized Autonomous Organization) was a trailblazing venture fund that gave investors the ability to vote on which assets to invest in. One of the biggest crowdfunding campaigns in cryptocurrency history, it raised over 11 million Ethereum (ETH), which at the time was worth over $150 million, from more than 18,000 investors.

The Hack: The DAO’s smart contract code has a vulnerability, or “flaw or exploit,” that was found and used by an unidentified attacker in June 2016. They were able to take away around one-third of the $50 million worth of Ether that The DAO had amassed as a result.

The Community Debate: In the Ethereum community, the hack incited a significant ideological dispute. The majority pushed for a “hard fork” to stop the theft and refund the stolen money, including Vitalik Buterin, a co-founder of Ethereum. The hard fork was adopted by almost 85% of the network’s miners, who argued that it was necessary to safeguard investors and the platform’s reputation. There was a sizable minority that strongly disagreed with the hard fork, upholding the idea that “Code is Law.”

Regardless of the repercussions, they maintained that a blockchain’s history should be irrevocable and unalterable once it has been recorded. Reversing the attack, they felt, would create a risky precedent and go against the fundamental principles of immutability and decentralization.

The Split: Eventually, the hard fork was implemented by a majority vote. Since the Ethereum Foundation applied its trademark to this modified version, the new, branched chain that stopped the hack and gave back the stolen money has been known as Ethereum (ETH). “Code is Law” supporters continued to maintain the original, unmodified blockchain, which was renamed Ethereum Classic (ETC) and retained the history, including the DAO hack. Block 1,920,000, which was created on July 20, 2016, was the first Ethereum Classic block to be excluded from the compromised chain.

Core Philosophy: “Code is Law” and Immutability

Unaltered Ledger: Ethereum Classic’s unflinching adherence to the “Code is Law” philosophy and blockchain immutability is what makes it unique. According to ETC, every transaction and smart contract execution including those brought about by exploits should be preserved on the blockchain in its original form, unaltered and uncensored.

No Centralized Control: ETC opposes the notion of a centralized entity (such a foundation or team of engineers) going in to alter the blockchain’s past, even for a “good cause.” Any involvement is viewed as a violation of fundamental blockchain ideals, and maximal decentralization and censorship resistance are given top priority.

Distinctions from Ethereum (ETH)

Consensus Mechanism: While Ethereum (ETH) completely changed its security and validation architecture in 2022 by switching to Proof-of-Stake, ETC is still a Proof-of-Work blockchain that depends on mining for security.

Supply Limit: Because ETC has a predetermined supply cap of 210.7 million tokens, it is intentionally deflationary. In contrast, the quantity of Ethereum (ETH) is infinite, but its pace of increase is regulated by a number of factors, such as token burning.

Immutability Philosophy: Since ETC places a high value on absolute immutability (“Code is Law”), transactions are never reversible or changed. A more practical approach to its ledger was shown by Ethereum (ETH), which was prepared to change its past in order to undo the DAO breach.

Community and Development: Ethereum (ETH) continues to be the most widely used network, with a larger and more engaged developer and user base that fosters more innovation and speeds up the creation of new features and decentralized apps. The ETC community is smaller, more specialized, and moves more slowly overall.

Security: Since Ethereum (ETH) has a big community, a much larger market capitalization, and a much higher network hashrate (pre-Merge) or staked value (post-Merge), it is usually thought to be more secure. Since its hashrate is relatively low, ETC has historically been more susceptible to 51% attacks, which makes it a more appealing target for bad actors.

Transaction Fees: Because ETC often has lower transaction costs than Ethereum (ETH), it is a more cost-effective option for those looking for smart contract interactions and cheaper transactions.

Market Value: Ethereum (ETH) has a much larger market capitalization and a higher value per token than Ethereum Classic. This discrepancy may be attributed in part to increased investor confidence, a bigger variety of investment options within its ecosystem, and a stronger network effect within the larger cryptocurrency industry.

Decentralized Applications (dApps): The number of dApps on Ethereum (ETH) is far greater and more varied, spanning a number of industries like as enterprise solutions, gambling, NFTs, and DeFi. The ecosystem of dApps at ETC is much smaller.

Ethereum Classic vs. Ethereum (Mainnet) – Key Differences:

Ethereum Classic Disadvantages

Smaller Community and Slower Development: One of Ethereum Classic’s many problems is that it has a lower developer and user base than Ethereum. This may restrict its competitive edge in the rapidly evolving blockchain market by slowing innovation, reducing the number of new dApps being developed, and slowing down protocol advancements.

Vulnerability to 51% Attacks: In its existence, ETC has suffered significant 51% double-spending assaults, most notably in January 2019 (in which it lost around US$1.1 million) and August 2020 (in which it lost an estimated US5.6 million and US1.68 million in two different events). Through the acquisition of more than 50% of the network’s mining capacity, these attacks take advantage of the decentralized structure of the network, enabling malevolent actors to rearrange the blockchain and double-spend funds.

Response to 51% Attacks (ETChash/Thanos Upgrade): A modified version of the Ethash Proof-of-Work consensus algorithm, called ETChash (or Thanos update), was implemented by Ethereum Classic in November 2020 in response to these issues. The purpose of this modification was to lower the growing rate of the Directed Acyclic Graph (DAG), which is related to the amount of memory needed for Ethash mining.

This substantially increased the cost and complexity of a 51% attacks on ETC by making it far more difficult for Ethash miners, who mostly mined Ethereum, to move between Ethereum and Ethereum Classic with ease using their strong mining hardware. when the Thanos Upgrade, ETC’s dedicated hashrate rose, solidifying its status as the top blockchain using the Ethash algorithm family particularly when Ethereum moved away from proof-of-work.

Market Traction: Since Ethereum has gained a lot of traction and ETC has lost a lot of market share to other cryptocurrencies like Bitcoin, its future in terms of wide market dominance looks less promising. Still, it is mined by a fairly stable community of merchants, enthusiasts, and ideological supporters who appreciate its original vision and purist position, and it is still traded on major exchanges.

Ethereum Classic is a resilient platform for those who support its fundamental ideas of immutability, censorship resistance, and true decentralisation over practical fixes, and it remains a testament to the diversity of ideologies within the blockchain space despite its difficulties.