Ethereum vs. Ethereum Classic: More Than Forks Now

Among forks and reiterations of major cryptocurrencies, Ethereum (ETH) and Ethereum Classic (ETC) are a very well-known pair. Due to their history, their divide is often perceived as mere difference in ideas. However, there is more to it, and with this guide, we will go deeper into what makes ETC and ETH different and what it means for you.

Key Takeaways

• What's the difference between Ethereum (ETH) and Ethereum Classic (ETC)? The answer is a brief history lesson: a 2016 incident known as The DAO hack necessitated a hard fork to undo the damage but also caused a minority to split off to a new cryptocurrency.
• Ethereum is actually the chain that rewrote history, branching off to a new blockchain with the majority support. Today, it has higher adoption rates and perceived value between the two.
• Ethereum Classic strictly followed the principles of ‘code is law’ and blockchain immutability, refusing to rectify a costly mistake. Despite being the original chain, it is a minority blockchain that is not as popular as its counterpart.

What is the Difference between Ethereum and Ethereum Classic?

The question in the title can be answered without two separate explanations (although we will provide them for clarity) because originally, these two cryptocurrencies were one. An event that caused them to become independent is a chain split that followed a hard fork after the DAO hack in 2016. Why did Ethereum fork back then and Ethereum Classic came to be? Let’s explain it all in order.

First, we have to segue to explain why blockchain is immutable, and this is by design. Each block in the chain has a cryptographic hash of the previous block embedded, connecting them in a sequence. The hashes are calculated at the time of block creation using a lot of information, including the transactions recorded in that block. Rewriting the transaction history eventually becomes impractical, as hashes of all following blocks would need to be recalculated. Moreover, precisely because the transaction history cannot be easily rewritten, as a distributed ledger, a blockchain exhibits a degree of integrity and trustlessness that is not present in other systems.

Going back to the topic, what is Ethereum? As the name without the modifier suggests, it is the original cryptocurrency in question. Also called ‘the world computer’, it is a blockchain platform that introduced smart contracts and full-fledged programmability into the crypto world. One of the applications of smart contracts is crypto tokens which caused a meteoric rise in value for the new cryptocurrency and solidified its place as the second only to Bitcoin but there were other, arguably more ambitious applications for the new technology.

For instance, it could be used to create decentralized applications (dApps), and the Ethereum community attempted to build entire decentralized autonomous organizations (DAOs). The first one was aptly called The DAO, and fundraising to start it was done, of course, using a smart contract. However, the technology was still not battle-tested, so the smart contract that held the funds was exploited and drained by an unknown hacker. Later dubbed The DAO hack, this event has caused a loss of about $50–70 million in USD at the time, and for years was the largest incident in crypto history.

Since there is no single entity to make a decision about dealing with the consequences at its sole discretion, the community had to have discussions and arrive at a consensus. Although eventually the majority concluded that rolling back the blockchain would be the best course of action, their opposition was in the minority but did not accept the solution for multiple reasons. Since a hard fork was required for a change that major anyway, they chose to continue supporting the Ethereum blockchain without modifying its history, and adopted the name Ethereum Classic.

In other words, what is known as Ethereum today is the modified blockchain. Ethereum Classic is the continuation of the original blockchain, but since the split, they have introduced more changes to further set it apart from its counterpart.

For one, the Ethereum Classic (ETC) cryptocurrency has a hard limit on the total amount of coins: 210.7 million. It resembles a similar limit on Bitcoin’s supply, which is believed to be a feature that makes it a hard asset. To drive the point further, a halving mechanism for new coins in circulation, very similar to Bitcoin's, was introduced along with the change. As time went on, even more differences between ETH and ETC added on, which we are about to cover in more detail.

Key Differences Between Ethereum (ETH) vs. Ethereum Classic (ETC)

Consensus Mechanisms: Proof-of-Work (PoW) vs. Proof-of-Stake (PoS)

Another major difference that was not initially present but distinguishes the two chains today is their consensus mechanisms. Although Ethereum was always meant to eventually transition to Proof-of-Stake as its scale increased with adoption, it started out as a Proof-of-Work blockchain and cryptocurrency.

What is the ETC crypto secured with? Proof-of-Work, as it was implemented in the original Ethereum and is now present in Ethereum Classic, requires network participants called miners to perform computationally-intensive tasks with their hardware to add blocks to the chain. To incentivize miners, each new block rewards the miner who added it with a block reward, which is newly minted and added to the circulating supply, plus gas fees from transfers and contract calls included in the block. Thus, even if all supply enters circulation and the miner rewards cease, they will still have the incentive to continue supporting the blockchain.

However, at the scale of the ‘world computer’, Proof-of-Work could be unsustainable economically and environmentally, so the Ethereum developers included a so-called ‘difficulty bomb’ into the protocol, which would serve as a catalyst for an eventual transition to a ‘greener’ alternative, Proof-of-Stake. This flag would activate at a predetermined block and increase mining difficulty, a mechanism that calibrates the cryptographic problem difficulty so that blocks are solved at a consistent pace regardless of how many miners are online, to an impossible level. One of the first things the Ethereum Classic community did was remove this part of the protocol so that PoW could be used indefinitely.

The newer Ethereum chain committed to the long-term plans and from 2020 to 2022, shipped updates that eventually merged consensus layer with execution layer and brought PoS online to completion. Hence, the large-scale update, which was actually a series of upgrades over years, was called The Merge.

Proof-of-Stake, as it is implemented in the post-Merge Ethereum network, requires network participants called validators to stake (commit) capital to get the chance to approve of new blocks being added to the blockchain. The chance is directly proportional to the size of the stake, and likewise, validators are rewarded with staking rewards, also in proportion to the work done. If a validator misbehaves or underperforms, they can be penalized by slashing, which introduces an element of risk and the motivation to work as intended.

Both PoW and PoS were present in Ethereum at different times, and the network necessitated it due to their unique advantages and disadvantages. Proof-of-Work is arguably considered a more secure consensus algorithm due to the difficulty of attacking and its longer track record. When Ethereum was starting out, it was a better choice than PoS because it fostered decentralization, competition among miners, and had lower vulnerability to consensus attacks. However, eventually, as more network participants joined and scale increased, the energy consumption of PoW would become a hurdle to global adoption due to higher environmental impact and poor throughput. Proof-of-Stake improves on both, so Ethereum committed to all the trouble to change the whole consensus mechanism once the time came. Thanks to the Merge, Ethereum has better scalability than before and has reduced its carbon footprint by 99.5%.

Ideology and Philosophy

At its core, the schism that led to the Ethereum Classic fork was ideological: the minority that rejected the solution put forward by the Ethereum Foundation adhered strictly to the ‘code is law’ principle.

This maxim in regular talk means that once put together in code, the principles governing a smart contract or protocol must remain immutable, much like the blockchain history is nigh impossible to change. After all, immutability in blockchain, as discussed above, is a major factor that serves as a cornerstone of its integrity.

In practice, it turned out that about 80% of the Ethereum community were okay with rewriting history if it meant a catastrophe would be undone. To the remaining 20%, however, changing history would be the catastrophe, creating an incident for further changes in protocol or ledger. This was the reason the Ethereum Classic supporters chose to keep the history unchanged after The DAO hack.

Immutability as it was upheld by Ethereum Classic meant that the value lost in the incident was lost forever but the trust in the solid, unyielding and uncompromising vision in the ‘code is law’ maxim was kept. The current Ethereum, conversely, prioritized adaptability and collective decision-making over the ‘unchangeable’ nature of the blockchain and even censorship resistance.

Development Activity and Community

It comes as no surprise that the decision to roll back and bail out The DAO was supported by more financially-oriented users and hardcore developers and miners were behind Ethereum Classic. However, did it influence their development and ecosystems? Is the community makeup the same today or did it also change?

When it comes to development activity, Ethereum is no doubt the winner with thousands of contributors and full-time developers. In contrast, the ETC-related repositories show a lot scarcer updates, although this is not to say no work has been done. Some of the EIPs (Ethereum Improvement Proposals) were implemented in ETC clients, such as the ones introduced to ETH by the Berlin hardfork. Some ETC updates were necessitated not by innovation but by security concerns, like Thanos in 2020, which followed a series of 51% (or consensus) attacks.

Likewise, the developers represent only a part of a broader community, and Ethereum has a larger and more engaged audience, compared to Ethereum Classic. This is evident through many facts, from larger number of conferences with considerable turnout (e.g. EthCC) to current social media presence (13.9% vs. 0.15% Social Dominance for Ether vs. Ethereum Classic respectively, according to Lunarcrush). It could be argued that the community of Ethereum Classic could be the tighter and more dedicated one, but the apparent lack of activity disproves this.

Nevertheless, both platforms see projects being built on the platforms, of course, to a varying degree. Ethereum’s ecosystem of dApps and DeFi (decentralized finance) protocols accounts for billions of dollars in value locked, and enables activities like permissionless trading, lending and borrowing, gaming, NFT trading and collecting, and more. Ethereum Classic at its core remains very similar and can do most things ETH does but fewer builders means the range of available dApps is in the dozens, not thousands.

Market Value and Adoption

When it comes to market standings, one glance reveals the gap: Ether (ETH) is second only to Bitcoin with a $455.14B market cap today. In contrast, Ether Classic (ETC) currently has a $3.22B market cap at the time of writing, about a 1% of the cryptocurrency that kept the original name.

Market valuations do not always reflect the network stats and adoption rates but in this case, they also rather pointedly demonstrate the difference. Ethereum is the better known network that sees more use: it averages 1.7 million transactions daily, with over 10 thousand contracts deployed daily. Similar metrics for Ethereum Classic show the following picture: over 20 thousand transactions daily on average and 100–300 contracts deployed each day.

Realistically, market standings, while more or less reflecting the difference in adoption rates, should not be the grounds to write off Ethereum Classic completely. It is still a top-50 cryptocurrency in the market with the perceived total value of the project in billions of dollars. Although compared to Ether (ETH), which is definitely the safer and less volatile investment option between the two, ETC is the riskier one, it can present more opportunities to capitalize on price swings, as seen in the chart above.

Side-by-side Comparison of the Ecosystems

Summing up all of the above, here is how Ethereum and Ethereum Classic ecosystems compare:

Ethereum or Ethereum Classic — Making the Call

For investors, choosing between one or the other is not really the only option, since you are free to hold both. However, ETH and ETC are closely correlated, so allocating capital to both is not the best diversification strategy. You can do it if you pay particular attention to volatility when trading or managing allocations but for those who would like to settle on one, ETH is the more established digital asset.

For developers, the choice also has more leeway than one or the other due to both being mostly compatible. Nevertheless, you would want to commit to one platform, depending on your priorities. Do you prefer to have community support, tools and a competitive ecosystem? Then the obvious answer is Ethereum. Do you find yourself agreeing with the ideas of the Classic community? The ETC ecosystem could really use more builders and contributors.

For any type of crypto user, the choice comes down to alignment with goals and values. Blockchain purists are one of the reasons Ethereum Classic survives with some relatively decent traction and standing. If your focus is instead on liveness and adaptability, and you do not mind the path taken after The DAO incident, then by all means, make the obvious choice.

Conclusion

Ethereum Classic today still has the reputation of the offshoot between the two, which is a misconception. Since the fork happened, their paths diverged, and ETC offers more than an ideological alternative to Ethereum: it also attracts the crowd that prefers the security of Proof-of-work and Bitcoin’s supply dynamics.

Which side are you on? Share in the comments under the article or learn more about ETC and ETH from our blog! For a live stream of fun and insightful content, follow us on social media: X, Facebook, and Telegram.