🤔 What is Etherium classic ?
Ethereum Classic is an open, decentralized, and permissionless public blockchain, that aims to fulfill the original promise of Ethereum, as a platform where smart contracts are free from third-party interference.
Etherium forked into two separate blockchains in 2016 after $60 million worth of ETH was stolen from one of the applications.
A part of community wanted to hard fork the original blockchain to revert the funds stolen and the other part believed that the code is law and blockchain should not be tampered with every time an application is hacked.
Finally, the Etherium blockchain split into two. Etherium classic is actually the original blockchain in which the stolen funds were not seized.
However, the original blockchain had to change its name to Ethereum classic because Etherium and ETH are patent trademarks of Etherium foundation which was in favor of hard fork to seize funds from hacker.
Etherium classic prioritizes trust-minimization, network security, and integrity. All network upgrades are non-contentious with the aim to fix critical issues or to add value with newly proposed features; never to create new tokens, or to bail out flawed smart contracts and their interest groups.
Etherium classic carries on the original vision of Etherium – code is law, where developers can build truly unstoppable domains which cannot be tampered with.
Ethereum classic has same technology as Etherium and the community share similar philosophy with Bitcoin community.
💡 What role does ETC token play ?
ETC is the native cryptocurrency of Ethereum classic blockchain. It is used for:
- Transaction fee: Users pay ETC tokens as transactions fees(gas) to include their transactions on the Etherium classic blockchain.
- Miner rewards: Etherium classic is a proof of work blockchain. Miners receive ETC tokens as rewards for running nodes.
📝 Origin of Etherium classic
Birth of Etherium
- 2013: Idea for Etherium was conceived by Vitalik Buterin. He also published Etherium white paper in 2013.
- Etherium’s initial coin offering was held( 2,000 ether for 1 bitcoin).
- Dr. Gavin Wood( co-founder of Etherium) published the Ethereum Yellow Paper that would serve as the technical specification for the Ethereum Virtual Machine (EVM).
- 2015: Etherium blockchain was launched.
Slock.it a german startup founded DAO. The DAO was like a venture capital where investors can pool in ETH and collectively vote on which projects to fund using that ETH.
The DAO managed to raise ~$150 million in Ether in an April 2016 initial coin offering (ICO).
DAO code had split function which allowed any investor to redeem their deposited ETH. The reclaimed ETH was subject to 28 days lock-up period before being released to the investor.
On 26 June 2016, a hacker exploited a bug in the split function and drained nearly $50 million worth of ETH.
Security vulnerabilities disclosed
Many developers had highlighted the bug well in advance. On 28 May 2016, a paper was released detailing security vulnerabilities with the DAO that could allow Ether to be stolen.
On 9 June 2016, Peter Vessenes publicly disclosed the existence of a critical security vulnerability overlooked in many Solidity contracts, a recursive call bug.
On 12 June 2016, Stephan Tual publicly claimed that the DAO funds were safe despite the newly-discovered critical security flaw.
The DAO bailout
There were many developers who advocated seizing the hacked funds by altering the state of Etherium chain. Whereas other developers disagreed to bailout DAO.
On 15 July 2016, a short notice on-chain vote was held on the DAO hard fork. Of the 82,054,716 ETH in existence, only 4,542,416 voted, for a total voter turn out of 5.5% of the total supply on 16 July 2016; 3,964,516 ETH (87%) voted in favor, 1/4 of which came from a single address, and 577,899 ETH (13%) opposed the DAO fork.
The expedited process of the carbon vote drew criticism from opponents of the DAO fork. Proponents of the fork were quick to market the vote as an effective consensus mechanism, pushing forward with the DAO fork four days later.
Etherium finally forked into two separate blockchains on 20 July 2016:
- Etherium classic: Where the stolen funds remained with the hacker.
- Etherium: Where stolen funds were seized.
Etherium classic vs Etherium
Over a period of time Ethereum classic roadmap has diverged from Etherium:
- In Dec 2017 an Etherium classic was updated to reduce block rewards by 20% every 5 million blocks until fixed max supply of 210 million is reached in 2042.
- Unlike Etherium, Etherium classic will not be migrating to proof of stake.
Currently, Etherium classic is being developed by IOHK and Etherium classic foundation.
🏛️ Governance model
Anyone can submit code changes, via Ethereum Classic Improvement Proposals (ECIP), to update Etherium classic protocol.
Proposers have to convince all miners to implement changes to their nodes for the update to be successfully implemented by the protocol.
Controversies and hacks
Classic Ether Wallet website attack
On 29 June 2017, Ethereum Classic’s Twitter account made a public statement indicating reason to believe that the website for Classic Ether Wallet had been compromised.
The Ethereum Classic Twitter account confirmed the details released via Threatpost.
The Ethereum Classic team worked with Cloudflare to place a warning on the compromised domain warning users of the phishing attack.
51% double spend attacks
In January 2019, Ethereum Classic was subject to double-spending attacks.
From July through August 2020, Ethereum Classic suffered from more 51% attacks.
😨 Risks and challenges
- 70% of the mining hash rate is under control of just two minniing pools. This makes the project susceptible to 51% attacks in the future.
- Majority of the developers are now working on Etherium, which is seeing rapid development and community growth. Etherium classic does not seem to have any long-term plans/ roadmaps to make it more scalable.
- Competition: A number of layer 1 smart contract blockchains have cropped up that are direct competition with Etherium classic.
Ethereum Classic’s token distribution follows that of Ethereum, as the two chains have a shared history. Before the eventual split sparked by The DAO incident, ETH and ETC were the same asset.
The original distribution event occurred through a public token sale managed by the Ethereum Foundation, which sold roughly 60 million ETH (80% of the initial 72 million ETH supply).
The sale took place between Jul. 22, 2014, and Sep. 2, 2014. The remaining 12 million ETH (20% of the initial supply) were allocated to the Foundation and early contributors.
Of the ether sent to the Foundation:
- 3 million were allocated to a long-term endowment
- 6 million were distributed among 85 developers who contributed prior to the crowd sale
- 3 million were designed as a “developer purchase program” that gave Ethereum developers the rights to purchase ETC at crowdsale prices.
All other ETH (and now ETC) issuance that took place occurred through the process of Proof-of-Work (PoW) mining.
When Ethereum and Ethereum Classic split following the DAO fork (on July 20, 2016), anyone who held ETH now owned equivalent amounts of ETH and ETC.
ECIP-1017 was activated on December 11, 2017. The proposal introduced a disinflationary token issuance policy, in which the block reward is reduced by 20% every five million blocks which means that the total supply would not exceed 210.7 million ETC.
🧐 Indicators to watch out for
- Minning is becoming more competitive as more miners are competing to add new blocks to the blockchain.
- Twitter following is growing.
When individuals voluntarily engage with Smart Contracts on a chain that follows Code is Law, they accept the outcome of whatever logic is defined within those contracts.
If a contract is poorly written or has a mistake, it is not the responsibility of the wider network to “make whole” parties who are not happy with a given outcome. In short, there are no do-overs, bailouts or refunds, unless pre-programmed.
It is not the responsibility of Etherium ecosystem to bail out every time a developer writes poor code and an app is hacked because of it.
Such an act of bailing out victims exposes the ecosystem to moral hazards, where developers and users will expect the blockchain to be amended every time they lose their funds to a hack.
After the hard fork, Etherium kept most developers and the community but it lost out on most important value of blockchain – immutability.
For many Etherium classic will remain an annoying reminder of this lost value in times to come.