Ethereum VS Classic Ethereum

The fight between Ethereum and Ethereum Classic is both ethical and ideological. If you’ve been associated with cryptos, there’s no chance you don’t have some theory on it.

Before we begin to clarify the fundamental distinction between the two and draw our own conclusions, it is important for us to learn a little bit about history.

There were a lot of things that had to happen to us in order to arrive at this conclusion. So, let’s turn the clocks back and search some of the most important moments in not only Ethereum history, but cryptocurrencies in general.

Creation of the DAO

The Ethereum network as a whole works on the basis of smart contracts. For the uninitiated, smart contracts are essentially how things are done in the Ethereum ecosystem. To put it in layman’s words, smart contracts are digital contracts that execute and promote the provisions of the contract itself.

The DAO, also known as the Decentralized Autonomous Organization, was a dynamic smart contract that would revolutionize Ethereum forever. It was essentially supposed to be a collective venture capital fund that will finance all potential DAPPS in the eco-system.

The way it worked was pretty easy. If you decided to get a say in the path of DAPPS that would be run, you would have to purchase “DAO Tokens” for a certain amount of Ether. The DAO tokens are signs that you are now technically part of the DAO system.

How are the DAPPS going to be accepted and built? Okay, first of all, they need to be whitelisted by the curators, who are practically recognized people in the Ethereum universe. They will be voted on by the holders of the DAO token upon collecting their acceptance stamp. If the plan is approved by 20% of the referendum, they will get the requisite funds to get going.

The promise of the DAO and the versatility, power and total accountability it provided is unprecedented; people jumped in to get their share of the pie. It raised over $150 million worth of ether in a crowdsale within 28 days of its founding. At that time, 14 percent of all ether tokens had been issued.

You may be thinking, that’s all fine, but how do you get out of the DAO? What if a DAPP gets accepted that you’re not a big fan of, then how can you opt out of the DAO? To allow this, an escape mechanism was created called the “Split Function.” Using this feature, you can get back the ether you have spent and, if you wish, you could also create your own “Child DAO.” In addition, you could break up with several DAO token holders and create your own Child DAO and start taking proposals.

There was one clause in the deal, so after breaking off from the DAO, you will have to hang on to your ether for 28 days before you could use it. And for the time being, everyone looks good and spiffy … well, there was a question. A lot of people saw a big void and called it out. The DAO designers have told us that this is not going to be a major deal. The thing is, it was, and it produced the entire storm that split Ethereum into Ethereum and Ethereum Classic.

DAO Attack

On 17 June 2016, someone manipulated this very loophole in the DAO and siphoned off one-third of the DAO’s assets. That’s around $50 million. The backdoor found by the hacker(s) was very simple in retrospect.

DAO Attack

If you wanted to leave the DAO, you did so by submitting a request. The separating method would then follow the following two steps:

What the hacker did was render a recursive function in the request, and this is how the splitting process went:

This went on and on until $50 million worth of Ether was pulled out and deposited in the Child DAO and, as you might imagine, hysteria passed through the entire Ethereum world.

Note: Before continuing with the post, let us make a simple distinction. The hack happened because of a DAO problem, not because of any flaws with the Ethereum itself. Ethereum is running in the background while DAO is working on it.

As Gavin Wood, the co-founder of Ethereum, puts it, to blame Ethereum for the DAO attack is like claiming “The Internet is down” every time a website goes down.

The outcome of the DAO Assault

Now, though Ethereum is in no way to blame for what happened to the DAO, the event destroyed the trust that people had in cryptocurrencies in general. The price of ether fell from $20 to $13, and people were publicly holding funerals for it.

Although the hacker took away $50 million worth of Ether, it was still sitting in the Child DAO, and could not yet have access to it because the DAO smart contract clearly specified that any spent ether taken out of the DAO would not be accessible for 28 days. With this in mind, the Ethereum group and the developers have agreed to take action and three possible options have been identified:

Nobody Does Anything

Some people claimed that making some edits will be contradictory to the very existence and ideology of the Ethereum itself. After all, it’s meant to be immutable and “code is law.”

A lot of people weren’t satisfied about this, and the majority voted to go for the Soft Fork.

What Is A Soft Fork?

If a chain has to be modified, there are two options to do this: a soft fork or a hard fork. Think about the soft fork as a backward compatible software upgrade. What does that mean to you? Suppose you are running MS Excel 2005 on your desktop and choose to use the built-in MS Excel 2015 spreadsheet, you can still use it since MS Excel 2015 is backward compatible.

What Is A Soft Fork?
Image credit: Vitalik Buterin

But, not all features that you will experience in the newer edition will be available to you in the older version. Coming back to our MS Excel example again, assume there’s a tab that lets you place the GIFs in the spreadsheet in the 2015 edition, you won’t see the GIFs in the 2005 edition. So essentially, you’re going to see all the email, but you’re not going to see the GIF.

That’s literally what Ethereum was trying to do with their blockchain, a soft fork where it’s your decision whether or not you want to update it, but even the updated users and non-updated users will still communicate with each other. The aim was to fully encrypt the ether that the hacker stole by avoiding and segregating any blocks that involve a transaction that will help the hacker navigate through their stolen ether.

It looked like a brilliant idea, and the bulk of the Ethereum community was on board, but then a problem emerged, a problem that took the whole group into another predicament. The deployment of a soft fork would result in a “Denial of Service” (DoS) attack vector.

Understanding The Soft Fork DoS.

All mining operations are awarded by “Gas” in the Ethereum ecosystem. This is the primary way that miners are safe from DoS attacks. Suppose someone tries to target the network by loading it with transactions that require complex calculations. Miners will then sit down and run these computations, and even though they fail to complete them correctly, they’ll get a Gas score that is equal to a number of computations they’ve completed. So more time consuming and impossible to quantify, the more Gas they obtain, and at the same time, the intruder would have to expend a lot of his own resources to make such attacks possible.

But what’s going to happen is, the second this soft fork is introduced, the attacker can have a way around this device. Now the attacker will fill the network with transactions that connect with the DAO and make the miners perform endless complicated computations for little to no price of gas and at no monetary cost to the attacker. In reality, the attacker can also trick miners to solve malicious computing by setting a high price for Gas.

All this meant was that it wasn’t a no-go for the soft fork. This meant that there was only one way for the Ethereum group to go, and it was the “Hard Fork.”

What’s a Hard Fork?

The key distinction between a soft fork and a hard fork is that it’s not backward compatible. If it’s utilized, there’s just no going out. If you do not use the updated version of the network, you will not be able to download any latest changes or communicate with any other device users.

What's a Hard Fork?

The way the hard fork of Ethereum is meant to operate is that it is a branch that splits from the main block chain at a particular stage (in this case right before the DAO attack). Up to that point (block 1,920,000) the old chain and the new chain are the same, but shortly after the hard fork, the two chains are entirely separate entities. The new chain was called “Ethereum” or “ETH”.

This hard fork was created primarily to refund all the money that was taken from everyone by the DAO through a smart contract refund that had the primary purpose of “withdrawal.” Hence, for every 100 DAOs, 1 ETH is granted to the holders of the DAO tokens. This idea created a great deal of uproar in the group, and there was a break. The people that were “Anti-Hard Fork” declined to move to the latest blockchain and wanted to remain in the old blockchain calling it “Ethereum Classic” or “ETC.”

And that is where we come to the fight that rages throughout the Ethereum world as we speak, the war between ETC and ETH. This fight is interesting, because it is ethical and ideological. This is the very moment that Gavin Wood, the co-founder of Ethereum, has named “the single most significant moment in the history of cryptocurrencies after the inception of Bitcoin.” So let’s put on our microscopic lenses and analyze them in depth.

What’s the Ethereum Classic? Ethereum vs Ethereum Classic

People who rejected the hard fork chose to adhere to the original chain called “Ethereum Classic.” Ethereum Classic stands at $17.09 a coin (according to CoinMaketCap). Let’s take a look at what the graph looks like:

Ethereum Classic charts

The market cap for ETC currently stands at just over $1.5 billion and is actually the 5th most expensive cryptocurrency in the world.

So, why did people stick to the old chain when all the heavy hitters of Ethereum, including founders Vitalik Buterin and Gavin Wood, moved to the new chain? It’s a philosophical question. You see, as Ethereum, and cryptocurrencies in general, were launched, it was meant to be a stand against financial corruption. The reason the blockchain was rendered decentralized was because they needed the system to be resilient to human whims.

That’s why, to many ETC sympathizers, the hard fork is a simple cop-out, because if you alter the whole chain with one hack, it defeats the intent of Ethereum in the first place. You’re demonstrating that the blockchain can be influenced by human whims. And this has resonated with a lot of “crypto-idealists.” Some pretty heavy hitters like Barry Silbert, CEO of Grayscale, have gotten behind ETC.

Now all this sounds well and fine, but there are certain issues with Ethereum Classic that absolutely can not be overlooked.

Issue with the Ethereum Classic

The key concern with the ETC is the lack of backward compatibility with the Ethereum Hard Fork. All the heavyweights of the Ethereum group have moved on to the new chain, which ensures that anybody who is part of the ETC will not be able to receive any changes made by the ETH. The perfect example is the transfer of ETH from Proof of Work (PoW) to Proof of Stake (PoS). ETC won’t be able to enforce this because their platform doesn’t allow changes to be implemented.

There are far more sinister issues with the ETC, some of which are conspiratorial. Many find the ETC to be an infringement on Ethereum itself. What does that mean? Post hard fork when the group was split and weak, many claim that the anti-Ethereum camp openly supported the ETC, just to destroy the party. Even more, influential bloggers including David Seaman have claimed that Classic is an insecure orphan chain that is being marketed in a manner that would be unlawful if Ethereum were a publicly traded company, which it could inevitably be.

Ethereum Hard Fork or ETH

ETH is the product of the hard fork and what is now known as the “new Ethereum.” As for writing, ETH stands at $260.94 (according to CoinMarketCap). Let’s see the graph:

Ethereum Hard Fork charts

The market cap for ETH currently stands at an incredible $24 billion and is currently the 2nd most expensive cryptocurrency in the world behind bitcoin.

ETH is the latest version of Ethereum, no matter what the critics say. The original heavy hitters are now part of the system, and ETH is also the one who is going through the most innovative improvements (like the aforementioned transition from POW to POS). ETH was created for one reason and one reason alone – to restore the funds taken by the “DAO intruder” to the rightful owners.

ETH is much more than what seems to be on the surface; it is a triumph for the Ethereum culture. They came together after facing the worst hack in cryptocurrency history, stood together and made it better than their predecessor.

But having said that, as we’ve discussed before, there’s one problem with ETH, and according to pro-ETC supporters, it’s an ideological one.

The Issues with ETH

As we described before, the creation of ETH goes counter to the notion of the immutability of the blockchain and the ideology of “code is law.” In the minds of anti-ETH people, the hardfork was a cop out of Ethereum, so they should have embraced the main blockchain for what it was.

Another question that was posed was how someone would say for sure that no more hard forks would take place in the future subject to human whims? What if there are several hard forks to build various versions of Ethereum? What if hundreds of different implementations of Ethereum are running at the same time? Isn’t it going to massively devalue it and cryptos in general? (Although the majority vote of the Ethereum group would be required to allow these grand changes).

Let’s list the pros and cons of both Ethereum Classic & Ethereum

Ethereum Classic

Pros

Cons

Ethereum

Pros

Cons

Why do you need to support ETH

Having explored the discrepancies between ETC and ETC in depth and looking at the past of Ethereum itself, which camp are you heading towards? If you want to be part of history and want to join the Ethereum project, it goes without saying that you should be in camp ETH. There are huge holes in the claims of the anti-ETH people, let’s look at them.

Point #1: ETH stands against blockchain immutability

Although it is accurate that the hard fork went against immutability, the conditions around the move need to be addressed. The DAO assault took one-third of DAO’s ether stocks, which in turn accounted for 14 percent of the world’s ether. After such an assault, something needed to be done to ensure that justice had been served and that was just what the DAO force had accomplished. Not only did it greatly devalue the amount of ether owned by the intruder, it also reimbursed every holder of the DAO token.

Point #2: This may be the launch of a series of hard forks

This skepticism is clearly baseless because of one key reason: the Ethereum ecosystem is decentralized and democracy. You can not make these big decisions until the rest of the people consent to it.

Ethereum Classic – Conclusion

Ethereum has made a remarkable recovery from a total tragedy, and it seems like it’s going to meet all the hopes people had before it began. Rather than everything else, the real strength of Ethereum lies in its full reach. It’s not just a currency; it’s a forum on which people can create projects that shape the future. If decentralization is really the future, then Ethereum will be at the front and middle of it.

Now, this begs the question: what does this mean for ETH and ETC? ETH has all the leading developers on its side and is going to grow from strength to strength. Now, with the help of the EEA, it’s just going to get stronger. The value of every currency derives from the trust that people have in it, and because of all these reasons, trust in ETH can only rise. A lot of experts expect that ETH will be the first cryptocurrency since Bitcoin to cross the $1000 barrier.

Unfortunately, the same can not be stated for ETC. In the eyes of the people, the ETC will always be the black sheep of the Ethereum tribe. As of now, ETH is almost 15 times more expensive than ETC, and it’s really not going to get any better. Moreover, the fact that ETC is considered to be full of scammers further decreases the confidence that people have in it, which in turn reduces its interest. Are we saying it’s going to disappear completely from the market? No, no. Are we saying it doesn’t have a lot of growth potential? Perhaps, perhaps not. The wonderful thing about blockchain space is, as Milton Fridman said, free choose.

ETC decided to hold the chain and move on, that’s the magic of blockchain technology and free capitalism.

The future is bright for ETH, and it will continue to grow. It’s evidence of what the Ethereum ecosystem is capable of. They were faced with a major problem, stayed together and came up with a genuinely beautiful solution. ETH is the future, and if you are a fan of Ethereum and believe in what it stands for, you will certainly be in camp ETH.