What is the Difference Between Ethereum and Ethereum Classic?
One of the most common questions for newcomers to crypto is "what is the difference between Ethereum (ETH) and Ethereum Classic (ETC)." It's a valid question, given they share a similar logo and name. While they are two separate crypto networks with different native tokens (ETH vs ETC), they even share a common history. In this article, we will look at how Ethereum Classic was created and how it differs from Ethereum.
What is a fork?
Blockchains are made up of blocks that store transactions and are chained together using cryptography. Mining (aka Proof of Work) is the process of determining which block is going to be added next. However, there can be situations where the network has a disagreement around which blocks are valid and which ones are not. This can lead to a "fork," causing two separate blockchains to be created. Usually, the side of the fork that maintains the majority support is the one that retains the original name whereas the less supported chain is forced to select a new name.
What is The DAO?
Back in mid-2016, there was a special project released known as The DAO. It had an initial coin offering (ICO) and anyone that deposited their ETH into the contract would purchase tokens that would represent a share in The DAO. You could say it was the original DeFi app created on Ethereum. At its peak, almost 10% of all ETH in existence had been locked up into The DAO. However, an attacker was able to exploit the contract and assign themselves all the ETH in the DAO contract, but they couldn't withdraw the money from the contract for about 30 days. As a result, the Ethereum community started thinking about how to resolve the situation.
After much deliberation, the community decided to put out an update for all the node operators that would patch the issue in the DAO contract and allow the rightful owners to withdraw their ETH. However, a small minority in the community thought that this went against the ethos of Ethereum and decided not to install the update. As a result, there was a fork in the original Ethereum network and all the nodes that didn't install the fix created a separate blockchain known today as Ethereum Classic. Everyone that held ETH at the time of the fork also got an equal amount of ETC. So while Ethereum and Ethereum Classic share the same history before the 2016 fork, everything post-fork is different between the two. On Ethereum Classic, the attacker was able to withdraw the ETC funds, but on Ethereum users were able to withdraw their deposited ETH from the DAO.
Today, Ethereum and Ethereum Classic represent separate networks and communities. One cannot transact or send tokens from Ethereum to Ethereum Classic or visa versa, without going through a bridge or centralized exchange. Their respective native assets (ETH, ETC) are distinct from one another and hence the market has priced them very differently. Ethereum has nearly 56M wallets holding ETH, $100B in stablecoin liquidity, $9B in tokenized BTC liquidity, and a bustling DeFi economy. While Ethereum Classic is a completely separate chain, with notably less developer and market activity.