What is Ethereum Classic?
Ethereum Classic (ETC) is to Ethereum as Bitcoin Cash is to Bitcoin—the product of an intense practical and philosophical disagreement within the crypto community. In most respects, it is identical to Ethereum, though this will become less true over time as the two currencies continue to pursue different development goals after their division in 2016. The history behind this split explains a lot about what Classic is, why it exists, and how it works now.
It started in May of 2016, with a “Decentralized Autonomous Organization, or “DAO.” A DAO refers to any company that runs on a blockchain, but “the DAO” generally refers to the specific entity involved in this narrative. A quick note for clarification: the DAO and Ethereum are completely different—there was never a problem with Ethereum, only with the external app.
The DAO’s goal was to become a decentralized investment bank devoted to funding decentralized app development by loaning out investors’ funds using smart contracts. By June, the DAO had become the most successful crowdfunding endeavor in history, having collected 11.5 million ETH (168 million USD).
On June 17th, however, an attacker exploited several recently-discovered security flaws in the DAO (not in Ethereum; the blockchain was never in danger) to transfer about 3.6 million ETH (50 million USD) to their account. The theft was noticed quickly and the stolen funds temporarily locked down as the community discussed possible fixes.
Option one was to do nothing–cryptocurrency was, some argued, meant to be completely free from centralized interference. Option two was a soft fork. This would have had a low impact on the blockchain and reversed the attack but would have left the network open to further attack. Option three, which ended up winning the majority vote, was for a hard fork. This created an entirely new “official” blockchain where all legitimate transactions were kept and all DAO transactions reversed.
The old blockchain, while incompatible with the new version of Ethereum, remained intact as Ethereum Classic. It continues to find its main source of support among the segment of the crypto community that fought against the “bailout” of a “too-big-to-fail” bank. Since the split, the Classic community has been developing and trading with no major problems–except one.
The hard fork left the original blockchain unchanged, meaning that the attacker’s stolen ETH became ETC. Over the course of the next few months and years, the attacker moved the funds out of the account. He has presumably profited quite a bit, and will, in all likelihood, remain anonymous forever.
How Ethereum Classic works
Aside from the DAO heist remaining on the books, Ethereum Classic is the same as Ethereum on almost every level. The differences will become more pronounced over time, especially as Ethereum plans a major overhaul to improve speed and scalability, but the basic concepts remain the same.
Ethereum is a blockchain that can also run code, or smart contracts, which makes it far more than a simple currency. Computers connected to the network are constantly sharing and validating information, and this “world computer” trait is still present in Classic, albeit on a smaller scale.
Miners on the Ethereum Classic network still use computing power to find new blocks and validate transactions, and everything remains as secure and functional as on the main network. It may be attractive to those interested in the potential of Ethereum, but who prefer a network with less oversight.
Callisto, a cryptocurrency running on the Ethereum Classic protocol, is due to launch in early March. Upon its release, there will be an “airdrop” of Callisto tokens: everyone holding ETC will receive one Callisto token for every Classic token they own.
How to buy Ethereum Classic
Ethereum Classic is mostly bought and sold on Binance. You can’t buy it with fiat currency yet (USD), so here is a quick guide on how to buy Ethereum Classic starting with fiat:
1. Buy Bitcoin or Ethereum at an exchange that uses your fiat currency on Coinbase.
2. Transfer your BTC or ETH to an exchange that supports Ethereum Classic. Currently, Binance is the best choice. (Tip: if you bought BTC/ETH on Coinbase, look into using GDAX to avoid transfer fees)
3. Buy Ethereum Classic by trading your BTC/ETH for their coin, and you’re done!
Either as a gesture of goodwill or a taunt, the DAO attacker has donated about 1300 USD worth of ETC to the Ethereum Classic development team.