Ether Explained - Chapter 5: Ether Classic (ETC) vs. Ether (ETH)
Vontobel now offers investors access to the crypto currency «Ether». But what is Ether? And why has the second best-known crypto currency gained so much popularity in such a short time? In eight chapters, we want to give you high-quality knowledge about the exciting topic of «Ether».
After the DAO hacker attack the community decided to carry out a so called «hard fork». From Ethereum two different crypto currencies emerged: Ethereum Classic (ETC), which still stuck to the old Ethereum blockchain and Ethereum (ETH), which was separated from the original blockchain and now exists independently from ETC. This was followed by an ideological and ethical battle between the two crypto currencies. Let's take a closer look at the reasons why there is Ethereum on one side and Ethereum Classic on the other.
Ethereum vs. Ethereum Classic
Those who were against the Hard Fork decided to stay with the original Blockchain, which they called Ethereum Classic (ETC). The market capitalisation for ETC is currently USD 0.6 billion*, the 21st largest crypto currency in CoinMarketCap's crypto ranking. According to Kraken, you have to pay USD 6.15* for an ETC. The new blockchain kept the name Ethereum (ETH). It is the better-known crypto currency and currently has a price of USD 208.89* for one ETH. The market capitalisation for ETH is currently USD 22 billion* and is therefore in second place in the cryptro ranking.
Advantages Ethereum Classic
So why did people stick to an old blockchain when all the well-known Ethereum supporters, including the founders Vitalik Buterin and Gavin Wood, moved to the new blockchain? The answer is more philosophical. In their opinion, once a code standard has been set, it should not be changed («Code is law»). The blockchain is therefore untouchable and should not be changed, regardless of the outcome. Once the blockchain has been modified, you have to do it again and again if there are difficulties. The blockchain has been made unchangeable so that the system is resistant to human moods. But they criticize that the blockchain was nevertheless influenced by human moods. And this has triggered resistance among many «crypto idealists».
Ethereum Classic still has a hard time getting past its «mother» Ethereum, but with 21th place in the crypto currency ranking, ETC is still at the upper range. System improvements have also been made at Ethereum Classic. Significant innovations such as even greater decentralization are intended to prevent concealment, corruption, inefficiency and stagnation in the future. Although the operators believe in the original, a disaster like the one in 2016 cannot be repeated, according to the creators of Ethereum Classic. They want to develop more freely, more transparently and openly for discourse in the future. There should be no more transactions behind closed doors.
Disadvantages Ethereum Classic
The main problem with the ETC is the lack of downward compatibility with the Ethereum hard fork. All the famous supporters of the Ethereum community have joined the new ETH blockchain. Anyone who participates in the ETC also has no access to ETH updates. The best example of this is the change of ETH from Proof-of-Work (PoW) to Proof-of-Stake (PoS). ETC will not be able to implement this because its software does not allow these updates.
At the moment, Ethereum Classic still lacks comprehensive external financing. In malicious forums, ETC is sometimes described as a speculative object or even fraudulent. Many even consider ETC an attack on Ethereum itself: Prominent bloggers like David Seaman have reported that «Classic is an insecure orphan chain being promoted in a way that would be illegal if Ethereum were a publicly traded company.»
ETH was founded for a single reason: to return the stolen Ether from the DAO hacker to its legal owners (the DAO token holders). It is also a victory for the Ethereum community: It has overcome the worst hack in the history of crypto currencies and formed a network that is stronger than its predecessor. ETH is also undergoing the most revolutionary changes (such as the aforementioned change from PoW to PoS).
It is true that the hard fork speaks against the immutability of the blockchain, but the circumstances for the modification must be taken into account. The DAO attack stole a third of the DAO's Ether supply, which in turn accounted for 14% of the total amount of Ether. Therefore, it is dangerous to surrender such a large amount of Ether to a malicious attacker. After this attack, something had to be done to ensure that justice was preserved. This is exactly what the hard fork has achieved. Not only did it devalue the Ether the attacker had in his possession, but it also compensated every DAO token holder. Therefore, the concerns that this could be the beginning of many hard forks are pointless, because the Ethereum community is decentralized and democratic. Such essential decisions can only be made if the majority of the network agrees. Moreover, Ethereum is still at a very early stage where mistakes can happen that can be corrected at a later stage. In addition, the rescue operation protects investors from legal action and prevents regulatory intervention.
ETH is growing exponentially and has the majority of supporters who have produced Ethereum on its side. ETH is backed by a group of 270 companies called the Enterprise Ethereum Alliance (EEA). It aims to establish smart contracts with Fortune 500 companies using blockchain technology. In addition, the new version is constantly updated with the latest updates.
But ETH also has its ideological problems. In the eyes of the anti-ETH people, the advocates of ETH should have accepted the main blockchain as what it was - even after the hack. Moreover, how can you be sure that in the future there will be no more hard forks that are subject to human moods? What if there are several hard forks that create different versions of Ethereum? What if hundreds of different versions of Ethereum are kept alive at the same time? Will this not lead to a strong devaluation, even for crypto currencies in general?
Conclusion: Ethereum is far ahead of Ethereum Classic
After the DAO hack, Ethereum's reputation suffered massively. However, ETH is proof of what the Ethereum community is capable of. It faced a severe disaster, stuck together and found an elegant solution. Ethereum is not just a currency, but a platform on which projects can be built. If decentralization is indeed the future, then Ethereum will be at the forefront. ETH has all the leading developers like founder Vitalik Buterin at its side. The value of a currency results from the trust that people place in it, and due to all these factors the trust in ETH will only grow. Many experts even predict that ETH will be the first crypto currency since Bitcoin to break the USD 1,000 threshold in the future.
Unfortunately, this cannot be said for ETC. Some claim that ETC will always be the "black sheep" of the Ethereum family. At the moment ETH is almost 34 times more valuable than ETC. Moreover, the fact that ETC is known to be fraudulent only reduces the trust people have in ETC, which in turn reduces its value. However, ETC decided to keep their blockchain and develop further. That is the beauty of the blockchain mechanism and free -market capitalism.
*As of 30 July 2019
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