Coin of the Week: Ethereum Classic [ETC]
Before 2016, there was just one Ethereum coin, but after the infamous DAO attack, the community behind Ethereum, as well as the coin itself, split. The majority of the community was in support of a hard fork that would erase the attack, while the minority stayed true to the original chain.
What was the infamous “DAO Attack”? Let’s start out by first explaining that the DAO (Decentralized Autonomous Organization) was a huge project on Ethereum’s platform. It utilized smart contracts to essentially create a sort of mutual fund that would give funding to other potentially successful DApps. People who bought DAO tokens would be a part of this collective fund. For a DApp to be approved on the DAO, it needed an approval from the board (this board consisted of the most prominent faces in the Ethereum community) and then at least a 20% approval from the token holders.
The DAO project was undoubtedly the biggest project at the time. In a matter of 28 days the DAO raised around $150M in Ether, which at this point accounted for roughly 14% of all the Ether in circulation.
However, the DAO’s protocol had some fundamental flaws in its code. The part which became problematic was its policy that allowed participants to opt out of the DAO, called the “Split Function”. In the perfect world, people could get back their Ether if they no longer wanted to be a part of the DAO, or create their own “Child DAO” (their own fund), but because of a fundamental flaw in the code, one person (or a group of people) was able to steal $50M from the DAO (equating to 1/3 of the funds).
After the attack, Ethereum’s bewildered community split in two. The majority of the people considered different opportunities to change Ethereum’s blockchain in a way that people could get the funds back, while a smaller camp stayed true to the saying “Code is Law” and disapproved any changes to the blockchain.
The conflict concluded in a hard fork. Around 90% of people accepted the change where the blockchain was reversed to Block 1,920,000, or the block on the Ethereum blockchain just before the DAO attack, and thus the stolen funds were returned to their rightful owners, whereas 10% remained on the old chain. This old chain became Ethereum Classic.
Interesting facts:
- After the hard fork, most of the leading members of Ethereum moved forward with Ethereum, which left very little manpower to Ethereum Classic. Ethereum has the Ethereum Alliance, consisting of over 200 multi-million dollar corporations (JP Morgan and Microsoft, for example) which support Ethereum, while ETC has a very small group of prominent supporters, the most well-known of them being IOHK, which is better known for developing Cardano;
- Since the split was a hard fork, it meant that Ethereum Classic would not be compatible with the main Ethereum blockchain, thus it won’t be able to benefit from the updates developed by regular Ethereum’s much larger community;
- The Ethereum and Ethereum Classic hard fork is one of the biggest events in blockchain history. It marks the day when Ethereum decided to prioritise its community over one of the fundamental characteristics of blockchain – immutability. This event can be quite controversial, as it meant that Ethereum did exactly what they set out to eliminate in the first place.
Whitepaper: https://coss.io/documents/white-papers/ethereum-classic.pdf
Website: https://ethereumclassic.org/
Coinmarketcap: https://coinmarketcap.com/currencies/ethereum-classic/