Ethereum is an open-source software platform that enables smart contract functionality and allows programmers to build decentralized applications based on this smart contract technology. Smart contracts are programmatic agreements that can execute automatically when certain conditions are met.
Ether (ETH) is the native token of the Ethereum network. ETH is used to process transactions and give developers power to run their programs. Ethereum Classic (ETC) is basically an older version of Ethereum, but there are significant differences between the two currencies.
What Is Ethereum Classic (ETC)?
Ethereum Classic is the original Ethereum blockchain and ETC is its native token.
Ethereum (ETH) is the blockchain that resulted from a hard fork of the network that happened in July 2016. ETH and ETC share the same blockchain record prior to a hard fork. Since they both stem from the same project, ETC classic has many of the same features as ETH.
To understand the difference between ETH and ETC, and whether they make sense as part of your crypto portfolio, it’s important to first have a firm grasp of how smart contracts work.
What Is a Smart Contract?
Simply put, a smart contract is an agreement between two parties written in code. The blockchain will execute the terms of the contract automatically, when conditions agreed upon by the two parties are met.
Because blockchains are also immutable (their records cannot be changed), smart contracts create a lot of opportunities for certain businesses to do things faster, more efficiently, and in a way that doesn’t require a third-party.
Smart contracts are steadily becoming a bigger part of how crypto works. Many different types of cryptocurrencies can use smart contracts, but Ethereum was the first and remains the most prominent leader in the space.
Ethereum Classic Definition
Ethereum Classic (ETC) is simply the first version of the Ethereum blockchain. Before July 2016, Ethereum Classic was known as “Ethereum.” Today, what we refer to as “Ethereum” is actually the newer blockchain that was hard forked from the Ethereum Classic blockchain.
Ethereum Classic History
This history gets quite complicated and technical. A simplified summary of the altcoins might go something like this:
• Developers created the DAO (decentralized autonomous organization) on Ethereum with the goal of funding future development of decentralized applications on Ethereum.
• The DAO had its own tokens that were interchangeable with ETH tokens and executed contracts using Proof-of-Work.
• After hackers took advantage of a flaw in the DAO smart contract and stole $50 million worth of ETH, the community decided that the network would create a hard fork as the solution to the security challenges.
• The new blockchain created as a result of the fork would be called Ethereum and use Proof-of-Stake to execute contracts. The old blockchain would be called Ethereum Classic.
Ethereum vs Ethereum Classic
Both networks allow software developers to use smart contracts to build centralized applications.
One pro of ETH (which is also a con of ETC) is that it has a larger market cap and user base than ETC. This makes ETH less volatile overall, gives the token higher liquidity, and makes it more popular on exchanges. That means that ETH may have less investment risk than ETC.
ETH also has the added use case of being fuel or “gas” for decentralized applications (dApps). Many developers build decentralized finance (DeFi) protocols on top of Ethereum. To use those kinds of apps, users need ETH tokens. Sometimes ETH is the only token that users can exchange for other tokens necessary for participating in the platform. Other times, decentralized applications require small amounts of ETH to perform actions.
For example, Crypto Kitties was one of the first big dApps. The game allowed users to buy, sell, and trade virtual cats that could be “bred” with one another, creating new unique virtual cats. To participate in the game, users needed ETH tokens.
ETH also has stronger support from something called the Enterprise Ethereum Alliance. This group has more than 200 members including big companies like Microsoft, VMWare, Intel, CitiBank, JP Morgan Chase, and more.
At the time of writing, ETC was the #18 cryptocurrency with a market cap of just over $5 billion. By comparison, Ethereum (ETH) is the second-largest cryptocurrency with a market cap of about $212 billion. Both tokens can be traded as speculative assets and both are listed on many of the most popular crypto exchanges.
Bitcoin remains the largest cryptocurrency, with a market cap of $556 billion.
The Future of Ethereum Classic
What is Ethereum Classic when it comes to the future? In all likelihood, not much.
Looking at Ethereum Classic vs Ethereum, it’s not hard to see that Ethereum has better prospects for the future. There’s more trust in the ETH network, it has more backing, and it has a much larger market cap when compared to the Ethereum Classic value. There are also a lot of DeFi platforms and other dApps built on Ethereum, more so than on any other smart contract platform.
To make matters worse, the Ethereum Classic network has suffered several 51% attacks. This can happen when attackers gain enough hashing power to control the majority of the network. Then they can alter the blockchain, leading to potential problems like double spent transactions, where users can send the same coins more than once.
Ethereum Classic is the original version of Ethereum, which has experienced several security issues, including several attacks since the original DAO hack, and the problem doesn’t yet appear to be fixed. Even if the network were to be made more secure, restoring people’s trust in ETC could prove difficult when there are so many other types of cryptocurrencies available.
Whether or not you want to invest in ETC, you may still be interested in cryptocurrency. A great way to start building your portfolio is via the SoFi Invest® brokerage platform, which allows you to buy and sell cryptocurrencies as well as other types of investments, such as stocks and exchange-traded funds.
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