Ethereum 2.0 is the new and improved version of the original Ethereum project, while Ethereum Classic is a smaller, less well-known fork from the original Ethereum blockchain, dating back to 2016. The native coin of Ethereum 2.0 is ETH, unchanged from the original Ethereum project. The native coin of Ethereum Classic is ETC.
Ethereum 2.0 features a series of innovations and upgrades that became known as The Merge, when the project shifted from a proof-of-work system to a more efficient proof-of-stake algorithm in September 2022.
Ethereum Classic, meanwhile, still exists, but ETC has a much smaller market cap and lower price compared with ETH.
What Is Ethereum 2.0 (ETH)?
Although Ethereum is the second-largest crypto by market cap, the road to Ethereum 2.0 has been long and complicated.
History of Ethereum 2.0 and Ethereum Classic
It helps to think of Ethereum as evolving in three stages:
• The original Ethereum project and crypto (ETH) were created by Vitalik Buterin and launched in 2015 as the first programmable blockchain.
• In 2016, a hacking incident resulted in a hard fork of that original blockchain, which divided the Ethereum project in two. Users loyal to the original blockchain became part of Ethereum Classic — essentially the original Ethereum, untouched — creating a new coin ETC.
Those who favored the upgrade, which reconfigured the blockchain to address the hack and cyber theft, built a version known simply as Ethereum, which kept ETH as its native coin. Call it Ethereum 1.0.
• Then in late 2022 the Ethereum 1.0 blockchain completed a major shift from its legacy proof-of-work system, migrating to proof-of-stake. This more efficient blockchain is sometimes called Ethereum 2.0 — but that moniker is fading now that some of the major changes are in place.
So when people talk about Ethereum 2.0, they are referring to the latest upgrade to the far more energy-efficient, proof-of-stake consensus mechanism. But Ethereum 2.0 is really the same big crypto competitor that has been #2 in size and scope to Bitcoin’s #1 for years.
What Is Ethereum Classic (ETC)?
Ethereum Classic was created from a hard fork of the original Ethereum blockchain, and ETC is its native token. The hard fork was an effort to cope with a cyber attack in which $50 million was stolen.
ETH and ETC shared the same blockchain record prior to the hard fork. Since they both stem from the same project, Ethereum Classic has many of the same features as Ethereum 2.0. But owing to the substantial technological differences between the two chains, Ethereum Classic wasn’t able to support the kinds of innovations that have built Ethereum into the DeFi powerhouse it is today.
Ethereum is best known as one of the most successful programmable blockchain platforms, with the capacity to support smart contracts, dApps (decentralized apps), non-fungible tokens (NFTs), and other DeFi projects. For these and other reasons, Ethereum remains a crypto industry leader, pointing to some of the reasons investors may consider crypto.
As of February 7, 2023, ETC was the #23 largest cryptocurrency, with a price of $22 and a market cap of just over $3.1 billion. By comparison, Ethereum (ETH) is the second-largest cryptocurrency with a price of $1,638 and a market cap of about $200 billion. Both tokens can be traded as speculative assets and both are listed on many of the most popular crypto exchanges.
Bitcoin remains the oldest and still the largest cryptocurrency, with a market cap of $442 billion, as of February 7, 2023.
What Is a Smart Contract?
A smart contract is an agreement between two parties written in code. The blockchain will execute the terms of the contract automatically, when certain conditions agreed upon by the two parties are met.
Because blockchain technology is also immutable (a blockchain’s records cannot be changed, at least in theory), smart contracts create many opportunities for businesses to do things faster, more efficiently, and in a way that doesn’t require the time and money costs of third-party oversight.
Smart contracts are a critical 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.
How Ethereum Classic Works
Ethereum Classic is the original Ethereum, and still adheres to the rules and functions of the original Ethereum blockchain. As such, the upgrades that have been implemented over time, leading to Ethereum’s current incarnation (Ethereum 2.0), are not compatible with Ethereum Classic.
Accordingly, Ethereum Classic retains a proof-of-work consensus mechanism, in which miners can generate additional ETC through crypto mining.
Ethereum Classic also doesn’t adhere to the ERC20 token standard. The primary purpose of ERC20 tokens is to work with smart contracts and define a common list of rules that all tokens on the Ethereum blockchain abide by.
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Ethereum Classic History
The history of Ethereum Classic is complicated and technical. A simplified summary of the altcoin might go something like this:
• Developers created the DAO, or decentralized autonomous organization, on Ethereum with the goal of funding future development of decentralized applications.
• The DAO had its own tokens that were interchangeable with ETH tokens and executed contracts using proof-of-work.
• In 2016, 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 to solve its security challenges.
• The new blockchain, created as a result of the fork, would be called Ethereum. Ethereum began a bigger evolution in 2021 and shifted to proof-of-stake consensus algorithm in 2022. The old blockchain is called Ethereum Classic.
Difference Between Ethereum 2.0 and Ethereum Classic
If you’re looking to build a well-balanced crypto portfolio, you probably want to choose one but not both Ethereum and Ethereum Classic.
While the Ethereum 2.0 and Ethereum Classic networks allow software developers to use smart contracts to build applications, one advantage of Ethereum 2.0 is that it has a larger market cap and user base than Ethereum Classic. This may make ETH less volatile overall. Certainly the token has higher liquidity, and is more popular on exchanges.
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, dApps require small amounts of ETH to perform certain functions.
For example, Crypto Kitties was one of the first big decentralized applications, or 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.
Ethereum 2.0 also has stronger support from something called the Enterprise Ethereum Alliance, which counts many large companies among its members.
Choosing Which Ethereum to Invest in
If you want to invest in one of the two Ethereums — Ethereum 2.0 or Ethereum Classic — the decision will ultimately come down to your personal preferences and goals as an investor. As discussed, the two are similar, but there are some stark differences that may make one more attractive than the other.
For the average crypto investor, though, it may make sense to stick to the larger cryptocurrency, which is Ethereum 2.0. It has more liquidity and a larger market cap, which might make it a more attractive choice. On the other hand, if you’re interested in being able to mine crypto, Ethereum Classic may be more suited to your tastes.
Price of Ethereum Classic vs Ethereum 2.0
In terms of price or value, Ethereum 2.0 (ETH) is more valuable than Ethereum Classic (ETC). As noted above, Ethereum 2.0 tokens were trading for roughly $1,638 each as of Feb. 7, 2023. That is down significantly from its all-time high of more than $4,600 in the fall of 2021.
Ethereum Classic, conversely, trades for around $22. That, too, is far off its all-time high, which was around $120 in the spring of 2021.
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The Future of Ethereum Classic
What is the future of Ethereum Classic? It’s hard to say.
Looking at Ethereum Classic vs. Ethereum 2.0, it’s not hard to see that Ethereum appears to have better prospects for the future. For instance, 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 2.0 — 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.
The Takeaway
Ethereum Classic is the original version of Ethereum, which itself has undergone several upgrades and is now Ethereum 2.0. The two are similar, and have their roots on the same Ethereum blockchain, but now are two different cryptocurrencies entirely, operating on their own blockchains.
Ethereum Classic still adheres to the original Ethereum’s standards and protocols, including its proof-of-work consensus mechanism. Ethereum 2.0, on the other hand, has adopted new and improved standards, including a proof-of-stake model. It’s also vastly more popular and valuable.
FAQ
Is Ethereum Classic the same as Ethereum?
No, Ethereum Classic is its own project on a separate blockchain network, that adheres to the original Ethereum’s standards and protocols. It’s more accurate to say that Ethereum 2.0 is the “original” Ethereum, as it is the old Ethereum having undergone upgrades and updates.
Which is better: Ethereum 2.0 or Ethereum Classic?
It’s impossible to say which is better, as that’s a subjective call. But Ethereum 2.0 has many advantages over Ethereum Classic, since it’s bigger, more widely used, and more valuable. But prospective miners may give Ethereum Classic the edge.
Is there a future for Ethereum Classic?
Ethereum 2.0 appears to be winning over more investors and market participants. Ethereum Classic is still one of the largest crypto, however, so it’s not time to rule it out.
Photo credit: iStock/MStudioImages
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