Ethereum operates on the basis of smart contracts. Which are basically pre-programmable, self-executing contracts. They lay at the foundation of the whole Ethereum network.
Before I give you an explanation and a history lesson on Ethereum classic and Ethereum, we must first divert our attention to the DAO, or the Decentralized Autonomous Organization.
The DAO was essentially a very complicated smart contract, the goal of which was to make ETH revolutionary by employing decentralizing venture capital funding that would be used to fund all of the ecosystems future decentralized applications.
So, imagine that you would like to have a voice as to which applications get funding? Well, to vote or express your view you would have to use DAO Tokens. You would pretty much have to buy them. Being a DAO holder would indicate that you were an official member of the system.
In order to receive funding, Dapps would need to get whitelisted and approved by well-known crypto space figureheads. After this, user communities could vote on Dapps, and if the proposed Dapp got a 20% approval rate, then it would get funded.
The DAO was extremely flexible and transparent, which is pretty much why it was able to raise over $150 million during its crowdfunding.
The DAO had a “Split Function”, or exit door for those who would want to leave the ecosystem because a Dapp that they didn’t like would get funding. Though, users who left the DAO would have to hold on to their invested ETH for at least 28 days before they could spend it.
There was a damn big problem with this.
And because of that problem.
The DAO exploit.
In hindsight, the exploit that caused $50 million to leak away was pretty simple and straightforward.
When an individual decides to leave the DAO, a request needed to be submitted. Following this request, the “Split Function” would give the requestor his ETH back in exchange for his DAO tokens. The transaction would be registered on the systems ledger, and the internal user token balance would be updated.
So, where’s the sexy exploit that you want to know about?
The sneaky hacker made a recursive function, altering the splitting function. What happened was, users got their Ethereum as requested, but, before the transaction could be registered, the recursive function would kick in and even more Ethereum would be transferred to the requestor for the same amount of DAO tokens.
This allowed the hacker to place ridiculous amounts of Ethereum into a private Child DAO, chaos ensued.
Now, obviously, it’s kind of bad if one person is sitting on such a massive pile of Ethereum. So, what did the devs do?
Ethereum after the DAO incident.
The price of 1 ETH dropped by 65% instantly. But, here something interesting. Remember the rule that stated you couldn’t use your Ethereum for 28 days after submitting the “split request”? Well, that applied to the hacker too.
The Ethereum community saw only one solution to the attack, a hard fork.
What’s a hard fork?
The primary difference between a soft fork and hard fork is that it is not backward compatible. Once it is utilized, there is absolutely no going back whatsoever. If you do not join the upgraded version of the blockchain, then you do not get access to any of the new updates or interact with users of the new system whatsoever.
A hard fork separates the main Blockchain at a specific point, creating an entirely new Blockchain. The new Blockchain that resulted from the hard fork would come to be known as Ethereum.
The purpose of the hard fork was to return the stolen money to users. A lot of controversies emerged in the cryptocurrency community following the fork. A lot of users didn’t want to transition to the new Blockchain and decided to stay on the old one that was breached.
They even gave it a name, Ethereum Classic or ETC.
Gavin Wood, one of the Ethereum co-founders stated that this fork, the DAO, and the formation of ETC, are one of the most critical events in cryptocurrency history.
What’s Ethereum Classic?
The people who stick with ETC believe that the fork completely defeats the purpose of decentralization and immutability. Because what happened with the DAO kind of shows that a human being can affect the system. After all the whole ideology of Blockchain technology is to create a system that stands against financial corruption and is resilient to human intervention.
Well, ETC evangelists can scream and shout as much as they want. But it’s undeniable that there are definitely issues with their Blockchain.
ETC users can’t access any of Ethereums newest updates. For example, Ethereum transitions to a Proof of Stake system, while ETC will be forever stuck working under Proof of Work, simply because the software can’t support the update.
I would now like to compare the pros and cons of Ethereum and Ethereum classic.
ETC Pros: Remains devoted to the philosophy of Blockchain immutability, has a few big market players supporting it.
ETH Pros: Growing at a ridiculously fast rate, excellent developers are constantly working on the platform trying to make it as sophisticated as possible. The Network is being continuously updated (PoW-PoS), possesses a much higher has rate than ETC. Ethereum is also a member of the EEA (Enterprise Ethereum Alliance). Which is an organization that aims to tailor smart contracts to fortune 500 companies. Additionally, it did return DAO victims their money.
ETC Cons: Can’t access all of the new Ethereum updates, less popular than ETH, has tons of scammers.
ETH Cons: Kind of made room for a lot of scam ICO’s, did tamper with immutability.
Let’s take a look at prices and market caps.
I think it’s kind of stupid to support Ethereum Classic, it’s obviously going nowhere, and it’s already obsolete. Ethereum is obviously much superior despite the whole DAO situation. That’s over now. The ETH devs genuinely care about their community and the project, working tirelessly to perfect it.
Just the fact that ETC cant utilize the Proof of Stake philosophy should be enough to thwart away potential supporters.