ETC production reduction, will the ETH2.0 merger bring new hope to Ethereum Classic?

The current price of ETC is ¥303.64, with a daily increase of +10.54% and a 24-hour transaction value of ¥23.318 billion. The current circulating market value of ETC is ¥40.725 billion, ranking #25 in the cryptocurrency market; the total supply of ETC is 211 million ETC, and the current market circulation is 134 million ETC.

They see a name and logo similar to the well-known Ethereum and may think that this project with "Classic" added is trying to profit from the success of ETH. In a market flooded with such projects, and with limited time for users to research, many people may automatically think that Ethereum Classic is a clone of Ethereum. What few people understand is that the relationship between "Ethereum Classic-Ethereum" is similar to the connection between "Bitcoin-Bitcoin Cash". The slight difference is that Ethereum Classic is the continuation of the original Ethereum blockchain launched in 2015 and is the world's longest-running smart contract. "

Ethereum Classic's performance this week is better than its predecessor. As an old currency, Ethereum Classic has doubled in ten days in the current market, which is not too good. As a former mainstream asset, ETC's production reduction plan has attracted a lot of attention. Between March 16 and 23, ETC rose from $25.6 to a maximum of $48.3, an increase of 93.5%, becoming one of the few crypto assets with outstanding performance in recent times.

On March 21, ETC's 24-hour trading volume jumped to sixth in the entire network, and also jumped to third place on the hot attention list of OKX, second only to BTC and ETH. In recent days, ETC's popularity and trading volume have remained high. ETC has not been so lively for a long time. Ethereum Classic has a comprehensive return of 6314.07% since its launch, and a return of 78.56% in the past 30 days, which is still an excellent performance.

1. The origin of Ethereum Classic

In mid-2016, the Ethereum blockchain, which had been running smoothly for a year, launched a crowdfunding vote for a project. TheDAO was a 28-day community voting crowdfunding project announced by the blockchain company Slock.it. The DAO project raised a total of more than 12 million Ethereums, almost 14% of the number of Ethereums at the time, and was worth more than 150 million US dollars at the time.

After the crowdfunding was completed, an anonymous hacker stole about 3.6 million ether through a vulnerability in TheDAO's code. After this was confirmed, it immediately sparked a heated debate in the cryptocurrency community. However, due to a 28-day clause in the smart contract, the hacker could not do anything with the stolen 3.6 million ether before the expiration of that time. This gave the Ethereum community time to discuss possible solutions.

2. Community members proposed three ideas

2.1: A soft fork, which is a backwards-compatible approach, means that any block containing transactions involving the movement of stolen ether will be ignored, and the resulting "Denial-of-service attack" (a network attack in which criminals attempt to temporarily or indefinitely interrupt the service of a host connected to the network, making it impossible for the target user to use the machine or network resources) will not only cause a sharp increase in network costs, but also require miners to solve many meaningless algorithms.

2.2: Hard fork is a non-backward compatible method that cannot be changed once completed. This method can return all lost assets to those victims of the DAO attack, and at the same time all users need to execute the new code/rules, otherwise they can no longer interact with the new blockchain or network in any way.

2.3: Inaction. Drawing on the idea that code is law, the essence of blockchain is decentralized trust, which means that it cannot be tampered with after being confirmed by the network. This is the value of the network.

Some members of the ETH community believe that Ethereum should perform a hard fork to re-appropriate the stolen funds and that a hard fork is needed to reverse illegal transactions. Other members believe that blockchain forks create moral hazard, which may lead to other hard forks in the future, so the legitimacy of the stolen 3 million ETH must be recognized.

Eventually, the network chain was split into two different blockchains due to two different community views: after receiving more than 85% support from the community, the new chain that implemented the hard fork retained the name of Ethereum and has been running smoothly to this day. At block 1,920,000, due to the successful execution of the hard fork code, the stolen funds on the new chain were recovered. The Ethereum team designed an unconventional state change in block 1,920,000 and transferred most of the computing power on the original chain to the new chain that supports the hard fork, which is now the Ethereum Smart Chain. The old chain that did not do anything was retained and operated at the insistence of some developers and community members, and was also renamed Ethereum Classic. At block 1,920,001, people originally predicted that the old chain that did not implement the hard fork would disappear within a few hours, but it was found that some miners continued to maintain the old chain, and the over-the-counter trading of the old chain tokens also provided value to the old chain, so Ethereum Classic was born. Although the two blockchains took different paths, they continued to share the same blockchain history until the hard fork (i.e., block 1,920,000 ago).

3. ETC token production reduction mechanism

On December 11, 2017, the ECIP 1017 document was released, which redefined the issuance of ETC: when the block height reaches 5,000,000, the block reward will be reduced by 20%, and then reduced by another 20% every 5,000,000 blocks. Due to the change in the $ETC reward rate, the total supply is expected to be approximately 210 million $ETC, and the maximum will not exceed 230 million $ETC.

According to statistics, Ethereum Classic will reach Bitcoin-level inflation in 2032.

According to data, ETC is expected to reduce block rewards in 32 days, and the Ethereum Classic network is expected to exceed 15,000,000 blocks and enter the fourth era of the 5M20 emission schedule. At that time, the ETC block reward will be reduced from 3.2 $ETC to 2.56 $ETC, a reduction of about 20%.

This means a decrease in the total supply of the ETC ecosystem, resulting in the actual circulation volume also being affected by expectations of market changes, but in the long run, the unit number of tokens will be more valuable, similar to BTC's production reduction mechanism, which makes ETC one of the investment products favored by users in the short term.

ETC has always put technology first in its development process, and has devoted itself to developing technology and applications. This is a very good thing for a technology-based digital currency. If a technology-based digital currency only focuses on the market and ignores technology during its development, the final result will only be death. ETC attaches great importance to the development of technology. As it continues to develop into a decentralized and tamper-proof public infrastructure, ETC will eventually become the next king.