ETC production reduction: difficult to solve the weak ecological dilemma

During the downturn in the crypto market, ETC (Ethereum Classic) showed unusual movements. From March 16 to 21, ETC rose from $25.6 to a high of $41.1, an increase of 60.5%, becoming one of the few crypto assets with outstanding performance in recent times.

The upcoming production cut is clearly the catalyst for this wave of increases. According to Viawallet data, ETC is expected to reduce production on May 1, 40 days later, when its block reward will be reduced from 3.2ETC to 2.56ETC, a 20% reduction.

In addition, as ETH is expected to switch to the PoS consensus mechanism in the coming months, its current version of PoW computing power will also flow to other public chains, and ETC is expected to get a share of it, thereby strengthening the network.

However, whether it is reducing production or taking over the computing power of ETH, it cannot completely "quench the thirst" of ETC at present. Although multiple applications including DEX, NFT, games and other tracks have been born on its chain, the richness of on-chain applications, asset accumulation and number of users are still far behind other emerging public chains.

During the production cut fermentation period, although ETC has emerged from the rising market, it still needs to further build the on-chain ecosystem if it wants to continue to maintain its competitiveness. After all, production cuts only reduce supply, the value generated is limited, and it cannot create demand.

ETC rises 60% amid expectations of production cuts

If the news of the block reward reduction had not started to ferment, ETC (Ethereum Classic) might still be in a forgotten corner. In the past year, new public chains such as Solana, Terra, and Avalanche have taken away some traffic from the dazzling Ethereum, while old public chains such as ETC and LTC have been somewhat lonely in this trend.

As Ethereum moves towards the consensus layer of PoS (Proof of Stake), ETC finally returns to the crypto community’s attention after a long absence. Even though the crypto community is now dominated by NFTs, the metaverse and other scenarios, the word "production reduction" still touches the nerves of many people in the community.

According to Viawallet data, ETC is expected to reduce production on May 1, 40 days later, when its block reward will be reduced from 3.2ETC to 2.56ETC, a 20% reduction.

Countdown to ETC production reduction

In the past few years, crypto assets such as BTC and LTC that use the PoW (Proof of Work) consensus mechanism have triggered a wave of market speculation every time the block reward is halved. This is mainly because the reduction in production will bring about changes in the market supply and demand relationship. When the block reward is reduced, it means that the inflation rate of crypto assets will slow down. In theory, if the market demand is stable, the reduction in production will lead to an increase in asset prices.

As a once mainstream asset, ETC's production reduction plan has attracted a lot of attention. Between March 16 and 21, ETC rose from $25.6 to a maximum of $41.1, an increase of 60.5%, 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 place in the entire network, and also jumped to third place on OKX's hot attention list, second only to BTC and ETH. As the production cut approaches, the market hype around ETC has already started.

On social media, discussions about ETC have increased significantly. With the upward trend, some people have shouted the slogan "ETC is the real Ethereum."

However, the upward effect of the value brought by the reduction in production is limited, and the market often hides various uncertainties. The last reduction in ETC production occurred on March 17, 2020, when the block reward was reduced from 4 ETC to 3.2 ETC. Before that reduction in production, the crypto asset market experienced the famous "3.12" crash, and ETC fell from a high of $13.2 to a low of $3.1 within 40 days before the reduction in production.

Ultimately, production cuts often only play the role of a booster, and ETC's future performance will depend on whether it can create more market demand.

ETC chain ecology lags behind new public chains

It is noteworthy that in addition to this wave of production cut expectations, ETC has also received some extra attention due to the upcoming launch of Ethereum version 2.0.

On March 19, Ethereum co-founder Joseph Lubin expressed confidence in the release of ETH 2.0 in the next few months. He revealed that the energy consumption problem of ETH proof-of-work will be solved by then, and transaction costs will be several orders of magnitude cheaper.

This news makes ETH investors and users particularly excited, but for Ethereum's existing PoW miners, this means that they will soon be unable to use computing power to mine ETH, so where the computing power will go becomes a problem.

Previously, Xu Kang, head of ETC Asia Pacific, said that during the consensus conversion process, ETH's computing power will flow out to other chains, and ETC is the most suitable PoW blockchain to undertake Ethereum's computing power.

Currently, ETC has released a hashrate migration guide in its official blog, welcoming disenfranchised Ethash miners. It also points out that ETC has the ability to absorb most of the abandoned Ethash hashrate. However, the mining version of ETC is a modified version of Ethash, called ETChash. ETH miners will need to upgrade their firmware if they want to migrate to ETC.

Under the official promotion of ETC, many people believe that ETC's computing power will increase, which means the expansion of its network scale. According to data from OKEx on March 21, the computing power of ETC's largest mining pool, etc.ethermine, increased by 8.27% in 24 hours, which is a good sign for ETC.

However, whether it is reducing production or taking over the computing power of ETH, it cannot completely "quench the thirst" of ETC at present. While various emerging public chains are vigorously building on-chain ecosystems and embodying value through practical applications, ETC has not done enough in this regard.

As a smart contract platform that respects "code is law", ETC has also tried to increase the use cases of blockchain in recent years. Currently, game projects such as Commonwealth Tribes and Aqua Bank, as well as DEX projects such as HebeSwap have been established on its chain. In addition, there are also multiple NFT projects on the ETC chain, including ETCPunks, Lazy Lions, etc.

ETC's current on-chain application landscape

However, whether in terms of the richness of on-chain applications, asset accumulation or number of users, ETC is difficult to compare with the emerging public chains in the market. According to DeFi Llama data, the top five public chains in terms of total locked value are ETH, Terra, BNBChain, Avalanche and Solana, while ETC is far behind, ranking in the 80th place.

In terms of on-chain activity, according to OKEx statistics, in the past week, the number of ETC daily active addresses has remained around 1,000, and the daily on-chain transaction volume is around 100,000 ETC. In contrast, new public chains such as Avalanche and Solana have tens of thousands of daily active users.

The weakness of the on-chain ecosystem has long been a problem for ETC, and its market value has fallen from the top ten in the crypto market to the 24th place today. Although ETC has seen an upward trend during the fermentation period of production cuts, it still needs to further build an on-chain ecosystem if it wants to maintain its competitiveness. After all, production cuts only reduce supply, and value still needs to be provided by demand.