ETC creates a new development path, and the new monetary policy may follow Bitcoin

Created as a protest against Ethereum’s hard fork to recover funds stolen from The DAO, Ethereum Classic (the original Ethereum chain) has evolved into a unique identity since its inception.

The project, which adheres to the Ethereum ‘original chain’, appears to be abandoning the development path established by the Ethereum Foundation and instead pursuing a unique development path. The development community around the smart contract platform is growing, and the project has established its own “hard fork policy”. Unlike ETH, ETC may not switch to (full) POS mining anytime soon.

As the biggest move since Ethereum’s first hard fork, ETC could be moving toward a radical economic change: a new monetary policy.

According to Arvicco, the ETC project leader:

“The current plan for unlimited release blatantly violates the fundamental principles of Austrian economics ^[1] .

New developments

When ETC first appeared, many people posted articles mocking the project as a joke, a pump and dump project, or at best a protest that would disappear sooner or later. However, near the end of 2016, ETC's performance even exceeded the expectations of some of its original supporters.

Although ETC transaction volume dropped sharply in the early stages, the price of ETC is currently relatively stable at around $0.9. According to CoinMarketCap data, ETC's market value is already more than 10% of Ethereum's, ranking sixth among cryptocurrencies.

More importantly, ETC development is progressing well. In a conversation with Bitcoin Magazine, Arvicco, one of the initiators of the ETC project, explained:

“Initially, the ETC volunteer development team consisted of only one person, but now we have 34 people with commit access in GitHub. In addition, Charles Hoskinson’s IOHK blockchain company just announced that they will contribute a new development team to ETC: Grothendieck Team. In addition, core developer Igor Artamonov is forming a new professional team to also support the core project.

ETC has also received support from prominent companies and individuals in the digital currency space, especially from China. BTCC, a major exchange, wallet service, and mining pool, recently announced that it will support ETC trading. ETCWin, a decentralized digital currency exchange, has successfully completed the largest ETC ICO to date on the Bitcoin crowdfunding website. In addition, Guo Hongcai also plans to guide the creation of 100 ETC decentralized applications in the next three years.

From a technical perspective, unlike ETH's "cut the Gordian knot" attitude, the ETC community claims to adopt a more conservative approach and still adheres to the immutability of the blockchain ledger, refusing to make any changes to the ledger. The most obvious example is that ETC did not implement the so-called "Spurious Dragon" hard fork.

Arvicco explained:

“In the 10 spam attacks against ETH and ETC, millions of so-called ‘zero’ accounts were created. These accounts have no balance, but cause congestion in the blockchain and client memory. Some in the community believe that the information about these accounts – even though they were created due to a bug – is still part of the blockchain’s history. So ETC did not adopt the same Spurious Dragon” hard fork as ETH.

Separately, the ETC community is deploying its own hard fork to mitigate the January ‘difficulty bomb’. This difficulty bomb – originally implemented by the Ethereum Foundation – will exponentially increase the difficulty of mining over time. This will make mining unprofitable, effectively ‘freezing’ the protocol and making it unusable. The community will then have to hard fork to a new version of the protocol, perhaps introducing proof-of-stake mining: a bomb designed to be very difficult.

However, since ETC is in no rush to switch to POS mining, there is no need for the community to force itself to make the switch; rather, the difficulty bomb is considered useless and even dangerous.

Monetary Policy

However, perhaps the biggest shift for ETC is its upcoming monetary policy changes.

Ethereum’s emission schedule produces a steady amount of new tokens each year.

The project officially launched with the initial 72 million tokens distributed to pre-sale investors, the Ethereum Foundation, and developers, with approximately 13 million new tokens mined each year thereafter, and on an ongoing basis.

Because it sticks with the original Ethereum chain, ETC has maintained the same token distribution and inflation schedule. However, this may change.

Arvicco explained the rationale behind this possible adjustment:

“A monetized platform token is a key component of a blockchain platform. Its function in the system is to align the economic incentives of all key stakeholders, including investors, users, miners, and developers. In order to monetize a token, an asset must first have two prerequisites: utility and scarcity . With the inflation of the Ethereum blockchain, the number of tokens will continue to grow, and from a practical perspective, there will be no scarcity at all.”

The first proposal to replace the current monetary policy is ECIP-1017 (ETC Improvement Protocol 1017), which was drafted by Matthew "snaproll" Mazur. Similar to the situation with Bitcoin, ECIP-1017 will set a hard limit on the total supply of ETC. Specifically, the block reward will decay by 20% approximately every two years, so that by around 2070, the mined ETC will stabilize at around 200 million - and the total supply will be around 210 million ETC. The first decay should occur at block 5 million, which is expected to be mined in less than a year from now.

However, ECIP-1017 — which requires a hard fork — has not yet received consensus. Of course, it remains to be seen whether the community can reach a consensus on such a major change.

Arvicco said:

“We are doing our best to reach and measure consensus. At present, those who support this change have the upper hand. However, the ETC community agreement has only one ultimate principle: let developers provide code and let the community decide how to run it .”

In order to reach a consensus on monetary policy, the ETC community will organize a meeting in London tonight to discuss monetary policy. Expert panelists include Jon Matonis, the founder of the Bitcoin Foundation; Alistair Milne, a digital currency angel investor; Edan Yago, CEO and founder of Epiphyte; and Matt Herbert, director of the British Bankers Association.

Notes (↵ returns to text)

1. The Austrian School of Economics is the most important school of thought in the modern marginal utility school. It originated in the 1870s and became popular in the late 19th and early 20th centuries. Because its founder Menger and his successors Wieser and Böhm-Bawerk were all Austrians and professors at the University of Vienna, and all used the marginal utility of personal consumption psychology to establish their theoretical system, it is also called the Vienna School or the Psychology School. ↵