In-depth analysis: Ethereum and Ethereum Classic

Rage Review : Ethereum finally implemented a hard fork on the 20th of this month, after which the "Ethereum Classic" blockchain version and its token ETC appeared. Community participants have controversial views on this, some believe that this is an opportunity and challenge for investors and developers, while others believe that it will bring many unpredictable problems. But in any case, whether it is good or bad, we still don't know based on the current situation. This article will deeply analyze these two blockchains, list the causes and consequences and their impact, so that readers can have a deeper understanding.

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In an effort to recover investor funds from a high-profile project, a split effectively split the second-largest public platform community.

The split wasn’t just psychological. It was also technical, given that it also encompassed public blockchain systems, presenting two competing visions of the real blockchain, or different versions of a project’s transaction history.

This weekend, two groups will examine competing versions of ethereum, a blockchain-based platform designed to enable the development of decentralized applications.

If Bitcoin envisions how to allow users to create and manage currency, then Ethereum pursues the goal of allowing a distributed group of users to create and manage a decentralized and uncensorable application store.

However, the platform now has two slightly different versions for users to choose from, one is Ethereum, which is the "official" version of the blockchain maintained by its original developers; the other version "Ethereum Classic" is an alternative to the blockchain maintained by an entirely new team.

Both versions offer the same technology platform, and according to the developers, they share the same vision for the roadmap going forward, but this small difference has spawned two markets that together are worth around $1.2 billion.

How did we get here?

Please review The DAO first.

In the first half of this year, Ethereum's hottest project, The DAO (abbreviation for Distributed Autonomous Organization), raised a total of $150 million in ether (the cryptocurrency of the Ethereum network) through public crowdsales. Anyone who holds ether on the network can participate. In theory, the idea is simple. Investors send money to The DAO and receive voting tokens. After that, these investors (voters) will decide how to use The DAO funds through democratic voting.

But just as the vote was about to begin, The DAO was hacked (or hacked, or compromised, depending on your opinion). To some in the academic community, the early problems were obvious, and discussions about their severity had already begun.

However, all the debate came to a halt when an individual or group of individuals, or perhaps a group, withdrew funds to the DAO account they controlled through a valid action in the code. For the Ethereum platform, this action was valid to some extent, and it could be executed according to the content of the contract; but for other investors, it was a controversial action.

After a series of debates, the Ethereum community finally voted, with most participants agreeing to change the Ethereum code in the hope of recovering their funds - from the attackers and returning them to investors.

Ethereum Classic (ETC)

Then there was a small group of people who disagreed with this choice and they took action.

While most agree that blockchains can and should be changed if everyone agrees, other developers say that in order to provide a good historical record, blockchains have to be censorship-resistant and tamper-proof.

So, instead of changing their tune when Ethereum created a whole new blockchain, a vocal minority continued to mine the old version of the blockchain. Effectively, Ethereum Classic is a parallel version of its blockchain, where funds have never been returned to Ether holders who lost funds when The DAO project was terminated. The Ethereum blockchain, by contrast, has already moved those funds to other addresses.

However, it seems that these few differences have a big impact.

According to Ethereum Classic’s website: “The Ethereum Foundation responded in the worst possible way,” before explaining, “We believe that the original version of Ethereum, as a world computer, will not fail and runs irreversible smart contracts.”

The project organizers subsequently outlined in a cryptographic statement that the blockchain should be subject to witnessing, including its openness and, more importantly, immutability - that is, once a transaction is made, it cannot be reversed in the event of a hack.

“Not all blockchains are created equal,” the website reads.

And by staying on an unmodified version of Ethereum, they are protecting those values.

Who is involved in Ethereum Classic?

The Ethereum Classic team currently has four developers, but according to its lead organizer Arvicco (who declined to reveal his real identity), in theory anyone can join. Like Ethereum itself, Ethereum Classic is supported by an open source community.

Some well-known developers have also expressed interest in the Ethereum Classic project, including early Ethereum CEO Charles Hoskinson (who left the team in 2014 due to some differences).

However, it is important to note that blockchain exists for more than just a conceptual reason. It seems that more and more Ethereum miners are investing a lot of computing power into this classic blockchain because they see the value in securing transactions and winning the associated mining rewards.

At the time of writing, the network’s hash rate is 544 GH/s, which represents 13% of the total Ethereum network hashrate, an impressive figure considering it has only been available for a day or two.

Why is this profitable?

There is still debate as to what makes Ethereum Classic (ETC) valuable, but in general, it has value because people believe in the project, and now that it is listed, those who want to support it can invest (or speculate) in the market.

Ethereum Classic is essentially a clone of the digital currency, so Ether holders can now set up accounts on the Ethereum Classic blockchain version to earn money and replicate their balances.

Because Ethereum Classic is a replica of the original blockchain, aside from a few key changes related to the reversal of The DAO’s transactions, everyone who held tokens on Ethereum at the time of the fork would hold the same number of Ethereum Classic tokens. This was essentially a windfall for traders.

If you had $100 in ether, you would have had 8 ether at the time of the fork (when the price was $12), which means you now have 8 ETC, or an additional $16. However, those who held more ether before will now get more windfalls.

This also caused problems for exchanges, because even if they didn’t want to list Ethereum Classic, they still held customer funds because they held Ethereum during the fork. But the big exchanges have already included these alternative Ethereum tokens, so now you can trade Ethereum (ETH) or Ethereum Classic (ETC).

Poloniex was the first exchange to accept the coin. Kraken, Shapeshift, and Bitfinex followed, indicating that most exchanges that support Ethereum now also support Ethereum Classic.

There are also profit opportunities in switching between the two currencies, and one startup founder even raised the question of whether this would be a new way for money to be used twice, a problem that the Bitcoin blockchain was intended to solve because it does not require the intervention of a central authority.

Who is affected?

Ethereum tokens on both blockchains are all susceptible to “replay attacks” if they don’t properly separate their addresses to handle the two blockchains separately, a process that can be a bit complicated for individual users.

Since Ethereum Classic is mostly similar to the old network, users with balances on one network can also use them on the other network. However, this, in theory, can lead to some ridiculous problems, such as accidentally transferring funds from one network to another.

Poloniex decided to automatically take precautionary measures for its users, and Ethereum creator Vitalik Buterin said Ethereum Classic would update its code to address the issue.

What does this have to do with Bitcoin?

Speaking of important lessons, whatever happened to this classic is a new perspective that Bitcoin can learn from.

The dispute over increasing bitcoin’s block size (the technical upper limit on the number of transactions the network can support) may seem unrelated to this fork, but it actually is.

Bitcoin Core developers have insisted in a long-running debate that hard forks are controversial, dangerous and could have unpredictable consequences, such as splitting one blockchain into two competing ones.

Many in the community, such as Stephen Pair, co-founder and CEO of BitPay, said that Ethereum Classic’s sudden popularity shows that this is a valid concern.

Brian Armstrong

Another point about this controversy is that the Ethereum hard fork was immediately labeled a success by Ethereum developers and other members of the Bitcoin community. For example, Coinbase CEO Brian

Armstrong said on Twitter: “This is nothing to be afraid of, it’s just that there are multiple coins.”

But that may be premature, and he has said more in a new blog post.

In a twist of sorts, some bitcoin developers appear to be in favor of ethereum classic, which would update the codebase without consensus if it could also demonstrate the potential risks of switching to a new blockchain.

What does this mean for Ethereum?

The current attention on Ethereum Classic will eventually die down, but it may not. Take Bitcoin Classic as an example. The Bitcoin Classic subreddit is still active, even if it never succeeded in replacing Bitcoin as its engineers planned.

In the future there will be two Ethereums developing on two different paths.

So far, one of them has similar features that Ethereum should provide, mainly smart contracts to help create builds of Twitter that can bypass the review process and achieve decentralized autonomous organizations. However, it is cheaper and more troublesome to use in an environment without a developer tool ecosystem.

Ethereum itself is also compressed because some users and miners remain on the old chain, which reduces the total number of users and reduces network security.

Now that all of this has happened and Ethereum Classic exists, the community still has many questions. For example, is it worth the risk of hard forking the blockchain, or rewriting the code to reverse transactions without near-unanimous consensus? If Ethereum developers fork again to solve similar problems, will it be split again?

Either way, we cannot clearly determine whether Ethereum Classic is good or bad for the development of technology.

The controversial blockchain gives a small number of people the opportunity to create their own systems, and some say it's an exciting development.