In the busy world of cryptocurrency there are as yet no juicier stories than that of the DAO Ethereum fiasco that gave rise to the battle: Ethereum vs. Ethereum Classic. Although the full story of the DAO issue is available everywhere on the internet, the Readers Digest version is that a type of investors group, called a distributed autonomous organization (DAO), raised $150M in working capital – in Ether – through community crowdsourcing. Promptly thereafter, in June 2016, hackers exploited a loophole in the regulations governing purchase and sale of ether, inserted a recursive command, and made off with $50M in the currency. Or they almost did. Because of a 28-day hold imposed on withdrawals of this nature, the money couldn’t disappear into the bad guys’ wallets.
That’s where the schism began. The majority in the Ethereum community saw this theft as a uniquely bad thing. It was important, they felt, that the money be returned to its rightful owner/investors. So, they instituted a do-over – a re-coding of the block in the blockchain that effectively erased the theft. It was known as a hard fork, since it irrevocably edited the history of Ethereum.
The Hard Fork
While most saw this as a positive step, there were others who saw it as a rejection of everything that blockchain stood for: an immutable and transparent record of contracts and transactions. “What good is a blockchain,” they asked, “if anyone can simply go in an edit it on a whim?” This group rejected the results of the 2016 hard fork and continued on with a parallel Ethereum blockchain that retained its original history, including the losses incurred in the DAO attack. They named it Ethereum Classic.
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A year later, both strains of the currency continue to exist. Ethereum (ETH) is by far the most successful, being the second most popular currency after Bitcoin. It recently sailed to a high of $380 or so, and dropped during July 2017 to below $200, which many analysts say is a correction to more realistic valuation, following months of speculation, bandwagon fever, and ICOs. It has a market cap of $18,349,161,492. Ethereum Classic (ETC) has remained the underdog, with a more humble price of $16-17, and a market cap of $1,619,859,188 (all numbers current as of July 14, 2017, in US dollars).
But they both still exist, and neither is out of the running despite the confusion – and potential for duplication – that the existence of parallel Ethereum blockchain structures allows.
So, what are their differences? What is the essence of the Ethereum vs. Ethereum Classic divide? Ethereum (ETH) is the success story at present. The big players including Vitalik Buterin are behind it, and they continue to improve and enhance the platform. A major shift is on its way that will change ETH mining from a proof-of-work model to a proof-of-stake. This may change the game for cryptocurrency mining in general, if successful, but because it is happening after the hard fork, owners and miners of Ethereum Classic will be left out, with no access to this or any other change.
ETH is the darling of the investment crowd at present and is homing in on Bitcoin’s kingdom.
But then there is the ideological split. The camp that supports Ethereum Classic asks “how many more corrections will be allowed? How many more hard forks? How many more violations of the supposed sanctity of the blockchain? How many different versions of Ethereum might this create?”
Philosophical differences in an ideal tend to create acrimony, splinter groups, and the potential for sabotage, which can lead to public disputes and negative press in an era when all cryptocurrencies continue to struggle for mainstream legitimacy.
Despite the split, both versions of Ethereum have a future worthy of scrutiny. Although Ethereum (ETH) has plummeted from its 52-week high of $380, it continues to be the primary fuel of the ethereum blockchain, which itself continues to gain traction in all areas of commerce and finance, with major banks, industries, and governments instituting tests of blockchain technology for their day-to-day activities. Along with its ongoing evolution and sophistication, it stands a good chance of rebuilding and exceeding its peak price of last month and growing market share.
As for Ethereum Classic (ETC), it more than held its own in mid-July, gaining value while the other big five all descended along very similar lines. Short-term future gains might also be realized as China’s major exchanges all bring ETC online in the next few days.
As blockchain technology continues to evolve, the principles of internal purity and immutability may become significant deciding factors for those interested in purchasing Ethereum, but who are wary of its DAO misstep. Its relatively low price point might pale in comparison to ETH and to Bitcoin, but they, too started at the bottom and had to work upwards.
For the time being, the two exist like David and Goliath, or Shrek and Donkey, depending on your approach. But with the advent of the proof-of-stake mining change, the Ethereum vs. Ethereum Classic relationships might yet even out.