Whether you’re new to the cryptocurrency landscape or are a long-time investor, you’ve likely noticed that many of these digital currencies have similar names — names that often include the word “coin,” like Bitcoin, Litecoin and Dogecoin, among plenty of others. But another prime example of similar naming involves Ethereum and Ethereum Classic.
While the two tokens do share an origin and a similar title, they aren’t the same thing. And while both are popular, these cryptocurrencies stand apart in some key areas. By understanding the cryptocurrencies’ common features and the differences between Ethereum and Ethereum Classic, you can make wiser investing decisions. Here’s what you need to know.
The History of Ethereum and Ethereum Classic
Ethereum isn’t just a name you find among a slew of cryptocurrencies; it’s also an open-source software platform featuring smart contract capabilities. The Ethereum platform supports apps, which anyone can upload to and run on it. An estimated 3,000 decentralized apps use the technology, some of which include “Ethereum” in their names.
Ether tokens (ETH) are the backbone of the Ethereum network. This is the platform’s own cryptocurrency, and it plays a critical role in processing transactions and running programs on the platform. After ETH was introduced it quickly grew in popularity, ultimately taking its position right behind Bitcoin in terms of widespread usage.
Ethereum Classic (ETC) and Ethereum are based on the same broader project. Developers crafted a decentralized autonomous organization (DAO) using the Ethereum technology to fund future development on the platform. Developers funded the DAO by selling tokens during a crowdfunding campaign. These DAO tokens were interchangeable with ETH. Plus, they gave investors a way to pool funds, creating a platform for presenting ideas to a broader community and potentially securing financial support.
One of the main goals of the DAO was to create new ways for commercial and nonprofit businesses to operate digitally. Some of these projects could receive tokens based on smart contracts present in proposals; smart contracts are programs on Ethereum’s platform that complete certain transactions automatically. Additionally, investors could receive rewards based on whether they could generate Ether. In many ways, the concept was considered revolutionary. However, the technology wasn’t exactly perfect.
A flaw in the original DAO smart contract allowed hackers to steal ETH valued at approximately $50 million, and the incident created a level of division in the community. Some felt the transaction needed a reversal because it was hack-related activity. Others thought that doing so would go against the main tenet of using blockchain, a technology that was designed to prevent tampering and reversals. That division in thought is what ultimately led to a hard fork — a divergence in the blockchain — with one ledger showing a reversed transaction and another not including it. Ethereum and Ethereum Classic were the result, representing that hard fork, which occurred back in 2016.
In fact, while Ethereum Classic has a different name, it’s the original iteration of the cryptocurrency with the hacking event intact in its blockchain record. The new blockchain that split away is what’s called Ethereum today.
Ethereum vs. Ethereum Classic: How They Compare
ETH and ETC do have quite a bit in common. Considering their history, this isn’t too unexpected. The pair of tokens have the same blockchain and technology as starting points because they were originally a single entity before the post-hacking split created them.
Each coin can run decentralized applications (dApps) and is usable for smart contracts, so their capabilities in that regard are functionally the same. Each one relies on blockchain technology, too, and they both depend on peer-to-peer networking. When it comes to non-fungible tokens (NFTs), Ethereum is the primary blockchain for mining. However, there are also NFTs launching on Ethereum Classic; it’s just less popular for that particular use right now.
While Ethereum and Ethereum Classic are based on the same underlying technology, there are some inherent differences between the two altcoins as well. First, Ethereum has a much larger market cap compared to Ethereum Classic. The same goes for its user base. Overall, ETH is the second-largest crypto-asset around, coming in only behind Bitcoin. ETC, on the other hand, is closer to 18th, but its exact position can vary depending on market conditions.
For example, back in May 2021, Ethereum Classic saw a spike. Its value rose by more than 300%, causing it to cross $174 and altering its position on the broader crypto landscape. However, the value increase didn’t hold. By early 2022, it was closer to the $20–$35 range on most days.
In the end, ETH is far more liquid. That makes cashing it out significantly easier, should the need arise. Additionally, it can reduce some degree of risk, as interest may remain higher even during downturns due to the larger user base. Plus, the value of ETH is practically 100 times the value of ETC.
ETH is also the token behind far more dApps than ETC. Because they’re relying on the protocols behind the dApps, users need the correct coin to perform specific operations or activities. With more usage, that gives Ethereum stronger positioning than Ethereum Classic. There’s a greater inherent amount of interest in ETH, and it goes beyond financial value, which incidentally supports higher price points.
Finally, while ETH isn’t perfectly secure, it outpaces Ethereum Classic significantly. In one month, ETC was subjected to three 51% attacks, giving a single group enough power to alter the blockchain and create possible issues like double-spent transactions getting through.
The Future of Ethereum and Ethereum Classic
Overall, the future of Ethereum appears to be reasonably strong. It’s playing a critical role in a range of applications, and overall interest from investors is generally high. Plus, its sizable market cap gives it a solid position. While there are never any guarantees — particularly in the world of cryptocurrency — these factors could mean Ethereum has a better chance of standing the test of time.
With Ethereum Classic, that’s not necessarily the case. It remains vulnerable to hackers, which is never ideal for financial products. The problem that led to the original DAO hack has never had a definitive resolution. Plus, the repeated 51% attacks should give anyone pause.
Additionally, ETC isn’t the primary token for nearly as many dApps. That limits overall interest and could alter the long-term potential of the Ethereum Classic altcoin. Between the lower usage rates and the reduced trust, keeping investors engaged with ETC seems like an uphill battle. While there could be potential for growth, it isn’t nearly as strong as what exists right now with Ethereum.
