Ethereum Classic Explained
Last Updated: 1st November 2018
Ethereum Classic is a public, decentralized platform that operates on smart contract functionality. It came into existence following the hack of the decentralized autonomous organization (DAO). The aim of Ethereum Classic is to use smart contracts to construct a blockchain platform that enables developers to build decentralized applications (dapps). With dapps, data and transaction information is not stored on a single, centralized server. Instead, this information is distributed to all nodes on the Ethereum Classic blockchain.
Ethereum Classic also provides a token called classic ether (ETC), which can be traded on cryptocurrency exchanges and stored in cryptocurrency wallets. Gas, on the Ethereum Classic network, is an internal transaction pricing mechanism that senders of a transaction will need to pay in order to execute an operation on the blockchain. Gas functions as an incentive mechanism to encourage participant nodes to process transactions. As well as this, gas is also used to prevent spam on the Ethereum Classic network, by making spam attacks too expensive to carry out.
The DAO Hack
The DAO was a smart contract that was intended to function as a kind of decentralized venture capital fund. Using the funds it had raised, The DAO was to invest in promising dapps in the Ethereum eco-system.
In May of 2016, The DAO raised approximately $168 million. However, in the same month, a document was circulated that detailed security vulnerabilities that could be found in The DAO. In the following month, $50 million USD was stolen from The DAO, abusing one of the vulnerabilities that had been raised in May. After some debate, it was decided that the Ethereum blockchain would be hard forked. This allowed the stolen Ether to be moved to a new smart contract that restored funds back to their owners.
Ethereum Classic came into existence when some Ethereum community members rejected the hard fork on philosophical grounds. They argued that a hard fork undermined the notion of an immutable blockchain, and the dictum that ‘code is law’. ‘Code is law' was part of the terms and conditions first expressed in The DAO, and some community members believed that, regardless of the circumstance, the ‘code is law' maxim should be adhered to. Because of this, those opposed to the hard fork decided to stay with the original blockchain, labeling it: Ethereum Classic.