The Ethereum Challengers, ep. 7: Ethereum Classic (ETC)
The original Ethereum chain, with a commitment to immutability, sidechains, and aspirations in the IoT space.
Confusing newcomers is something cryptocurrency does particularly well.
Bitcoin. Bitcoin Cash. Ethereum. Ethereum Classic.
…Bitcoin Gold, Bitcoin Diamond, Bitcoin God, Ethereum Fog…
As most readers will know, but most newcomers will not, Ethereum Classic isn’t a subsidiary or alternative product offered by Ethereum. They share a common origin, yes, but they’re now entirely separate projects.
Ethereum (ETH) hard-forked in 2016 to undo the damage caused by a bad actor taking advantage of bad code, as we’ll explore below, but Ethereum Classic continued the original chain, allowing the bad actor to keep their stolen tokens as ETC — since doing otherwise would be an act of censorship and violation of immutability.
As Ethereum’s currency is called “ether,” ETC tokens are called “classic ethers.”
Opinions on the ETH/ETC divide run hot, with strong proponents and equally strong critics.
So far we’ve looked at RSK, EOS, Cardano, NEO, NEM, and Qtum. Each time, we’ve discussed a few concepts relevant to each project. To understand Ethereum Classic, we’ll take a brief look at forks and immutability.
Note: As we move down the market cap rankings, good, up-to-date info gets harder to find. I’d greatly appreciate a comment or a tweet to @bitgenstein if you have important information to add to this article.
May the Fork Be With You
For much of 2017, a lot of price action both ways was driven by forks. Not all forks are alike:
- Some forks only fork code without continuing the same blockchain. For example, Litecoin was a fork of Bitcoin’s code, but owners of bitcoins didn’t receive free litecoins when the Litecoin network launched.
GitHub forks like this aside, there are two types of upgrade forks:
- Soft forks only require roughly a majority of nodes to accept the upgrade. Since new transactions after a soft fork still follow the old rules and will be approved by outdated nodes, it is not necessary for all nodes to upgrade. Conversely, though, some transactions that would be accepted by outdated nodes might not be accepted by upgraded nodes following the new rules — so soft forks cannot be undone without a hard fork. Since we’re not talking about a soft fork in this article, I’ll save examples for a later article.
- Hard forks, by contrast, require all nodes to implement the upgrade or be rejected by the upgraded network. In this case, if enough nodes reject the upgrade, the old, non-upgraded network will continue, and the new, upgraded network will fork into a new network and a chain split.
Chain splits are the most notorious forks, and the source of many “free coins” during the 2017 hype.
Bitcoin Cash, for example, shares the same blockchain content with Bitcoin (BTC) up until 1 August 2017 (block 478559), so everyone up until that point who had an amount of BTC also had the same amount of BCH.
Changes to the BTC blockchain since then have not affected BCH balances, and vice versa, since the BTC and BCH ledgers have split, never to join again.
To explain a chain split, here’s the greatest nerd analogy ever.
It’s kind of like how an official change to Star Wars IV: A New Hope would affect both Star Wars Legends (the Expanded Universe books) and the now-canonical Disney Star Wars movies. They both share the same root source material, the same original chain: the pre-Disney movies.
Whether Han shot first is not two questions, but one, and the answer affects both Legends and Disney, since the shootout with Greedo was before the fork.
But a change to one universe after the fork doesn’t affect the other. Han Solo is still alive in the Legends chain, and Chewbacca is still alive in the Disney movies chain. Both Legends Han and Disney Chewbacca are blissfully unaware of the fates of their alternative selves.
Speaking of retroactive spoilers, the most famous hard fork and chain split ever executed by Ethereum was created to refund victims of the hack of The DAO.
The DAO is a now-infamous Initial Coin Offering that ran on Ethereum in mid-2016 — with a vulnerability in its code that resulted in the stealing of millions and millions of dollars’ worth of funds.
Ethereum forked to return the hacked funds. But some in the Ethereum community believed this censorship was the wrong move, and so the chain continued sans refunds as Ethereum Classic.
Ethereum Classic is the incarnation of belief in immutability: that nothing that happens on the blockchain should ever change, under any circumstances. Code is law, and if we start changing things arbitrarily when the code works differently than we thought, we open up the door to censorship once again.
Side Discussion: Code Is Law?
I usually keep philosophical opinions out of Ethereum Challengers posts. But since ETC’s primary dispute with ETH is philosophical, we have to get philosophical ourselves to do it justice.
Ethereum Classic is all about total immutability, yet as I argue elsewhere, and in good company, “Code Is Law” smart contracts are too inflexible to actually rule the real world, at least beyond a very limited set of cases.
For one thing, those who think they can create a set of universal ethical laws that are not adaptable to specific people and situations — and yet remain just — probably haven’t had much experience with justice systems.
For another, related thing, technology has not yet advanced to a place where the subjective realities of humans can be reasonably accommodated by robots. Coded contracts do not understand context and lack compassion.
A world ruled by hard numerical law without exception would probably end up something like Nosedive, that Black Mirror episode where a numerical social media rating is everything. A string of mistakes and unfortunate circumstances plunges a girl with a 4.2 eager to increase her rating down into the depths of the lower 2s. Each new poor rating snowballs into others, and soon she has no way to escape the avalanche.
This is not to say that I think we should ramp up censorship.
Rather, as we move forward with designing these systems, we need to continually innovate robust technology that somehow accommodates human subjectivity.
This might mean decentralized arbitration.
It might mean limitations on what kinds of contracts are law combined with solid formal verification.
Or it might mean incredible developments in artificial intelligence.
Or it might mean something else we haven’t yet invented.
That’s also not to say there is no place for Ethereum Classic.
I’m just not sure we want to live in a world ruled by it, a world where it becomes the platform. It could feasibly be a large part of the coming economy — where its approach is used only in appropriate cases.
Ethereum’s ability to deal with a real-world situation, The DAO, was in fact the reason that Ari Nazir of Neural Capital cites for becoming more interested in Ethereum, on episode 13 of Clay Collins’s podcast The Flippening:
“It was really the … real professional response, in my opinion, after that, and how that was handled really for everybody in the entire world to see, that got me believing in the potential for Ethereum and smart contract platforms … It was really after The DAO that I had more faith in a lot of the governance and the way that people were able to respond to real-world events.
I understand where Ari is coming from. There might be applications where ETC’s philosophy is best, but I doubt it’s a good idea for the whole decentralized world.
All of that said, I’m happy to see that the conversation is shifting away from “which chain is best?” to a co-existence of these ideas.
Ethereum Classic is the chain you go with if you need and want complete immutability for your project.
Will the market and the people determine that there is sufficient demand for these advantages? We’ll see.
Ethereum Classic has, of course, seen development activity since the fork. Like Ethereum, the “difficulty bomb” designed to force the network to transition to Proof of Stake was delayed.
Ethereum itself has four major development stages: Frontier, Homestead, Metropolis, and Serenity. We’re currently in the Metropolis stage, which has two parts (Byzantium and Constantinople) and is designed to implement zk-Snarks for privacy, Proof of Stake for scalability, account abstraction, and upgrades to smart contracts.
Part of moving to Proof of Stake is the “difficulty bomb,” designed to force the network to transition away from Proof of Work. Ethereum development wasn’t as rapid as initially planned, so the difficulty bomb was delayed in the Byzantium hard fork. Ethereum Classic also needed to hard fork to delay this difficulty bomb.
But Ethereum Classic hard-forked in something significant of its own, too: on December 11, 2017, Ethereum Classic implemented a fixed cap monetary policy: in other words, while a small stream of ethers will be issued forever, classic ethers will cap at 210 million.
With immutability paramount and a fixed cap monetary policy implemented, and no immediate plans for moving to Proof of Stake, Ethereum Classic is keeping closer to its Bitcoin roots than Ethereum itself does.
The Core Devs and IOHK’s Grothendieck Team
One well-known figure in the cryptocurrency space is Charles Hoskinson (not actually pictured above). Charles was the initial CEO of Ethereum, but left before the launch of the project back in 2015. When ETC split from ETH, Hoskinson quickly involved his group IOHK in the former.
IOHK now includes Ethereum Classic as one of its major cryptocurrency projects, the others being Cardano (ADA) and ZenCash. The IOHK website promotes Ethereum Classic as “a next-generation digital currency united with an intuitive programming platform. This allows software developers of all skill sets to build the next wave of market disrupting decentralized applications (Dapps) that can change the world.”
The team at IOHK working on ETC is called “the Grothendieck Team,” and their recent activity is focused on the Mantis ETC wallet:
However, IOHK is not actually in charge of core Ethereum Classic development. Nor is a centralized foundation like ETH’s Ethereum Foundation, which ETC repudiates.
The core ETC team currently keeps a low profile and is in the short-term focused on:
- “Scalability through sidechains,”
- “IoT and Machine-to-Machine protocol,” and
- Helping “3rd party developers to build apps on top of ETC.”
As I mentioned above, despite IOHK’s major focus on Proof of Stake (Cardano’s PoS system Ouroboros is a major development), the Ethereum Classic community seems to be sticking with Proof of Work for the foreseeable future. On this, Hoskinson remarks,
“That’s fine. We shouldn’t fall in love with one idea. While I do think Ethereum Classic’s consensus algorithm, ‘Ghost,’ needs to be removed or improved, sticking to proof of work will help us differentiate from Ethereum, so the two projects can complement each other instead of competing.
“This could also help Ethereum, as miners will have a place to go when they make the switch, which should make their transition easier.”
Good Luck Brian
Coinbase arguably gave Litecoin so much of its growth and tenacity over 2017. Retail investors joining Coinbase were immediately presented with a coin with solid charts and a thesis that was attractive to them.
Now, Coinbase has announced support for Ethereum Classic “in the coming months.”
After the addition of Bitcoin Cash, it seems obvious to many that Coinbase has selected Ethereum Classic before the “many other assets” it will add simply due to ease of integration. (ETC was actually issued to those who held ETH on Coinbase at the time of the 2016 hard fork and was available for withdrawal until December 30, 2016.)
But Ethereum Classic fans and team members say Coinbase made the choice because of the outsized potential of the project:
Take Anthony Lusardi, director of ETC Cooperative, who says that “the future of ETC is the future of all cryptocurrencies, and that future is interoperability, there will be no one winner. ETC will become highly interoperable while others naively fight to be dominant.”
So it’s time for our big questions, applied to Ethereum Classic (ETC).
Ethereum Classic has its own scalability plans, involving sidechains, for 2018 and forward. As with most major platforms, scalability is the most urgent project on the developers’ plates. ETC devs have also hinted at interoperability, arguably another kind of scalability. I don’t know more details at this point.
Bitcoinesque. “Ethereum Classic manifests these values by relinquishing control by a formalized central foundation. The only hierarchy is that of transparent meritocracy and mutual reputation. No backroom deals or behind-closed-doors unilateral decision making; just free and open discourse.”
Immutability — no censorship under any circumstance — is a major focus. As ethereumclassic.org puts it, “Your ETC is yours forever.”
3. Development Complexity
Given that Ethereum Classic is built on “code is law,” bugs will likely not be easy to fix.
Development work unique to Ethereum Classic has produced the Emerald Software Developer Kit, a toolkit to build dapps. The SDK contains other components for developers such as UI, libraries, and build tools.
Developers seeking an incubator and all the accompanying support can pursue a place at Ethereum Classic Labs. ECL funding is between $100,000 and $500,000 per project.
Usually this category doesn’t have a clear winner, but at this point Ethereum apps have the same basic development flow as ETC and yet also have a larger and growing set of tools and incubators. One of Ethereum Classic’s major focuses is improvements for developers, so this may change in the future.
Deployment of scalability via sidechains is planned for 2018. Focus on IoT applications and courting developers will be major goals in the years to come.
5. Generalized Features
ETC does have an SDK with libraries and build tools. These aren’t the same as generalized features, but they do ultimately provide many of the same benefits.
As with the other categories, information about Ethereum Classic’s plans for the future beyond broad strokes is still difficult to find.
I’m not aware of any improvements to adoptability by Ethereum Classic over Ethereum at this time.
ETC may actually be harder to adopt, as some ETH tools do not work on ETC yet. One example is MetaMask, though ETC is working on MetaMask compatibility. Going forward, each ETH adoptability improvement may be compatible with ETC or may not. Of course, ETC may build its own improvements to user-friendliness.
7. Market Position
Some may hope that Ethereum Classic has strength because of its commitment to immutability, but that has shown limited practical effect. The community needs to make major plays to gather attention, and the past couple of months include at least two.
First, Consensus 2018 saw the $50 million launch of Ethereum Classic Labs. Second, Ethereum Classic is going to be added by Coinbase soon. This alone may give it the publicity, clarity, and price bump needed to spur future development. Amidst bigger, more popular projects, I’m not holding my breath, but I’ll keep an eye on it.
The Ethereum Challengers series has so far explored:
- RSK (formerly RootStock), with side discussions on smart contracts, Turing completeness, and sidechains,
- EOS, with an intro to consensus methods and Delegated Proof of Stake, the Byzantine Generals Problem, and Byzantine Fault Tolerance,
- Cardano (ADA), with an introduction to formal verification and an endless link-rabbithole starting at Ada Lovelace,
- NEO (NEO and GAS), with discussion of China’s size and government philosophy as factors in the success of Chinese projects,
- NEM (XEM), formerly New Economy Movement, with a focus on templates, APIs, and multi-level multi-signature transactions, and
- Qtum (QTUM), pronounced “Quantum,” including a discussion of Bitcoin’s UTXO model vs. Ethereum’s account model.
Lisk was scheduled to be up next, but first we’ll detour into two newer projects: IOS (with the token IOST) and Hedera Hashgraph.
I have zero commitment to keeping this article immutable, so don’t forget to mention anything you think needs adding, and I’ll be happy to include it.