Ethereum Classic is an open-source platform for running smart contracts and decentralized applications (dApps). It is the legacy chain that split from Ethereum following a contentious hard fork, known as The DAO fork, in Jul. 2017. Like its sister chain, Ethereum Classic features an execution engine optimized for smart contract processing (known as the Ethereum Virtual Machine or EVM) and a native token, called ETC, to pay for transactions and incentivize miner participation in its Proof of Work (PoW) consensus system. While it shares certain elements with Ethereum, Ethereum Classic offers a more defined monetary policy and inflation schedule and does not intend to transition to a Proof of Stake (PoS) design.
The DAO hack gives rise to Ethereum Classic
The DAO hack and resulting hard fork split the Ethereum network into two separate chains: Ethereum and Ethereum Classic (ETC). The DAO was an Ethereum-based venture fund that managed to raise ~$150 million in Ether in an April 2016 initial coin offering (ICO). A few months later (July 2016), an attacker exploited a bug in one of The DAO's smart contracts, enabling the hacker to steal 3.6 million ETH of the funds collected in its ICO.
A divide in the community formed around how to resolve the issue. One camp believed reverting the chain, thus erasing the hack from the network's history, was necessary to preserve the longevity of Ethereum. The other side reasoned mutability was antithetical to the ethos of crypto networks and refused to accept a ledger rewrite. The divide led to a contentious hard fork at block 1,920,001, and the legacy chain that did not reverse its transaction history rebranded to Ethereum Classic.
Philosophy and monetary policy change
The Ethereum Classic (ETC) community stresses the core principals of censorship resistance and (most prominently) immutability. And as a continuation of the Ethereum blockchain, it features a Turing-complete smart contract language to support the development of more complex decentralized applications (dApps). The Ethereum Classic community governs the network by the motto "Code is Law," which instills the belief that ETC transactions and dApps are truly censorship-resistant and immune to any third party interference.
ETC later (March 2017) adopted a new, Bitcoin-like monetary policy fit with a fixed supply cap and disinflationary emission schedule. The proposal drastically deviated from the original Ethereum monetary policy, which remains in flux as Ethereum core devs look to establish a more concrete economic model for its future Proof of Stake (PoS) network. Instead of monetary flexibility (and some uncertainty), Ethereum Classic now features a max supply of 210,700,000 tokens and miner reward reductions every five million blocks. And unlike Ethereum, the community intends to stick with Proof of Work (PoW) as its consensus and token issuance mechanism.
Development teams and future developments
ETC's structure varies from most blockchain projects, incorporating multiple development teams (ETCDEV, IOHK, ETC Labs, ETC Cooperative), each with their own goals. ETC teams typically focus on providing scaling solutions via sidechains, enabling machine-to-machine communication (aka IoT), building easy to use development tools (SDKs), and promoting cross-chain transactions so others can implement immutable smart contracts.
ETC is one of the few cryptocurrencies where investors can gain exposure to it through a traditional brokerage and or retirement account. Grayscale Investments created an Ethereum Classic Investment Trust (ticker ETCG) that allows investors to gain exposure to ETC without having to store or secure it directly. ETC is also eligible for tax-advantaged accounts by including it in a traditional IRA or Roth IRA.
Ethereum Classic (ETC) kept most of the original Ethereum technical features and architecture. It remains an account-based blockchain (as opposed to Bitcoin's UTXO model) consisting of external accounts, which are controlled by a user’s private keys, and contract accounts, which are managed by contract code. External contracts can create and sign messages to send to both types of accounts, while contract accounts can only execute transactions automatically in response to a message they have received. The latter are what are known as smart contracts and enable the programmability of decentralized applications (dApps).
Ethereum Classic also continues to use the Ethereum Virtual Machine (EVM), the smart contract and the transaction execution engine. It is a Turing-complete virtual machine featuring a specific language “EVM bytecode,” typically written in a higher-level language called Solidity or others such as the Python-based Vyper. Every operation on the EVM requires computational effort and memory. Ethereum Classic node operators and miners provide these resources to application developers and network users in exchange for gas.
The fee to make transactions or execute smart contract operations on ETC is (gas price) * (gas limit), and fees are paid to miners for including your transactions in a block. The gas limit is the maximum amount of gas users are willing to spend on a transaction, whereas the gas price is the cost users are willing to pay for each gas unit. A normal transaction on the network costs 21,000 gas but costs more if you are trying to execute something more complex as that requires more computational power. Users can also speed up their transactions by raising the gas price since that will incentivize miners to include the transaction(s) in the next block to receive those fees.
Ethereum Classic (ETC) uses Ethash as its Proof-of-Work (PoW) algorithm. New blocks are generated every 15 seconds, on average, and the current miner reward for each new block found is 4 ETC which is reduced by 20% every 5 million blocks (about 2.4 years). ETC will be mineable until around 2070 when miners will reach the soft supply cap of between 210 million and 230 million. In addition to miner rewards, ETC introduces Uncle Rewards, which incentive miners to include “uncle blocks”. Uncle blocks are valid blocks that arrived too late, meaning another miner solved the PoW faster than a given miner and claimed the miner reward, but that same block can be added as an “uncle block” by a slower miner. This practice aims to decrease mining centralization, reduce the chance of unintentional forks, and boost network security. Every new block can contain at most two uncle blocks. Uncle block rewards are 3.125% of the miners' reward or 0.125 ETC.
Ethereum Classic upgrade proposals are subject to the ECIP process. In this model, anyone can submit code changes, dubbed Ethereum Classic Improvement Proposals (ECIP), akin to Ethereum EIPs, on Ethereum Classic's open-source GitHub repository. The community then attempts to reach a "human consensus" to determine the outcome of any proposed changes to the protocol. ETC proponents discourage submitting proposals outside of the ECIP process, as some may see it as an attempt to subvert the network and as an attack against the community.
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