What became of the Ethereum Classic (ETC) cryptocurrency, and where is it going?
Some blockchain projects launched before the peak of cryptocurrencies' popularity are still operating under other names. Ethereum Classic has just become one such project.
History
The network was launched on July 30, 2015, under the name Ethereum — that's where Ethereum Classic begins its journey, which preserves the entire network history from the beginning.
Ethereum itself was renamed Ethereum Classic following the hack of the decentralized protocol The DAO in July 2016 and the network's subsequent hardfork. This was a case where the community, not the developers, decided to hardform.
On July 15, a vote was initiated in which most participants voted in favor of the hardfork. However, the voting was not all that smooth, as the number of votes depended on the number of coins. A quarter of the 3.9 million ETH used for the hardfork vote belonged to one person. Moreover, this number alone exceeds the number of all ETH coins voted against. Another controversial point was that the voting process lasted very short. This incident caused a storm of criticism towards the Ethereum fork.
The network branching resulted in a new blockchain, which bears the original name of the network, while the old version without the network rollbacks was renamed Ethereum Classic. Proponents of Ethereum Classic advocated for the immutability of the blockchain and followed the unspoken code of "code is law".
Ethereum Classic's strengths
One of the advantages of Ethereum Classic is its limited issuance. After the Gotham update released in December 2017, the maximum number of coins was limited to 210,700,000 ETC. Also, a deflationary mechanism was built into the protocol, whereby for every 5 million blocks, the reward to miners is reduced by 20%.
The ETC cryptocurrency was one of the few altcoins that could renew its all-time high (ATH) in 2021. At its first global peak in December 2017, the price of ETC climbed above $40 and reached a new ATH of $176 in May 2021. Ethereum Classic entered the top 15 cryptocurrencies on CoinMarketCap's list with over $15 billion in capitalization.
When writing, the ETC cryptocurrency is ranked 26th in the CMC ranking with a capitalization of $2.9 billion, which is quite good, and its price is over $20. This is unsurprising since many of Ethereum's followers supported the original blockchain rather than its hardfork. ETC is still traded on major exchanges such as Binance, Coinbase, Bitfinex, and Kraken.
Weaknesses
Like many other forks, the Ethereum Classic network was subject to a 51% attack. In 2019-2020, hackers conducted a series of such attacks on the blockchain. In total, hackers conducted three successful 51% attacks on the Ethereum Classic network, the amount of damage from which amounted to about $8.3 million. The point is that Ethereum was significantly inferior to Ethereum regarding hash rate, so any large miner could switch to this network and get a large share of the total computing power.
To solve this problem, the developers first decided to change the Ethash algorithm to a different one. Still, they decided to simply increase the epoch duration from 30,000 to 60,000 to prevent miners from quickly switching to Ethereum Classic.
Not only is the Ethereum Classic cryptocurrency subject to high volatility, but also the hash rate of the network. Often, these indicators correlate with each other: the price rises following the hash rate and vice versa.
For example, in December 2022, the network's hash rate fell almost 2 times, from 200 to 109 TH/s, in a short period. Following this, the Ethereum Classic exchange rate fell to $16.5. Analysts attributed this to the mass exit of miners and investors from the cryptosphere.
Analysts also expected miners to switch to Ethereum Classic after Ethereum The Merge update, which happened before the cryptocurrency collapse in late 2022. From the beginning of 2023, the price of ETC and the hashrate began to rise. However, the hashrate is not close to the peak values reached before the release of The Merge update and is still around 150 TH/s.
Future of Ethereum Classic
The developers are still working on the project, as indicated by active social media, github and project blog. Not many people know, but Ethereum Classic has an ecosystem of decentralized applications, although it is much inferior to Ethereum in its development.
The Ethereum Classic ecosystem includes the DeFi protocols:
- HebeSwap,
- ETCswap,
- SwapBOX,
- MonoNFT, and others.
However, the aggregate amount of assets blocked in the protocol (TVL) is only a few million dollars in fiat equivalent. By the way, Ethereum Classic remained almost the only decentralized protocol in the DeFi environment that operates based on Proof-of-Work consensus. The vast majority of networks in DeFi run on Proof-of-Stake or similar algorithms.
Judging by the metrics, Ethereum Classic is significantly behind many crypto projects regarding ecosystem development — even recently launched ones like Aptos, Sui, and Celestia.
In terms of prospects, much depends on the pace of ecosystem development, which has grown significantly in 2023: over 30 DeFi apps have appeared in the Ethereum Classic ecosystem during this period alone. Since the beginning of the year, Ethereum Classic's TVL has more than tripled, according to DeFi Llama, but at the time of writing, only 4 apps are counted there.
Ethereum Classic will hardly be able to take the leading positions in the future, but it has every chance to maintain the current ones. Experts from AMBCrypto forecast ETC price growth of up to $32 in 2024.