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What is Ethereum Classic?

The history - where it came from - definition


To understand Ethereum Classic, the definition and its difference with Ethereum – we have to go back in time and see how history rolled not only for the Ethereum eco-system but the cryptocurrency industry as a total.

The Decentralized Autonomous Organization – creation

Based on smart contracts, its how things get done in the entirety of the Ethereum eco-system. They represent automated contracts that enforce the terms of the contract itself.

The need of a decentralized venture capital fund that would be funding all future dAPPS (decentralized apps made in the eco-system) that are going to be created in the ETH eco-system brought the so called DAO – the decentralized Autonomous Organization a very complex smart contract.

Even as I mentioned, it is a very complex smart contract, the way it worked was quite simple and to the point. In case you wanted your part in any direction of the DAPPS that would be getting funded, you would buy “DAO Tokens” for a specific amount of Ether and the Tokens would make you officially part of the DAO structure.

The transparency, control, flexibility and potential that the DAO offered was incomparable. Everybody wanted to be part of this new “movement” while grabbing their piece. In around 28 days of its creation, it gathered over $150 million worth of ether.

  • And the only way to go out of the DAO if you opted do so was an exit door that was created and named “Split Function”. With is, the ether you invested would come back to you and if you wanted you could have created your own “Child DAO”.

But, after using the split function, you had to hold the ether for 28 days before you could use them again to buy lets say DAO Tokens. Many of the crowded noticed there was a loophole and had their finger directed to it. In the other side The DAO creators announced that that is not a big problem, but it turned out that was the cause of the big split of Ethereum into Ethereum and Ethereum classic.

The Decentralized Autonomous Organization – Attack

This Loophole was used by someone on 17th June 2016 and channeled away 1/3 of the total DAO funds. That is worth around $50 million dollars.

If you wanted to exit the DAO, as mentioned the split function would come to work in two steps:

  • Return the invested Ether in exchange of the DAO tokens they have.
  • Get the Registration done and update the token balance.

In this case what the attacker did was a recursive function in the request as following:

  • Get the DAO tokens being held by the user, and return the requested Ether.
  • Right before the registration step would be done, the recursive function made it so that the code would go and transfer even more Ether for the same DAO tokens.

So, these steps were going on until he gathered ether in value of $50 million and did put it in a Child DAO.

This is an “error” by DAO and not Ethereum itself, as Gavin Wood said: “blaming Ethereum for the DAO hack is like saying “The Internet is broken” every time a website goes down.”

The Wave after the Attack

Even knowing that Ethereum as a whole and its eco-system should not be blamed for what happened with DAO, this attack made wanted-to be investors and the crowd lose their belief and sympathy towards not only Ethereum but cryptocurrency in general. As the price indicated it crashed from $20 to $13.

  • The condition of the Split function that the returned Ether will be held 28 days without being able to spend them was of course still on function so the hacker could not access them yet.

So, keeping that in mind the community and the team had three solutions:

  1. Do Nothing.
  2. Soft Fork.
  3. Hard Fork.
Nobody does Anything

Doing nothing was supported very much by some of the crowd as doing anything would go against the very nature and philosophy of Ethereum.

But the majority went for the second option – the Soft Fork.


On of the two options to update a chain is the Soft Fork, the other one being the Hard Fork. The easiest way to understand the Soft Fork is to think of it as an update in a software which is backward compatible.

Lets say in your computer you have MS Word 2005 functioning and you want to open a word file built in MS Word 2015, you can still open that file because MS Word 2015 is backward compatible.

Img Credits to: Vitalik Buterin

So, all the updates you can enjoy in the newer version can not be found in the older one.

In other words that is what Ethereum was planning to do with their blockchain, using a soft fork where even if you want to update or not, everybody would be able to interact with each other. With this action, it caused the complete lock down of the stolen ether.

This looked all good and nice, but a bigger problem would be coming if the Soft Fork would have been implented: the “Denial of Service” (DoS) attack vector.

What is the Soft Fork DoS

“Gas” is the reward to all mining activities done in the Ethereum ecosystem and in the other side its the primary way how the miners are protected by any DoS attack. So if someone floods the network with transactions which are difficult to compute the miners can start computing them and if they fail to do so, they will get a Gas score which is equal to the number of computations done. So the more difficult the more you collect.

But with the Soft Fork, there was a way around there was a way around in which it would enable the attacker to flood the network with transaction that are difficult to be done with a little or no Gas price or expense for the attacker.

So, only one option was left to go: Hard Fork!

Meaning of a Hard Fork

Hard fork is not backward compatible. There is no way of going back at all. So if you do not come aboard the updated version, there is no open door for you to access any new updates or interact with the users.

The Hard Fork – in this case is supposed to work in that way that it’s a branch that separates from the main block chain at a particular point (before the DAO attack in this case). Until the block 1,920,000 the old and new chain were the same, but after that the two of them become totally different entities – the new chain was called “Ethereum” or “ETH”.

The hard fork was formed to refund all the money that has been taken from everyone by the DAO via a refund smart contract which had the sole function of “withdraw.” So for every 100 DAO, 1 ETH will be given to the DAO token holders. This proposal caused a huge controversy in the community, and there was a split. The people who were “Anti-Hard Fork” refused to change to the new blockchain and decided to remain in the old block chain naming it “Ethereum Classic” or “ETC.”

That is the moment where everything started between ETC and ETH or as Gavin Wood explains it:

“the single most important moment in cryptocurrency history since the birth of Bitcoin.” – co-founder of Ethereum

Ethereum Classic right Now

So the part of the crowd that were against the hard fork did stick to the original “version” naming it “Ethereum Classic”. Right now its price is $15.73 [based on Coinmarketcap].

Its market cap is below $1.5 billion right now on the 5th place of all cryptocurrencies in the world.

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