The Case for Ethereum Classic




I am actually a huge fan of Vitalik Buterin’s. As a writer, when people ask me who I like to read and learn from, Vitalik’s one of the first name’s I mention. He helped shape my thoughts on the beauty of immutable ledgers.

That is why I was so upset when the DAO Project imploded. Because as intelligent as he and his fellow developers are, they are human beings, which makes them subject to normal pressures and biases. $50 million is a lot of money to most people, but especially for a young, grassroots group led by an inexperienced boy genius. That much money should never have been invested in such an experimental and community-backed project this early in the cryptocurrency game.

Unfortunately, it was; a brilliant hacker/not-hacker inevitably took the bait, and there was nothing Vitalik could realistically do about it. The DAO wasn’t his project. Disgruntled investors, however, would surely turn to him, and since their ranks included significant Ethereum miners—whose support the network needs—the hard fork was really a foregone conclusion.

It’s due to those extenuating circumstances that I still like the Ethereum team, and am sympathetic to their situation. Everyone makes mistakes. For better or worse, however, the cryptocurrency market operates on the principles of rational self interest, with game theory being a popular area of study, so mistakes have to have consequences. Otherwise, they will happen again.

Why It’s Necessary

Ethereum’s leadership cannot simply promise not to fork again because it will be outside of their control. The precedent here is that they will cave in the face of sufficient pressure, and they cannot prevent investors from making massive mistakes again in the future. The pitchforks will come out again, and if we’re not careful, it will start to be for gradually smaller and smaller grievances.

These consequences, therefore, are intended for the market—the developers are bystanders. In fact, everyone who owned ETH received an equal amount of ETC, so to the extent your ETH’s value was drained, you were compensated proportionally. The only people who really suffer directly from this are DAO token holders and developers, and to the extent that those two groups overlap, I do apologize.

But we still have to do this. Blockchains are not a democracy, where the majority can enforce its will. When a sufficient disagreement arises, the need for consensus requires us to go our separate ways. Our purchased coins contribute to the market cap and value of ETH, and we do not consent to the way it has been used. The value of ETH can only suffer in proportion to how much the market disagrees with the fork, which is entirely fair. Nobody is entitled to other people’s support.

DAO supporters hoped to ignore these criticisms, rendering them irrelevant for practical purposes. Now that Ethereum Classic is tradable on Poloniex, however, ETC cannot be laughed off as a valueless clone. In response, they have turned to attacking Classic’s merits, both figuratively and literally. While a couple of their arguments have some merit, ETC actually has a relatively decent shot at taking off and achieving massive returns for its investors.

A Good Investment?

Let me preface this by saying that this is not a low-risk investment. I did buy some ETC, but they amount to a small fraction of my cryptocurrency portfolio, which wasn’t that large to begin with. Please be cautious.

The biggest threat to Ethereum Classic is its relatively small P2P network and weaker encryption strength (hash power). In fact, one notable miner threatened to execute a 51% attack, but he later relented. That’s because while many cryptocurrencies on the market are weak enough to attack, doing so costs time and money and attracts retaliation. Major pools will certainly not find it worth the effort.

Still, it is a concern. Since Poloniex listed ETC, however, its hash power has doubled, and it spiked further in self defense when the 51% attack threat was initially issued. He no longer has enough hash power to carry it out, and the way things are going, it will probably stay that way.

Just in the process of writing this article, ETC jumped over 50%. Chinese exchanges, major pools, and OTC whales are now getting in on the action. If the price continues to rise, the mining community will be unable to resist lending Ethereum Classic their hash power—otherwise, the difficulty will be too low in comparison to the block reward. Free money never lasts long.

The essential problem is that unless you own DAO tokens, you have no reason to choose Ethereum over Ethereum Classic. They are basically the same thing with different recorded versions of history. The entire thing is open source, so if the Ethereum developers come out with new features, Ethereum classic will adopt them almost immediately (unless they’re similarly controversial). Any Ethereum developer with DAO tokens now works against himself.

Conclusion

Once you realize that ETH and ETC are equally functional, it becomes apparent that the network effect is all that stops the latter from gaining ground. Since neither has a competitive advantage, the market will choose ideologically.

The only way for Vitalik to nip this movement in the bud is to convince everyone that there is no way a hard fork like this will ever happen again. I would like to see that happen; I would like to see it happen for every blockchain, in fact. But the cold, ironic truth is that Ethereum Classic is the only way to do that. If and when ETC goes away, it will be because Ethereum has become pure once again.

Published by

Andrew Wagner

Andrew Wagner is a decentralization advocate based out of Vancouver. He is one of the founders of the Bitcoin Co-op, a director of CoinOS, and the founder of CoinFest, the world’s first decentralized convention for decentralized currencies. He’s worked hard to spread Bitcoin in his home city of Vancouver, converting many businesses, and even got a Bitcoin tattoo! Now he’s a writer in the space, helping to elucidate and expand upon the abstract concepts behind cryptocurrency while exploring the hidden corners of its community.

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