Ethereum Classic and Ethereum are the result of the biggest ever ideological battle in the cryptocurrency community. The event was described by Ethereum cofounder Gavin Wood as the most important in the history of cryptocurrencies since the launch of bitcoin. Ethereum Classic was created after a hard fork of Ethereum. ETC is currently trading at $17.18 while the price of ETH is $474.69.
The Ethereum blockchain and DAO
Developers can create and run smart contracts or dapps on the Ethereum blockchain. These smart contracts are written in a programming language called Solidity. A Decentralized Autonomous Organization was created on the Ethereum blockchain on April 05, 2015. The DAO was a smart contract that would run on the mainchain. It would pool investor money to fund development of other dapps on the blockchain. Anyone who held DAO coins would have a say in the operations of DAO. The DAO crowd sale began on April 30, 2016. The price of 100 DAO tokens was equal to 1 ETH. The DAO crowd fund was an instant hit and investors purchased DAO tokens worth $150 million within 28 days of its launch.
The DAO smart contract was programmed such that anyone could liquidate his DAO tokens anytime in the future. Developers had used a ‘Split Function’ to enable users to sell their DAO tokens. On June 09, 2016, Peter Vessenes announced that he had found a vulnerability in the code which could be exploited by any hacker. The bug allowed the attacker to recursively call the Split Function and drain all DAO tokens from the account. On June 12, 2016, the DAO team announced that the bug was not a major issue and all funds were safe. However that was not the case.
DAO is hacked
A random attacker exploited the vulnerability in the DAO code and slowly drained funds. Panic set in the Ethereum community when it was revealed that DAO had been hacked. DAO had almost 14 percent of all Ethereum in circulation at that time. The Ethereum development team announced that the bug was in the code of DAO and Ethereum blockchain was completely secure.
The DAO smart contract gave 28 days for Ethereum developers to find a solution because the attacker would not be able to liquidate his tokens till then. A group of white hackers exploited another bug in DAO and gained access to the attackers tokens. They managed to successfully extract 70 percent of all attacked coins. The Ethereum community then began debating on carrying out a soft or hard fork to rescue investors. On June 24, 2016, developers released a soft fork for Ethereum. This would not let the hacker use any DAO tokens as miners would reject those transactions.
The soft fork itself was found to have another vulnerability and miners decided to not implement it. Between June 28, 2016 and July 15, 2016, the community debated if a hard fork of Ethereum mainchain was the only option left. The hard fork would result in updating the ledger to its state before the hack.
Ethereum Classic is born
A section of Ethereum developers and community were against rescuing DAO with a hard fork. They believed that the ledger should be immutable and this hard fork was unethical. Details of the hard fork was announced on July 15, 2016 and a 12 hour notice was issued. It was decided that the hard fork would be activated by default at block height 1,920,000. On July 20, 2016, 80 percent of nodes had updated as the network approached block height 1,920,000.
The hard fork was successful and DAO funds restored. It was anticipated that the old chain would cease to exist. But miners kept verifying newer transactions and block 1,920,001 was generated. Thus Ethereum Classic was born. Its supporters argue that it is the original Ethereum as it upholds immutable nature of ledger. Likewise the newer after the hard fork and the network continued to be called as Ethereum.
Several cryptocurrency exchanges began listing Ethereum Classic with ETC ticker. On August 10, 2016, an anonymous group of users tried to dump a large quantity of stolen ETC in the trading market. Poloneix was quick to block the transaction and freeze all funds. All DAO tokens on the ETC mainchain got activated on August 31, 2016. This included tokens owned by investors and those acquired by attacker.
Ethereum Classic is still functioning as a separate chain but perhaps growth is limited by its lack of backwards compatibility and low developer interest.
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