Ethereum Classic is a blockchain-based distributed computing platform that offers smart contract functionality. It is open source and supports a modified version of Nakamoto consensus via transaction-based state transitions executed on a public Ethereum Virtual Machine (EVM).
Ethereum Classic was originally known as Ethereum. It was conceived by Vitalik Buterin and the Ethereum Foundation and launched in July 2015. Ethereum was designed as a platform for building and deploying decentralized applications (dApps) that run on smart contracts. Smart contracts are self-executing programs that run on the blockchain when certain predetermined conditions are met. Ethereum aimed to create a more flexible and programmable version of Bitcoin, which only supported a limited scripting language.
Ethereum quickly gained popularity and attracted many developers and users who created various dApps on the platform, such as decentralized exchanges, lending platforms, prediction markets, and gaming platforms. One of the most ambitious and hyped dApps was The DAO, which stood for Decentralized Autonomous Organization. The DAO was a complex smart contract that functioned as a decentralized venture capital fund, where anyone could invest Ether and vote on proposals for funding various projects.
The DAO was launched in April 2016 and raised over $150 million worth of Ether in a month-long crowd sale, making it the largest crowdfunding campaign in history at the time. However, The DAO also had a critical security flaw in its code that allowed an attacker to exploit a recursive call bug and drain over 3.6 million Ether from the contract, equivalent to about $50 million at the time.
The DAO hack caused a major crisis and controversy in the Ethereum community, as it posed a dilemma on how to deal with the stolen funds. The Ethereum Foundation, led by Vitalik Buterin, proposed a hard fork of the Ethereum network that would effectively erase the hack from the blockchain history and return the funds to the original investors. The hard fork required the consensus of the majority of the network nodes, which had to upgrade their software to the new version.
After the hack, Vitalik Buterin and other project developers felt that regaining the confidence of the Ethereum community was necessary. Users could only trust the Ethereum ecosystem again if they retrieved their money.
Ethereum developers initially proposed a soft fork so that the current and updated versions are mutually compatible. But this didn’t materialize due to legal and technical issues. Instead, the network arrived at a consensus to hard fork Ethereum, which meant the creation of a new and backward-incompatible blockchain.
Ethereum Classic (ETC) emerged as the unaltered version of Ethereum (ETH) and derived its name after forking the network. Anonymous developers vehemently upheld the immutability of blockchain technology and convinced others to maintain the transaction record of the old Ethereum.
Similarities between Ethereum and Ethereum Classic
Both Ethereum and Ethereum Classic function as a store of value, facilitating trades and exchanges with other cryptocurrencies. Here are some other similarities between them:
- Decentralized blockchain technology
Ethereum continues to be a decentralized protocol similar to Ethereum Classic with its globally distributed blockchain nodes that eliminate single points of failure and process transactions 24/7.
- Smart contract functionality
Both Ethereum and Ethereum Classic automate decentralized applications and financial decisions using smart contracts. A smart contract is essentially self-executing code that can perform actions based on predefined conditions.
- Privacy protection
Ethereum and Ethereum Classic both put great emphasis on protecting the privacy of their users. While public keys are open for everyone, private keys remain under the user’s exclusive control. Users are also free to use aliases instead of their name and other details, preserving their anonymity while carrying out transactions.
- Minting limit
According to the monetary policy of Ethereum, there is no hard cap on its supply, which can increase indefinitely. However, developers have programmed the supply of Ethereum to increase by 4.5% only every year. The monetary policy of Ethereum Classic, on the other hand, stipulates a fixed supply of its tokens. There can only ever be 230 million Ethereum Classic tokens, which is meant to ensure a fair price.
- Protocol and Blockchain Use Case
Ethereum Classic supports smart contract creation, enabling developers to deploy decentralized applications. The network has undergone upgrades to improve stability, security, and interoperability with Ethereum, fostering collaboration between the two blockchains. Despite maintaining its core principles, Ethereum Classic continues to innovate and collaborate.
- Consensus protocol
Ethereum Classic runs on the Proof of Work consensus mechanism. Through this process, miners solve complex mathematical problems using energy-intensive equipment to gain rights for validating transactions on the blockchain. By successfully validating and adding new blocks, they get ETC tokens as rewards.
Ethereum used to run on the Proof of Work consensus model but made the shift toward the Proof of Stake mechanism where nodes must stake Ether tokens to become validators. Staking ensures that validators won’t add any dubious transaction to a block. This shift from PoW to PoS is known as the Merge and took place in September of 2022.
Uses of Ethereum Classic
- The ETC or Ethereum Classic asset is primarily used to pay for decentralized computations on the Ethereum network.
- ETC used to pay for executing transactions and smart contract functions on the Ethereum Blockchain. This is referred to as gas, and the fee associated with these actions are known as GAS costs.
- ETC is also a native token with a monetary policy that creates a predictable, disinflationary emission schedule with a fixed market supply cap.
- Ethereum Classic is a decentralized, open-source blockchain platform powered by smart contracts
- It utilizes Ethereum’s original, unforked blockchain up until the DAO hack
“Ethereum Classic runs on a proof-of-work consensus algorithm backed by the Ethash mining algorithm.
- Ethereum Classic has a current circulating supply of 137 million ETC out of a fixed total supply of 210 million ETC
- In 2020, Ethereum Classic underwent a Thanos network upgrade to improve security and enable treasury funding via a 12% tail emission model
- This lets ETC miners direct up to 35% of the block subsidy to a treasury to support development
- As part of the Ethereum ecosystem, Ethereum Classic can support decentralized applications, smart contracts, decentralized finance and other Ethereum-based applications.
- It provides an option for developers who prefer to build on the unforked Ethereum chain without writing any custom software
- With lower transaction costs than Ethereum, it may be better suited for certain high-volume applications
- The native Ethereum Classic token ETC serves primarily as a payment mechanism to pay for transaction fees and smart contract execution costs on the network
- ETC also serves as a value token and store of value, able to be traded on cryptocurrency exchanges and custodied in wallets
- The tail emission model provides an ongoing subsidy source paid to miners and helps fund protocol development via the treasury system
The ETC token can be considered Shariah compliant. It’s used for valid and plausible services, and the underlying blockchain offers a genuine use case and utility. ETC token holders do not hold equity in the underlying activities, and therefore token holders cannot be responsible for all and every activity that occurs on Ethereum Classic. The holders of ETC are responsible to ensure that their governance and voting aligns with Shariah principles, and that any activity or transaction they make using ETC is Shariah compliant.
Based on and subject to the foregoing information, and for the purposes of this conclusion, nothing has come to our attention that causes us to believe that ETC is in breach of Shariah* principles and rulings as adopted by the scholars conducting this research.
Based on and subject to the foregoing information, and for the purposes of this conclusion, nothing has come to our attention that causes us to believe that Cardano is in breach of Sharia* principles and rulings as adopted by the scholars conducting this research.
*Attention is drawn to the term ‘Sharia’ and ‘Sharia compliant’ and its interpretation thereof as expressed in the following link https://shariyah.net/glossary/