When you’re learning about cryptocurrency, chances are you start by hearing about Bitcoin. Eventually, you’re likely to start learning about other blockchains like Ethereum.
There are so many different cryptocurrencies and blockchains, though, that it can become confusing — especially if you run into blockchains and tokens that sound familiar. One example is Ethereum and Ethereum Classic.
These are two different blockchains, and each has its own token, even though they both emerged from a single blockchain. Before you invest, it’s a good idea to understand the difference between these two, so let’s take a look at Ethereum versus Ethereum Classic.
What is the difference between Ethereum and Ethereum Classic?
Ethereum and Ethereum Classic emerged from the same blockchain. Ethereum was originally described by Vitalik Buterin in a whitepaper in 2013. However, the blockchain wasn’t officially launched to the public until 2015. The split occurred in 2016 after a hack resulted in a controversial splitting of the blockchain, also known as a hard fork. In fact, the two blockchains are identical until block 1,920,000.
So, what caused the split? At its heart was a hack. The first decentralized autonomous organization (DAO) was created on the Ethereum blockchain — and it was hacked.
After the DAO hack, some in the Ethereum community were concerned. They wanted to make changes to the blockchain. On top of that, they wanted to erase the hack and restore what the victims of the hack lost. But the idea of a public ledger is that all transactions are recorded.
A hard fork in the blockchain was created, where Ethereum developed further, and the record of the hack was erased. As part of the hard fork, those who lost tokens in the hack received their money back on the new blockchain.
The Ethereum Classic blockchain is the version that retains a record of the hack and the original code. As a result, Ethereum Classic isn’t compatible with the new main Ethereum blockchain and its upgrades haven’t translated over to the Ethereum Classic chain.
How do Ethereum and Ethereum Classic work?
Ethereum Classic is the original Ethereum blockchain, although the new main chain, Ethereum, is more popular and is the version backed by founder Buterin. Ethereum Classic works similarly to Ethereum, providing for smart contracts and allowing for the development of decentralized applications (called dapps).
In order to hold both Ethereum (ETH) and Ethereum Classic (ETC), you need a compatible wallet. There are some wallets, such as MetaMask, Ledger, and Trezor that can be used to store both ETH and ETC. You can learn more in our guide to crypto wallets.
However, there are some differences between Ethereum and Ethereum Classic. It’s important to understand that the Ethereum Classic network has been working on parity with Ethereum, and in some cases is backward compatible.
One of the biggest differences, though, is that Ethereum is moving toward a proof-of-stake program while Ethereum Classic remains proof-of-work. Ethereum began rolling out proof-of-stake as part of its new ETH2 blockchain, which is designed to increase the network’s speed, efficiency, and scalability. The rollout began in 2020 and is expected to finish by the end of 2022.
Proof-of-work is the original method of determining who gets rewarded for powering transactions on the blockchain network. With proof-of-work, validation is done by miners who lend their processing power and essentially try to be the first to finish a complex problem.
On the other hand, proof-of-stake relies on validators who have a stake in the cryptocurrency token. Proof-of-stake is generally seen as less energy-intensive and more scalable than proof-of-work.
It’s also important to note that Ethereum Classic doesn’t use the ERC-20 token standard used on the main Ethereum network. ERC-20 is often considered a standard for decentralized finance (DeFi) apps. However, it is possible to get Wrapped ETC (WETC), an ERC-20 token that can work on the Ethereum blockchain.
Finally, Ethereum Classic has a limit on the number of tokens that will be produced. The total supply will be capped at 230 million. There is no total cap on Ethereum supply, although the growth in tokens is limited to 4.5% each year.
Ethereum Classic vs. Ethereum price
There’s a huge difference between the price of Ethereum and Ethereum Classic. Ethereum is more popular and is considered the standard. As of January 9, 2022, ETH was priced at $3,169; ETC was priced at $30.
The price of ETH peaked at more than $4,700 in November 2021, with ETC at an all-time high of $134 in May 2021. Ethereum Classic dipped below $4 multiple times in 2019, while ETH had a price below $1 when it was first launched in 2015.
Should you invest in Ethereum or Ethereum Classic?
Whether you invest in Ethereum versus Ethereum Classic depends on your individual goals and overall portfolio strategy. However, some considerations can help you decide which is most likely to be the best choice for your situation.
First, Ethereum is one of the most popular cryptocurrencies, second only to Bitcoin (BTC). The market cap for Ethereum is $380.8 billion, as opposed to Ethereum Classic at about $4 billion.
Additionally, Ethereum is more widely available and popular, making it more liquid. It’s easier to buy, sell, and trade ETH than Ethereum Classic. In fact, ETC isn’t available on all exchanges. In order to use ETC in the Ethereum blockchain ecosystem, you have to use Wrapped ETC so that it is compatible with the ERC-20 token standard.
For investors interested in something that is liquid and widely available, it might make more sense to choose ETH. On the other hand, ETC might seem like a better choice for blockchain idealists who believe in the ledger and the mandate not to tamper with it. Additionally, ETC is often considered speculative. If ETC gains traction, it could lead to larger gains.
Carefully consider your own needs and portfolio goals before deciding which cryptocurrency token to invest in.
How to buy and sell Ethereum and Ethereum Classic
Ethereum is so popular that you can easily acquire it on both centralized and decentralized exchanges. Ethereum Classic, though more limited in availability, can still be fairly readily found for buy, sell, and trade transactions.
You don’t usually need to have another cryptocurrency to buy ETH or ETC. In fact, many of the exchanges where both of these tokens are available accept payment in fiat currency, so you can make purchases with your bank account or even with a credit or debit card.
When it comes time to sell, you can usually choose to sell in exchange for fiat currency. Both ETH and ETC are liquid enough that you don’t usually run into problems selling on an exchange. You can also trade your tokens directly for another token using an exchange.
Why is Ethereum Classic so cheap?
Ethereum Classic is so cheap because it’s not in as great demand as Ethereum. Ethereum is a more popular cryptocurrency, so more people want to invest in it.
Additionally, the Ethereum blockchain has a larger ecosystem of dapps and is widely used for decentralized finance. This increases demand for ether that can be used to power transactions on the Ethereum blockchain. The current version of Ethereum Classic just doesn’t have that same level of popularity, and therefore the demand and price aren’t as high.
What’s next for Ethereum and Ethereum Classic?
Ethereum continues its upgrade to ETH2 and the move to a proof-of-stake system. Because of the popularity of decentralized finance, Ethereum has the potential to continue to grow. Additionally, the ability to build decentralized apps and the wide adoption of the ERC-20 token standard make Ethereum a likely candidate for long-term viability.
Ethereum Classic has been working on upgrading its protocols and blockchain technology to be more compatible with the main Ethereum blockchain. As a result, Ethereum Classic might remain relevant, especially if interoperability between the two chains can be achieved and maintained.
In the end, understanding the difference between Ethereum versus Ethereum Classic is important if you want to make an informed decision about investing in cryptocurrency tokens.
Don’t forget to check out the best cryptocurrency exchanges to find other tokens to invest in and learn how to add digital assets to your portfolio.
Disclosure: The author owns ETH.