Ethereum Classic exploded in the bull run of 2021 and managed to garner a huge following. The cryptocurrency trades with the ticker ETC. The performance of Ethereum Classic had been phenomenal but the question remains: is ETC’s growth sustainable in the long run?
We take you on a ride in ETC’s ecosystem to help you better understand what the cryptocurrency is. The secret of success as an investor is understanding the underlying technology behind a security or asset. After our run-down, you will be better equipped to make an informed decision on your standing with ETC.
What is Ethereum Classic?
Essentially, Ethereum Classic is a hard fork of Ethereum – the queen of the market. A hard fork means the cryptocurrency has replicated the code of Ethereum and works in a similar way with a few minute – or major – changes.
ETC is an open source decentralized blockchain which has the capacity to run smart contracts – like Ethereum. Smart contracts are self-executing programs that run on codes. The decentralization of the cryptocurrency means the smart contracts run without any intermediary which solves the woes of centralization – more power with one part and the likes.
History of the cryptocurrency
Ethereum Classic was created as a result of a major hack on Ethereum’s network back in 2016. A hacker was able to cash in on a loophole in a third-party project of Ethereum and managed to drain $50 million worth of ether from the network. The hack opened the floodgates for criticism of the novel technology and played a role in hindering the acceptance of the blockchain technology.
The development had to improvise and the code of Ethereum was altered. This led to clashes between the developers and a hard fork was performed. The newer improvised version of the network remained as Ethereum while the version which stuck to the original code renamed itself as Ethereum Classic. And; hence, Ethereum Classic was born.
The original founders of the network are that of Ethereum – Vitalik Buterin and Gavin Wood. But as the network split from Ethereum in order to “preserve the integrity” of the network. Ever since then, Ethereum Classic does not have an official team designated and considers itself “global development community [which] is a permissionless do-cracy”.
Ethereum Classic vs. Ethereum
Now that you understand the basic difference between Ethereum and Ethereum Classic, how does the standing of both of these networks differ?
Ethereum is the second largest cryptocurrency in the market with a market capitalization of $294 billion. ETH’s market dominance is at 18% and is regarded as the queen of the market. On the other hand, Ethereum Classic is ranked at eighteenth position in the market and has a market capitalization of $10%. The coin’s market dominance is less than 1%.
Ethereum stands at a price of $2,500 while Ethereum Classic is trading hands at $49 – at the time of writing. The stark price difference can be attributed to ETH being considered the more legitimate of the two networks. But the price may not be able to fairly evaluate the performance of the cryptocurrencies. ETH started off the year with a price of $682 and went towards $4,362 during the peak of the bull run. The cryptocurrency gained by 540%. While ETC started off from $5.6 and went to $176 – a gain of 3000% in just a couple of months.
So, while analyzing the prices of both the cryptocurrencies the stark difference become negligible and even favors the lesser priced crypto. As ETC is operating at a much lower price level, it has much more potential to grow.
Moreover, Ethereum is moving towards proof-of-stake mechanism with its new & anticipated upgrade, ETH2.0. The update will solve major concerns regarding environmental sustainability and scalability. Ethereum Classic also needs an upgrade in order to stay ahead of the game.
Problems facing Ethereum Classic
While both the cryptocurrencies took off, Ethereum Classic lagged. Ethereum become much more popular and is currently second only to Bitcoin – the king of the market. However, Ethereum Classic was the target of major criticism and stayed behind. The hack of $50 million was the major reason behind the backlash that the older version of the network faced.
The crypto space is highly dynamic and being new projects have to consistently improvise and change in order to stay up to date in the market. The ability of ETC to not do that led it to lag. The older code of the network may also prove to be a hinderance in the wide scale adoption of ETC. Moreover, due to the lack to improvement, Ethereum Classic also suffers from problems of scalability. The network has the ability to process only 15 transactions per second – which one compared to the industry standard of centralized network is much less.
Is ETC a good investment?
Although the cryptocurrency had been the target of distrust and criticism, the recent growth surge has enabled the cryptocurrency to reach back the top tier cryptocurrencies. Hence, the future outlook of ETC seems bright. According to the estimates of Wallet Investor, ETC is expected to stand at a price level of $84 in a year’s time while the five-year projection expects the cryptocurrency at $219. Digital Coin Price predicts Ethereum Classic to be operating at $75 by the end of 2021. It is also expected to reach towards $171 in five years’ time.
The bullish price projections for ETC are boosted by the explosion of DeFi sector in the current year. Furthermore, the outlook for the general crypto market has also been bullish due to the bull run in the beginning of the year. With its DeFi compatibility, ETC can be expected to reach further higher.
The hard fork’s recent success has once again brought it under the spotlight. With greater attention, the cryptocurrency’s future outlook is positive. Ethereum Classic is expected to grow in the coming days and ahead. However, the concerns with the network are still there. The unofficial development team needs to re-focus their efforts into increasing the security as well as scalability of the network in order to enable greater growth.