Ethereum Classic: Going Against the Grain
Slow, slow Sunday morning here. Bitcoin dipped around 3% over the past 6-8 hours, but I am thinking this week we can pick up some steam. Let’s not forget that this week bitcoin is up 16%, Ethereum is flat and Litecoin is down 5%. None of the altcoins have had a significant breakout that would be not synonymous with a bitcoin rally.
The one coin that behaves very oddly compared to the overall market is Ethereum Classic. ETC is up 5% while the entire market is red, and I have seen this many times before. Ethereum Classic had highs of $45, and usually hovers in the $30 territory consistently. My guess for this is that the community of Ethereum Classic has a strong willed community of holders. This isn’t a new ICO or a privacy coin. The people who own this have a strictly philosophical reason for it.
This was covered in my article on QTUM. I will summarize. A smart contract is a rules-based piggy bank. The creator of a smart contract can set rules and stipulations, and whoever completes a task following those rules or stipulations will be rewarded coins for their work. Shortly after Ethereum’s rise to power, a venture capital smart contract called the DAO was created as a publicly funded venture capital fund for any projects that were created on Ethereum. This was revolutionary, as it was set up to be autonomous in function, and completely objective.
Because of it’s granular objectivity, the fund contract had a loophole that allowed people to create their own ChildDAO and fund projects based on their own personal beliefs. Someone spoofed the code and made the piggy bank shake too many times, which created a mega ChildDAO. The people who put money into the venture capital fund looked in horror as all of their money was now in a malicious VC fund controlled by a hacker. The sword remained double edged, however. In it’s objective code, any DAO must wait 28 days before liquidating it’s Ether raised.
Ethereum’s community decided on a fork. Let’s first start with what a soft fork actually entails. A soft fork is a software update. Think of Microsoft Word 2000 and whatever Microsoft Super Vista Extreme we are on now in 2018. That was a series of soft forks. Microsoft 2000 is still compatible with the newly updated Microsoft, only with less features than the new one. A hard fork is a software update that completely overrides the functionality of the prior versions. That’s like if a Playstation 5 came out, and no longer supported Playstation 1 and 2 games. Ethereum’s hard fork was going to start a new blockchain altogether, and leave the prior version and its problems in the past. Ethereum decided on a hard fork, splitting Ethereum Classic and Ethereum. They didn’t want the difference to be Playstation 1 vs. 2, they wanted the difference to be Xbox Vs. Playstation.
There were people who actively supported the continuation of the old version, with no updates being made. In their minds, the hacker took advantage of the objectivity, and that was a lesson learned. They were taking a risk, however. With this old system, they were going to have to do updates without the super stars Gavin Wood and Vitalik Buterin. Soon after the hard fork, there was an update on Ethereum to go from proof of work (mining) to proof of stake (voting). This was a drastic change for the community, as mining was one of the key incentives for development. Many of the miners on Ethereum saw that going back to the old system may be more lucrative for them than the proof of stake system. This is almost exactly where we are at up to this date.
If it was notable, it wouldn’t be called Classic. The real differentiated value in the technology is that it is completely and utterly objective. “Code is Law” is their guidelines for everything. This has the associated consequence of being open to attack. If it is a completely unregulated ecosystem where there is no intervention, this is clearly a “kick me” sign like we saw with the DAO. There is going to be continuous soft/hard fork software updates to make sure this objective autonomous system remains in place, and each time there will be openings for attack. I would really, really prefer there was someone at the helm. If you go to notable tech on my prior article on EOS, they can freeze functions so that any attack can be disabled almost immediately, and there will be no need for the entire community to go through painful software updates and forking.
This all goes back to decentralization vs. non-decentralization. I am a businessman. This is not a business platform. I would be scared to death to put any of my money into any of their functions, because there is no one who will help me if it was a smart attacker! An attack is a loophole, and developers are fond of finding loopholes.
There is a virtual team behind Ethereum Classic. Igor Artamonov is the CTO, who has been working on the project since November 2016. There looks to be eight developers that are associated with ETCDEV, the development/business arm of Ethereum Classic. Their road map indicates they will be scaling the network through the use of side chains, while also doing what they can to support third parties to develop on the network. If you think of blockchain as a wide array of storefronts on which businesses can develop, I am not sure the offering of “Code is Law” is going to be a strong one versus the many others that can offer higher functionality and security.
This is a proof of work mining environment. People are solving complex equations to be rewarded tokens on the network. Personally, I like this type of system. It provides consistent incentives for sellers to keep working, and the network of people seem to be holding on to it for the prospects of its use cases, exactly like Ethereum holders. There are ICOs that have been developed off of Ethereum Classic, but they are either basic or very new.
Cardano: The Cardano Daedalus Wallet will be supporting Ethereum Classic coins. This seemed like a groundbreaking development for Ethereum Classic, and a low hanging fruit for Cardano. There is stiff competition in blockchain for wallet share (no pun intended), and the more coins that agree to be supported within a Cardano wallet, the more volume they can control. I wouldn’t exactly call this “Symbiotic”.
I am not interested in this project at all. The key differences are brutal objectivity and non-interference. I could see this coin going through attack after attack, and coin holders really suffering on account of them wanting to have code be the only rule of law. That is completely possible in 10-20 years, but not with outdated software and commercial interests not wanting to invest their funds into a HAL 9000 out of 2001 Space Odyssey.
The DAPP and smart contract business is a cut-throat industry now, make no mistake. Networks are free to develop on, there are VC based incentives to develop on certain platforms, and there is peace of mind knowing that someone could help you if there was a bad actor. The only way that Ethereum Classic could reach its goal of complete objectivity would be through investment and commerce taking place on the platform. Investment and commerce can’t take place on the platform because the platform is designed to have no safety net. That sounds like no business environment I want to be apart of.
None of what I say is a recommendation to buy or sell cryptocurrency… clearly. Please do your own research, and my opinions are based on my own biases that I have developed through research.
Sources: (Microsoft Excel analogy)
Featured image courtesy of Shutterstock.