The essence of creating this guide is to answer any question you might have concerning Ethereum Classic (ETC). In order to grasp the reason why and how Ethereum Classic came into being, it is essential to understand what led to its creation. You also need to understand the DAO hack and the hard-fork.
Though, before we dig deep into the core of this lesson, let’s take a little timeout to understand exactly what Ethereum Classic (ETC) is!
1. The Purpose of Ethereum Classic
Ethereum Classic is a decentralized, open-source, and blockchain-based cryptocurrency platform that runs smart contracts. Smart contracts are autonomous digital software or applications that are able to run independently on their own. In this regard, smart contracts depend on the principle of “Code is Law.”
Though not a new cryptocurrency, Ethereum Classic promotes the running of such smart contracts by providing the advantage of a decentralized financial space. By implication, it means that no government or external body can interfere, manipulate, monitor, or even censor the smooth running of such applications.
Just like Bitcoin Cash (BCH), Ethereum Classic came into being as a split from an existing blockchain, Ethereum. The two blockchains, Ethereum and Ethereum Classic, are similar in many ways, and Ethereum Classic offers the same features as Ethereum. These features include the creation and deployment of smart contracts as well as decentralized applications (dApps), and all the detailed descriptions including average block time, pay, and size.
2. The Turning Point in Ethereum Blockchain
Here, we will cover why and how the DAO was actually created, how the DAO was smoothly hacked, how the soft fork became a failure, and why everybody was relieved. Furthermore, how the hard fork brought a split and the eventual creation of Ethereum Classic. This is a brief summary of the events that led to the creation of Ethereum Classic.
So, if you have not read through this interesting history before, this is the best opportunity for you to clear all the confusion. Going forward, it is very important to understand these events!
3. The DAO – Venture Capital Fund
The absence of a centralized authority reduces costs and offers more control and access to cryptocurrency investors. As such, the Decentralized Autonomous Organization (popularly known as DAO) was actually meant to work as a venture capital fund evolution for the cryptocurrency decentralized ecosystem.
The Genesis DAO emerged at the beginning of May 2016 and was systematically built as a smart contract on the Ethereum blockchain. The DAO project was a complicated smart contract with many features. Initially, they went for a crowd token sale to support its development. They were able to pocket an impressive $150M USD, thus they made history as this was the second biggest crowd sale ever recorded.
Unfortunately, hackers exploited an error in the DAO’s code and made away with $50M USD out of the DAO’s fund. This caused dangerous turmoil in the cryptocurrency space, both among Ethereum enthusiasts, and DAO investors.
4. The Hack Exploitation
Members of the Ethereum community discovered that their funds were seriously drained from DAO and the total Ether balance was going down without abating. In the first few hours, a hacker had already pulled out a total of 3.6 million Ether. This attack, or hacking operation, took place because of an error discovered in the splitting function.
The exploitation withdrew Ether from DAO’s smart contract numerous times using virtually the same DAO tokens. The recursive call option made this action possible. Though, this error did not emanate from Ethereum itself, but rather from this single application built into Ethereum.
The code written for DAO was full of errors such as the recursive call exploit. Eventually, for reasons best known to him/her/them, the hacker stopped draining DAO funds.
5. The Emergence of a Soft Fork
In the aftermath of the hacking incident, they voted for a soft fork and approved it in order to help prevent the hackers from draining the Ether. A few hours before its release into the market, members discovered yet another problem with the deployment, a denial-of-service exploit vector. Therefore, developers created the soft fork to blacklist all those transactions that investors made from DAO.
6. The Hard Fork
Ether developers designed the hard fork to return all the Ether taken from DAO to refund the smart contract. Therefore, the new contract will be to withdraw only. The DAO investors can request 1 ETH for every 100 DAO tokens. Likewise, DAO investors that had paid more than 1 ETH for 100 DAO could request for the difference from the original address.
In order to arrive at a quick consensus, Ether holders who did send their transactions to the voting platform voted for the hard fork proposal and accepted it. The greater number of people (89%) voted for the hard fork and this occurred in the 19,200,000th block, precisely on July 20th, 2016.
This was when and how Ethereum Classic came into existence.
7. How to Buy Ethereum Classic (ETC)
This section will show you how to set up an Ethereum Classic account. Moreover, it will show you how to buy Ethereum and exchange it for Ethereum Classic. Here we go!
- Open your Google Chrome web browser and navigate to ClassicEtherWallet CX official download page.
- Add the wallet app to the Chrome browser on the top right of the browser. The Ethereum Classic wallet has now been properly installed. Click on the new Ethereum Classic app icon that is on your Chrome toolbar.
- Follow the next option to add the wallet.
- Select “Generate New Wallet.” Give the wallet a unique nickname, enter a password that would be difficult to guess, and click the “Generate” button.
- The next step is to click on “My Wallets” from the menu located across the top of the page. It will help you view details such as your new wallet and its special wallet address. Copy and keep it safe.
- Back up your wallet by clicking on the eyeball icon. In the pop-up, type your password and click “view wallet details.”
- You can now purchase ETH so that you can exchange it for ETC.
The rest of the steps will load once you choose an exchange. Changelly is a very good cryptocurrency exchange to buy ETC.
Ethereum Classic is not just a cryptocurrency, but a platform that developers can build projects on which will directly impact the world. Therefore, if decentralization is a commodity of the future, then Ethereum Classic could be at the forefront of it.
This article is not intending to provide investment advice. Users are ultimately responsible for the investment decisions he/she/it makes based on this information. It is your responsibility to review, analyze and verify any content/information before relying on them. Trading is a highly risky activity. Do consult your financial adviser before making any decision. Please conduct your thorough research before investing in any cryptocurrency and read our full disclaimer.
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