Ethereum classic (ETC) is the old blockchain of the original Ethereum which executed smart contracts with proof of work platform. It also has its own cryptocurrency tokens. While, Ethereum (ETH) functions on a whole new blockchain after a split in 2016, Ethereum being the newer blockchain it holds the majority of miners, users and protocols. Blockchain is far more than only cryptocurrencies, even though bitcoin network was the first real world application of blockchain. There are several other use cases for this technology and blockchain shows a lot of promise for a variety of useful applications.
How did they split into two different blockchains?The DAO attack was a pivotal point which caused the split.
An organization known as Decentralized autonomous organization (DAO) whom are understood as decentralized venture capitalists or investors, had an intention to fund the Ethereum ecosystem to build decentralized applications known as DAPPs. This was seen as a project with great potential and has attracted huge number of investors.
The DAO crowd sale was able to raise $150 million of Ethereum within its first 28 days. At least 15% of the entire Ethereum tokens in circulation was invested into DAO.
If any of the investors wanted to opt out of this investment, they could use something called a “split function” which enables them to get back their Ethereum for a return of their DAO tokens.
What was the problem?
The split function had a loophole for a hacker to extract funds, which was never corrected by the Ethereum community. On June 17,2016, an unknown person or a group of unknown people extracted around $50 million which many people believed that it was a hack.
The Ethereum community was in disarray because of this moment.
There was 28 days waiting period (of the DAO smart contract) that the hacker had to wait in order to take out his interests. On this period the developers of the Ethereum community had to think of a reasonable solution.
1. To do nothing – “code is law” which suggests the ideology of immutable blockchain believers which supported Ethereum, these are the group which largely stuck back for Ethereum classic (ETC)
2. Soft fork – The idea behind this was to isolate and segregate all the blocks that contained the hacker’s transaction with the goal of not letting the hacker to withdraw the stolen ether.
3. Hard fork – The hard fork would not allow both updated and non- updated holders (nodes) to interact with the new system if they did not join the new blockchain. Hence the hard fork was not backward compatible.
As a final decision the majority of the community decided to go for the HARD FORK.
The hard fork is implemented, on the block that was just prior to the DAO attack, the particular point of the block was about 19,20,000. After this implementation the old and new block had split up on two completely different blockchains. The invested money was given back to the original investors using the “refund smart contracts” on a rate of 1 ETH for every 100 DAO token.
People contradicted that the Ethereum blockchain went against their sole purpose of decentralization in first place, when the developers were able to manipulate the codes in the network. But still, the most influential developers of the blockchain such as Gavin Wood and Vitalik Buterin decided that the hard fork was the best decision to take.