Ethereum Classic v Ethereum
The split between Ethereum Classic and Ethereum is one that goes to the very heart of the philosophy underpinning the blockchain. The idea behind the blockchain is that transactions, once made, cannot be undone by anyone. The split between two factions of Ethereum users hinged on a disagreement with that concept.
The result was a new ‘fork’ of the Ethereum platform, with the bulk of the community moving to the new version, while dissenters stayed with what they named Ethereum Classic.
The split arose because of the Distributed Autonomous Organisation (DAO), a smart contract running on the Ethereum platform that was intended to be a kind of venture capital fund for Distributed Applications, known as DAPPS. Within 28 days of its launch, the DAO had accumulated $150M in Ether (ETH). Those who invested were able to vote on how the funds should be distributed.
However, a mechanism was installed to allow people to withdraw their funds if they no longer wanted to participate and this proved to be the DAO’s downfall. In the spring of 2016, somebody exploited the mechanism, using a loophole in its construction and withdrew $50M. Whoever did this did not breach the terms of the contract but the act was clearly not in the spirit of the system.
The community voted to change Ethereum’s code so that investors could get their money back. This was to be done via a ‘hard fork’ of the system – effectively splitting the blockchain in two. The community would move to the new chain, be given the equivalent amount of ETH to match what they had lost and the hacker would be left on the old chain with their funds now worthless. The fork went ahead in July 2016.
The problem is that those who see the blockchain as inviolable felt that this measure was wrong. Even though the fork was the result of the vote, those who oppose it argue that the community should not be able to alter the blockchain just because they disagree with something that has happened. On the other side, those supporting the fork argue that the community should have the right to make these decisions democratically.
Those who objected to the fork remained behind and retitled their blockchain Ethereum Classic, while the new fork continues to be known as Ethereum.
In terms of choosing between the two currencies, Ethereum has outperformed Classic since the split. This makes sense, given that Classic will not be compatible with any future upgrades and Classic has not developed at the same pace as Ethereum. That said, those who subscribe to the ethics that led to the creation of Classic might well prefer to stay with that currency.