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A look at Ethereum Classic and what has fueled its 28% jump in less than a week

A look at Ethereum Classic and what has fueled its 28% jump in less than a week

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By CNBCTV18.com Jul 28, 2022 6:49:15 PM IST (Published)

Ethereum Classic is a hard-forked version of Ethereum. It was formed due to a hack on The DAO, a decentralized venture fund operating on the Ethereum blockchain. Read more here-

Ethereum Classic (ETC) has been one of the few cryptocurrencies that has shown upward momentum over the last couple of weeks. ETC has spiked nearly 28 percent in the last four days alone, jumping from $25.54 on May 25 to $32.88 on May 28. It had a similar rally in the previous week too, jumping nearly 40 percent between the May 18 and 22.

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What is Ethereum classic?
Ethereum Classic is a hard-forked version of Ethereum. It was formed due to a hack on The DAO, a decentralized venture fund operating on the Ethereum blockchain. The platform allowed investors to vote and invest in potential projects, all through the use of smart contracts and codes.
In the short while it was operational, The DAO accumulated more than 11 million ETH from over 18,000 investors. However, in 2016, unknown hackers discovered a flaw in the project's open-source code and managed to syphon nearly $60 million of investor funds.
After the hack, the Ethereum community was split into two. One group believed that investors of The DAO should suffer the consequences of investing in a flawed project. The other contingent believed that a bailout should have been created to compensate investors.
The difference in opinion resulted in a hard fork. The old network came to be known as Ethereum Classic (ETC), whereas the new network continued as Ethereum.
What's fueling Ethereum Classic's rally?
Ethereum 2.0 is fast approaching. With the upgrade, Ethereum will shift from the Proof-of-Work (PoW) consensus mechanism to the Proof-of-Stake (PoS) consensus mechanism. The shift will likely be completed in September and promises to make Ethereum faster, less expensive, and highly scalable.
However, the shift will also render Ethereum miners obsolete. Therefore, when the upgrade is complete, several miners intend to shift to blockchains where PoW is still in practice. Ethereum Classic is one such network.
This could be one of the reasons why investors and analysts see Ethereum Classic as a strong proposition for the future.
Ethereum Classic is 'fine' and 'original'
Another reason for ETC's rally could be Vitalik Buterin's words of praise for the legacy blockchain. On the July 21, the Ethereum co-founder rallied behind Ethereum Classic and called it "the original Ethereum" and a "totally fine chain".
"If you like proof of work, you should use Ethereum Classic," said Buterin at EthCC, the largest annual European Ethereum event focused on technology and community.
Ethereum Classic's outlook is fundamentally bullish
Since the 2016 hard fork, Ethereum Classic and Ethereum have been following two different paths. While Ethereum is headed for its 2.0 version marked by improvement in performance, Ethereum Classic is reaping the advantages of following the fixed monetary policy. This hard capped supply of coins could further boost ETC prices in the future.
And if miners do jump ship, it will also make Ethereum Classic more secure and stable, boosting its long-term adoption. Therefore, the real uptick for Ethereum Classic will likely come after Ethereum 2.0 becomes a reality. It is seen as the future home of wealthy miners looking for viable opportunities in the PoW space. Last month, Grayscale investments bought over 130,000 ETC to signal that the cryptocurrency is becoming more attractive now.
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