What is Ethereum Classic?
Written by Alexandra Perry
Posted June 18, 2018
At this point, no one should be surprised that a new token came to Coinbase.
The writing was all over the wall.
Coinbase, the world's leading software wallet, has been making major regulatory and infrastructural strides, all of which would enable the exchange to support new tokens.
Two weeks ago, Coinbase announced that it was in the process of becoming a registered broker-dealer, which would allow the exchange to trade tokens under guidance from the SEC. Before that, Coinbase hinted at new tokens by building out ERC20 support.
ERC20 support would have allowed Coinbase to offer investors a whole new range of digital assets.
Now, after all that anticipation, the first new token has arrived: Ethereum Classic (ETC). Following the announcement, the digital token's price skyrocketed over 25%.
But not everyone is thrilled. Many investors feel like Coinbase offering Ethereum Classic is a bit of a joke. Why?
Well, some say its because Ethereum Classic doesn't seem to fit with the other Coinbase coins. Others object because Ethereum Classic is the less popular fork of the Ethereum blockchain.
But that doesn't change the facts.
The token is coming to Coinbase, and that has implications for the rest of the digital currency industry. It could also benefit some investors who got into the game early.
Before we get to all that, let's first take a look at what Ethereum Classic is and how it is different from Ethereum.
The Birth of Ethereum Classic
To better explain what Ethereum Classic is and why investors should care about it, we're going to take a step back in history and look at a very famous crypto event: the DAO attack.
Back in 2016, there was only one blockchain network bearing the Ethereum name.
An ambitious smart contract project known as the decentralized autonomous organization (DAO) was being run on that Ethereum blockchain.
The DAO would have provided something unheard of in the digital currency space: a decentralized venture capital fund. This fund, in turn, would be able to fund all the new decentralized applications built on the Ethereum network.
If an investor wanted to have a role in this, they had to buy "DAO tokens." These tokens could only be purchased with ether.
This kind of project had potential, completely reshaping our current venture capital model.
And it attracted a lot of investors.
In just 28 days, the DAO project was able to raise more than $150 million in a crowdsale.
Now, in today's digital currency market, that may not seem like a lot.
But back then, it was more than a lot. $150 million represented 14% of all the ether tokens in existence.
And this is where the problem began.
You see, if someone wanted to opt out of a certain project, they had to exit the project through something known as a "split function."
And this was fine until June 17th, when one smart cybercriminal realized he could exploit this model and keep removing funds. In the end, this criminal took over one-third of the DAO's funds.
Many investors lost everything.
It's important to point out that this theft was not the fault of the Ethereum network. It was the fault of the DAO.
That said, recovering the stolen funds was a response that fell to the Ethereum developers. And that is how we got Ethereum Classic.
The Aftermath of the DAO
In the aftermath of the DAO attack, the Ethereum community was forced to make tough decisions.
After the attack, the price of Ethereum fell from $20 to $13. In order to gain back investor confidence, the Ethereum team set to task on getting back the stolen funds.
And they logically could.
After evaluating multiple options, the Ethereum team decided the best way to reclaim the funds would be through a hard fork.
For those of you who are new to the digital currency world, you should know that hard forks are actually pretty common. When a hard fork happens, code is edited. This produces two versions of the code: the one that existed before and the one that existed after the fork.
In the case of hard forks, the new code is no longer compatible with the old one and now operates by different rules.
Of course, the decision to hard fork Ethereum was met with contention from the Ethereum community. Some developers believed that "code was law" and nothing should be altered to reclaim funds. But others believed that the best course of action was to make the changes and save funds for investors.
In the end, it was this disagreement that created Ethereum Classic.
When the changes happened, a group of developers decided to keep mining and supporting the old Ethereum blockchain, giving it the name Ethereum Classic.
Coinbase and Ethereum Classic: What it Means for You
Unless you were one of the lucky investors who already had Ethereum on GDAX before the hard fork, Coinbase's support of Ethereum Classic won't shower you with free tokens.
If you did hold Ethereum on GDAX before July 17, 2016, then you should be able to claim Ethereum Classic when Coinbase introduces it to its GDAX, now Coinbase Pro, platform.
It's important to note that Ethereum Classic isn't launching on Coinbase's main platform right away. Before Coinbase considers an asset safe for the main platform, it tests it on its professional platform, Coinbase Pro.
However, that doesn't mean investors should turn a blind eye to Ethereum Classic. Historically, all tokens that have gone onto GDAX have been added to Coinbase. Beyond that, tokens added to Coinbase tend to dramatically increase in value. Coinbase opens the doors to investors around the globe, and because of this, the tokens on its platform tend to get more exposure.
So keep an eye on the exchange for more information in the coming months.
We will also keep you updated on any new tokens and movements from the exchange.
@AlexandraPerryC on Twitter
Alexandra Perry is the managing editor of Token Authority and the associate editor of Technology and Opportunity. She also contributes weekly content to Wealth Daily, a free investment research newsletter that addresses a range of market topics. She has multiple years of experience working with startup companies, primarily focusing on artificial intelligence, cybersecurity, alternative energy, and biotech. Her take on investing is simple: a new age of investor can make monumental returns by investing in emerging industries and foundational startup ventures.
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