Table of Content

Birth of Ethereum Classic

 Ethereum Classic was created as a hard fork from Ethereum in July 2016 . In other words, the concept of Ethereum Classic did not exist until July 2016, and Ethereum and Ethereum Classic, except for some policy differences, are the main features of the platform, in that they can develop smart contracts and decentralized application DApps. All are the same.

'DAO Project', the prelude to the birth of Ethereum Classic

The reason for the separation of Ethereum and Ethereum Classic was the hacking incident of The DAO project in June 2016 . Before explaining the DAO project, let me briefly explain the concept of DAO (DAO).

DAO (Decentralized Autonomous Organization) refers to a decentralized autonomous organization. The DAO is a project that materializes the concept of DAO on the Ethereum network. It is implemented as a contract code on the Ethereum blockchain and uses Ether and DAO Token, a self-issued coin, as currency.

Coming back , the Dao project was the world's largest digital asset crowdfunding project based on the Ethereum platform when it started in March 2016 . Investors invest in ether without the intervention of a third party and receive DAO tokens calculated at the rate of their investment.

Unlike stocks, investors could easily invest like venture investors by using smart contracts without a general contract. Vitalik Buterin, the founder of Ethereum, also participated in this project, and many investors also participated in this project in anticipation that the Ethereum platform would bring about a new paradigm in the financial industry, for a total of about $168 million (about 200 billion won). We succeeded in attracting investment.

However, there was a problem in the project's smart contract design, and hackers who exploited the vulnerability hacked 3.6 million Ether in The DAO's account without permission . The 3.6 million ether was about 64 billion won at the market price at the time, or 10% of the total issued ether. Fortunately, the Ether withdrawn from The DAO was designed to be withdrawn after the 27-day grace period, so the actual hacked Ether was not stolen. 

Ethereum vs. Ethereum Classic

The failure of the Dao project took a toll on the Ethereum network. In response, the Ethereum Foundation has proposed two methods to solve the Dao Project Ethereum hijacking case. There is a soft fork that blocks the movement of Ethereum and a hard fork that gives back as much as the stolen Ethereum . Here, the soft fork failed, and opinions were gathered in the direction of solving the problem with a hard fork.

For reference, a soft fork refers to a fork that partially modifies existing blockchain functions. On the other hand, a hard fork refers to an action that modifies the basic function of the blockchain itself. After the upgrade, it will be a blockchain that solves the existing problems and has a protocol that is completely different from the previous blockchain. In other words, the biggest difference between a soft fork and a hard fork is that they are not backward compatible.

In July 2016, the DAO and Ethereum community members discussed how to solve the problem, and Ethereum was hard forked and split into two chains. One effectively reversed malicious transactions to recover funds and became the current Ethereum blockchain.

Ethereum Classic, under the belief that 'code is law', prioritizes immutability, the central value of blockchain, to solve the Ethereum DAO hacking incident and to stick to the original blockchain.  In addition, the currency issuance policy has been changed from the existing inflation policy, which is an unlimited issuer of Ethereum, to a fixed supply method such as Bitcoin, and the maximum issuance of Ethereum Classic is limited to 230 million. As such, Ethereum Classic was born as a result of a disagreement among the participants in the process of discussion to solve the problem derived from The DAO.