Ethereum Classic (CCC:ETC-USD) traded for $59.26 as of June 14 and had a market capitalization of $6.89 billion, according to CoinMarketCap. Compare that to Ethereum (CCC:ETH-USD). Its price was $2,583.05, and it has a market value of $300.39 billion as of the same date.
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Therefore, Classic is a cheaper way to buy Ethereum as a blockchain asset. It has many of the same features as regular Ethereum. Let’s face it, for the same amount of money, you can own a larger position in the Ether coin. That makes it very attractive as a digital asset. And that is not all.
As I pointed out in my prior article, Ethereum Classic has had a much better performance so far this year. ETC-USD is up nearly 950% so far year-t0-date, whereas Ethereum is up just 250% in the same period.
That said, Ethereum Classic is well off of its peak so far this year. Its highest price was $176.16 on May 6. So it is now down 66%. But this is also somewhat true of Ethereum. It is down 41% off of its peak of $4,362.35 on May 12. That is a slightly better downside performance.
But wouldn’t you rather have the upside gains, which was nearly four times better with Ethereum Classic? This is despite the downside that was less than twice as bad. And there are other good reasons to own Ethereum Classic.
The Ethereum Rift
Ethereum Classic came out as a result of a dispute or “fork” that occurred in July 2016. A fork means that the blockchain for a given cryptocurrency is duplicated, resulting in the original version and a split version that functions separately, usually due to a disagreement in policy.
The fork in 2016 was from a “dispute over how to best resolve a hack that stole over $50 million,” according to Decrypt. Ethereum Classic is a continuation of the original blockchain platform.
Here is how Cointelegraph describes the two sides of the rift:
” …accept the hack had happened and fully commit to the ethos of censorship-resistance and immutability, or gauge community sentiment informally and save the funds through a hard fork. Supporters of the first option maintained the legacy chain and transaction record after the fork, resulting in Ethereum Classic.”
Other Standout Features of Ethereum Classic
Another major difference with ETH is that ETC has a fixed supply limit which was adopted in March 2017. It issues ETC in a similar manner as Bitcoin (CCC:BTC-USD). It cannot have more than 210 million tokens in circulation. Not so with Ethereum. It has no supply limit, which has been one of its pitfalls, at least until lately. I recently wrote an article about Ethereum’s proposed change with its EIP 1559 (Ethereum Improvement Program).
This will cause Ethereum’s supply to become slightly deflationary. Nevertheless, it will not be as restrictive as Ethereum Classic. The latter’s strict supply limit tends to have a “squeeze” effect on the token. This, of course, can be seen in the huge outperformance of the Ethereum Classic.
Ethereum’s commitment to proof-of-work (PoW) and blockchain mining stands in stark contrast to Ethereum’s commitment to move to proof-of-stake (PoS) validation. The latter expects to transition to PoS within several months, according to recent reports. If this proves successful, Ethereum Classic could be left out in the cold.
Successful 51% Attack on Ethereum Classic
Ethereum Classic has been severely compromised in the past. In August 2020, CryptoSlate reported that hackers had gained control over four days of 51% of the blockchain addresses. They then proceeded to double-spend tokens. This resulted in a theft of over $5 million. Coinbase (NASDAQ:COIN) reportedly increased the confirmation time for transfers of the crypto to two weeks as a result of the situation.
As a result, Ethereum Classic Labs, the core development organization behind Ethereum Classic, hired a law firm and a crypto intelligence company and tried to calm the situation. So far, a cursory review of their website does not address the attack, nor what procedures it has taken to prevent this in the future.
This is a warning sign for all crypto investors. Your money is often not safe in smaller, less well-funded token currencies. This is clearly a buyer beware situation that all investors should be cognizant of before investing in cryptos like this.
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On the date of publication, Mark R. Hake held a long position in Bitcoin and Ethereum. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Mark Hake writes about personal finance on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.