The painful history of Ethereum Classic

Ethereum Classic is a derivative of traditional Ethereum, the backbone of numerous decentralized apps. It was created after the ill-fated hack of the Ethereum-based platform Decentralized Autonomous Organization (DAO) in 2016. How did the project appear in the first place, how has it evolved, and what state is it in now? Let’s take a look back and investigate Ethereum Classic’s painful history.

It all started with the DAO

Here’s what the process looked like:

  1. Startups registered on the platform.
  2. Reputable participants of the Ethereum community reviewed their applications and white-listed those that were worth investing in.
  3. DAO token holders voted for their favorite projects.
  4. Once a startup gained at least 20% of the vote, it received access to DAO funds.

The simplicity of the fundraising process caused a frenzy among cryptocurrency enthusiasts. In the first month since its launch, the DAO raised more than $150 million in Ether, almost 14% of all ETH issued to date!

How the DAO was hacked

Coinmarketcap: after the DAO hack, the market capitalization dropped from 15 to less than 11 billion USD in a matter of a few days

The method of getting hold of the funds was so simple it could barely be described as a hack. In order for investors to withdraw their funds, all they needed to do was to file a request, and a splitting function then exchanged their DAO tokens back to Ether. A hacker injected a recursive function into the request, which allowed a repeat of the withdrawal process many times over for the same DAO tokens before the transaction was registered in the network. This function repeated again and again until one-third of the raised funds was stolen.

The network reversal and the community split

A big question that arises is, was blockchain technology to blame for the hack? Some hold the opinion that in 2016 Ethereum was still an experimental project and that the manual interference was justified at such an early stage so that the system didn’t die under the weight of bugs and errors. However, the truth is that the blockchain technology itself had already existed for a long time — it was the smart contract technology that failed.

A new cryptocurrency arises

51% attack reignites questions about its future

Ethereum Classic still has a $1 billion market cap, but it seems that it is slipping into oblivion. Will the project be revived with the next bull run or will it be buried in the annals of crypto history? Unless the project shows a serious desire to keep up with the times, 2019 could well be the year we finally say goodbye to the project.

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Originally published at https://news.bitstarz.com on June 14, 2019.

Blockchain and cryptocurrency marketing specialist