A bullish thesis for Ethereum Classic. A lot of the thoughts touched on are inspired by reading a few Etherplan posts, listening to Nick Szabo on podcasts and my intuition for a potential evolution path for decentralized blockchain economies. ps: I have Ether and Ethereum Classic bags and might be slightly biased.
The thesis for this bet starts with the Bitcoin protocol. The Bitcoin protocol enables the consistent decentralized issuance of a digital token(bitcoin) which can be used as means of exchange and can hold its value over a period of time. Digital currencies have been created before bitcoin but there was always the problem of keeping an accurate track of how much of the available tokens each participant owns in a decentralized/trustless manner. The Bitcoin protocol solves this with its proof of work algorithm to obtain consensus on processed transactions and update participant balances. Based on known human history, the creation of accepted means of exchanges has rarely been outside the control of a few people sitting in a room. Trust is implicitly defined in this process and also the backing of violence is required. The implications of having a digital, open, trustless and permissionless monetary supply will be significant and far reaching.
Building on this innovation, the Ethereum protocol was created. The Ethereum blockchain is also open, trustless and permissionless with its own native token, the ether. What makes it different from the Bitcoin protocol is that it has a virtual machine that can run code. This code can be written and deployed to the Ethereum blockchain by anyone with a computer and an internet connection. Reading from the Ethereum blockchain is free, however writing to it will have an associated cost as writing to the Ethereum blockchain typically involves a state change which can be thought of as a transaction that needs to be included in a block so the blockchain has the most recent state of its participants.
After its launch in 2015, Ethereum is currently the dominant smart contract platform and the Ethereum Virtual Machine (EVM) / Solidity appears to be the smart contract standard. The Ethereum blockchain, its side-chains, L2s and rollups lead all other smart contract platforms and ecosystems in economic security, total value locked, developer contributions, daily transactions, active users and many more metrics.
Where does Ethereum Classic fit in? Ethereum Classic is the original Ethereum blockchain. In 2016, there was an application(smart contract) deployed to the Ethereum blockchain which was exploited, resulting in some participants losing their funds. When this exploit happened, some of the Ethereum community decided to make the participants who lost funds whole and forked the blockchain to create what is called Ethereum today. The rest of the community did not agree with this and continued to maintain the blockchain where participants were not refunded. This blockchain is called Ethereum Classic.
A case for Ethereum Classic
Ethereum’s success will be Ethereum Classic’s success. I believe Ethereum Classic will benefit from the EVM/solidity being the smart contract standard as a significant number of developers can write solidity and even the competing smart contract platforms typically build in EVM compatibility. There is also a significant amount of effort that has gone into auditing and ensuring code security assurances for solidity smart contracts.
Ethereum Classic will also likely benefit from the Ethereum blockchain’s migration to Proof of Stake. Both blockchains are currently Proof of Work blockchains and use the same mining algorithm. It stands to reason the miners from Ethereum looking for other profitable opportunities will mine Ethereum Classic increasing the security and money soundness guarantees of the Ethereum Classic blockchain.
Finally, it appears the modular blockchain approach is the most effective way to scale transactions on decentralized blockchains i.e. separating consensus, data availability and execution. Ethereum Classic stands to benefit from this by serving as an economic security/consensus layer for execution environments(read rollups) or even other blockchains that do not want to bootstrap their own security and consensus network.