Why Ethereum Classic Isn’t a Good Substitute for Ethereum
Ethereum (CRYPTO:ETH) has had an outstanding year so far, but as new investors start to explore the sometimes strange and confusing world of cryptocurrency, there’s potential for missteps. One such plausible mistake is buying Ethereum Classic (CRYPTO:ETC) when attempting to buy standard Ethereum. No, it’s not “cheaper” Ethereum – the once-unified coins have very different levels of support and roadmaps ahead. Here’s what you need to know.
The big split
Until mid-2016, there was only Ethereum. The rising cryptocurrency was building momentum as an alternative to Bitcoin (CRYPTO:BTC) thanks to its ability to run smart contracts – automated agreements that can power decentralized finance, or DeFi, services and other apps.
In 2016, some early Ethereum enthusiasts devised a bold and inventive plan to create a decentralized autonomous organization, or DAO, that would allow users to pool their Ethereum coins and collectively decide which projects to invest in. It was simply called The DAO, and it raised more than $150 million worth of Ethereum. Soon after, however, a fatal flaw in the code allowed an attacker to withdraw about $50 million of the funds.
The DAO was a disaster, and the Ethereum community had to reckon with the fallout. Some believed that “code is law,” and that the immutable nature of the blockchain technology behind Ethereum meant that nothing could or should be done. However, a large portion of Ethereum developers and backers believed that the blockchain should be amended to reverse the hack and return the money to the original holders.
That contingent started a new blockchain called Ethereum with the hacked funds returned, and continued building from there. The original blockchain was renamed to Ethereum Classic, and the fervent “code is law” believers supported that vision instead.
Varying paths
Since then, Ethereum has become a cryptocurrency powerhouse. It’s the most popular platform for developing decentralized apps and serves as the backbone for the vast majority of the burgeoning DeFi scene. The price of the coin has soared, too, reaching an all-time high of $4,357 in early May before falling to just under half that amount as of this writing.
By contrast, Ethereum Classic has more or less lingered on the sidelines. The original version of Ethereum has a fraction of the average daily trading volume of the current Ethereum, and it isn’t a popular platform for decentralized apps, DeFi services, or crypto non-fungible token collectibles. In other words, it has significantly less active utility than Ethereum.
All that said, Ethereum Classic has seen its own price surge so far in 2021. It set a new all-time high of $167 per coin in May, right around the same time that Ethereum hit its own peak, but has sunk further without strong fundamentals behind it: Ethereum Classic’s price sits at about $47 per coin right now, or 72% off its peak price. Even so, it has sustained a larger price multiplier since the start of the year than standard Ethereum.
Besides piggybacking on Ethereum’s own momentum, Ethereum Classic seems to have benefited from the meme coin/stock trend as investors attempt to find low-cost assets to pump. CoinDesk described recent price jumps as the result of “speculative fever.”
Ethereum Classic has a few things missing, however: support, security, and vision. It doesn’t have the vast developer support that helps Ethereum power much of the surging crypto app market. Ethereum Classic fell victim to multiple attacks in 2020 which could compromise the security of the network. And while Ethereum Classic is implementing some smaller improvements, it will not transition to an energy-efficient and scaling-friendlier proof-of-stake network model, as Ethereum will with its upcoming 2.0 upgrade
The road forward
Although they’re cut from the same cloth, Ethereum and Ethereum Classic have taken much different paths over the last five years since splitting. Ethereum appears poised for continued growth and development as it enhances its network and helps more DeFi services roll out.
Ethereum Classic, on the other hand, has a novelty aspect to it – almost like the meme-inspired Dogecoin (CRYPTO:DOGE) – but that’s not enough to justify a long-term investment strategy. The lower cost enables wider price swings, but as it stands, Ethereum Classic is an inferior investment that lacks standard Ethereum’s road to sustained growth and improvement.
Bitcoin, Dogecoin, and Ethereum Start the Week Weak
What happened
Cryptocurrencies are starting out the week on a weak note. As of 10 a.m. EDT Monday, the prices of several of the biggest names in cryptocurrency are stumbling out of the gate:
So what
Why is that? A couple of news items are weighing on the major cryptocurrencies today, and they begin in Israel.
As Israeli newspaper Haaretz reports this morning, Israel is cracking down on the use of cryptocurrency to fund Hamas, which is designated a terrorist organization by both the U.S. and the European Union. According to the paper, Israel’s National Bureau for Counter Terror Financing, an arm of the Defense Ministry, last month seized 70-plus digital wallets that it says were “linked to Hamas.” Each of the three major cryptocurrencies named above – Bitcoin, Ethereum, and Dogecoin – were seized in the operation.
Two implications follow from this news: First, and most obviously, Israel appears to be joining the slate of nations (which already include China, the U.K., and the U.S.) taking a dim view of cryptocurrency use. The more antipathy for cryptocurrency grows among nation states, the less attractive crypto may turn out to be for investment.
And second, coming on the heels of last month’s news that the FBI successfully tracked and seized 63.7 Bitcoins that had been paid as ransom to the Colonial Pipeline hackers, it’s becoming increasingly clear that cryptocurrency transactions aren’t quite as “anonymous” as they’ve been advertised to be – nor crypto as safe to hold as it was once thought to be.
Now what
As Haaretz observes, legislators in the U.S. are looking at regulating cryptocurrency to strip away anonymity from digital wallets even further. And as worries loom about the future for crypto, cryptocurrency news site CoinDesk warns in an article today that a “bearish crossover” looms for Bitcoin in particular.
This currency is already “in a lull,” warns CoinDesk, “locked in a narrow range of $32,000 to $35,000 for more than two weeks,” and potentially poised to move lower. Granted, that argument appears based on technical analysis – a kind of stock price prognostication that we don’t put a whole lot of faith in here at The Motley Fool. On the other hand, the regulatory moves to restrict trading in cryptocurrency in China, in the U.K., in the U.S., and now in Israel, too – are factual developments. They’ll have real-world effects on the value of cryptocurrency going forward.
Indeed, they appear to be having those effects today.
Ethereum Price Rides Bullish Wave on Catalysts
The Ethereum price has been finding reasons to rally lately even as the broader cryptocurrency market stalls. The second-biggest cryptocurrency is up more than 3% in the last 24-hour period and has advanced by more than 10% in the last week.
Investors are increasingly finding reasons to be bullish — including the launch of decentralized exchange (DEX) ShibaSwap and a bullish report out of Wall Street — and they are running with both catalysts.
ShibaSwap Strengthens ETH Demand
ShibaSwap was built on the Ethereum blockchain, which supports ERC-20 tokens and for which ETH is used as a payment method for gas fees on transactions. According to the whitepaper, they are looking forward to the day when ETH v. 2 is complete so that transactions will be faster and less pricey.
In the interim, the launch of ShibaSwap has strengthened the use case for ETH. ShibaSwap went live on July 6, and the DEX already has USD 1 billion in total value locked (TVL) on the meme-coin trading platform.
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Given the pent-up demand to trade and swap meme coins such as SHIB, LEASH and BONE, ShibaSwap has jockeyed its way onto the ETH leaderboard for its use of gas for transactions. Social media accounts say that the DEX even muscled its way into the top three for the amount of gas used. Most recently, ShibaSwap is ranked No. 8 on Ethersacan’s Ethereum Gas Tracker.
Store of Value Argument
The debate about bitcoin vs. Ethereum has been raging ever since the first major cryptocurrency bear market. Now Wall Street is joining the chorus, finding more reasons to pit the bitcoin and Ethereum communities against one another during the current market downturn. With the bitcoin price trading below USD 35K, investors are on edge already, and Goldman Sachs has just added fuel to the fire.
According to reports, Goldman Sachs experts have published a paper in which they suggest that Ether could surpass bitcoin as the coveted store-of-value asset. Normally bitcoin goes toe-to-toe with precious metal gold for this title, but now Ether has entered the fray.
Story continues
The Wall Street firm seems to think that Ether will muscle its way into the equation, saying that it “looks like the cryptocurrency with the highest real use potential” thanks to its popularity for smart contracts. Goldman Sachs thinks it’s enough to catapult Ethereum past the leading cryptocurrency, bitcoin.
The analysts also cite crypto price volatility as the reason why neither one of them will catch up with gold in the foreseeable future. Regardless, Ether seems to have enough catalysts to keep the bulls around for a while.
This article was originally posted on FX Empire
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