Ethereum Classic (ETC) — also known as the “original” Ethereum — is on a roll. Ethereum Classic has been up over 60% in the past seven days and over 150% in the past month, according to CoinMarketCap data. That’s far better than Bitcoin (BTC) and Ethereum (ETH) and makes it the best-performing project in the top 50 cryptos by market cap this month.
What’s driving the price increase?
Ethereum Classic was born in 2016 after a disagreement divided the Ethereum community. What we now know as Ethereum forked to a new blockchain, while Ethereum Classic continued on the original one. With the long-awaited Ethereum merge due in August, some parties are hankering for the old days. Here are two of the main reasons for its dramatic growth:
- Proof-of-stake is not for everyone
The Ethereum merge will switch the network from an energy-intensive mining system called proof-of-work to a more sustainable proof-of-stake model. The idea is to reduce the blockchain’s energy consumption by 99%. It will also pave the way for further upgrades to make Ethereum more scalable and reduce network congestion.
However, the move is not without risks. Proof-of-stake is not as road-tested as proof-of-work, which up until now has been used by both Bitcoin and Ethereum to keep their networks secure. Other cryptos, such as Cardano (ADA), Polkadot (DOT), and Avalanche (AVAX) all use proof-of-stake, but they aren’t anywhere near as big as Bitcoin or Ethereum.
But the main objection to the merge comes from current Ethereum miners. When Ethereum switches to proof-of-stake, miners who’ve spent collective billions of dollars on computer equipment won’t be able to mine ETH anymore. Some are looking for new ways to use that equipment, and one option is to mine ETC instead. Ethereum Classic will not switch to proof-of-stake.
At a recent conference, the man behind Ethereum, Vitalik Buterin, said that people who didn’t want to switch to proof-of-stake would find a welcoming community with Ethereum Classic. “If you don’t like proof-of-work you should go use Ethereum classic, it’s a totally fine chain,” he said. This has widely been reported as an endorsement of ETC.
- AntPool’s $10 million investment
AntPool is one of the top cryptocurrency mining platforms. It recently announced it would invest $10 million in the development of the Ethereum Classic ecosystem. Speaking at a recent digital mining event, AntPool CEO Lv Lei said the company plans to continue to support Ethereum Classic. This type of investment could help ETC to attract more projects and increase its ecosystem. We’ve seen similar incubator funds on other blockchains, designed to stimulate activity on the network.
Should you buy ETC now?
Ethereum Classic is certainly enjoying its moment in the sun, and its price surge reflects a new interest in the project. But the question for long-term investors is: How sustainable is this recent growth? In the cryptocurrency market, we often see prices rise on the back of speculation only to fall back again in the following months. In this case, there’s a chance that interest will taper off after the Ethereum merge in August.
One question to consider is whether proof-of-stake is better than proof-of-work. Both are tried-and-tested consensus mechanisms, and there are positives and negatives for each model. But given that there are many proof-of-work cryptos out there, this alone isn’t enough reason to buy ETC.
It’s worth looking at how Ethereum Classic stands up as smart contract crypto. The difficulty here is that even though it’s been around for longer than Ethereum alternatives like Solana (SOL) or Avalanche, it does not compare well in terms of total value locked (TVL) or projects on its system. TVL is the amount of money invested in projects on a particular ecosystem, and according to Defi Llama, Ethereum Classic ranks in 108th place. It has almost $200,000 in TVL, while big brother Ethereum has over $41 billion.
