This top cryptocurrency has gained over 1400% in 5 years

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Learn more about Ethereum Classic, the original Ethereum.

Key points

  • Ethereum Classic is still a top 50 cryptocurrency after five years, but has been overtaken by other cryptocurrencies in terms of the amount of money on its platform.
  • Ethereum Classic is the original Ethereum, formed after a network hard fork in 2016.
  • Ethereum Classic has gained over 1,400% since the beginning of 2017.

Five years is a long time in crypto. Many of the projects that were popular in 2017 have not only disappeared from our radars, but some have completely failed. As a result, a large part of the appeal of Ethereum Classic (ETC) is that it is still in the top 50 cryptocurrencies by market capitalization after five years. It has also produced solid returns for investors with a 1,400% gain since January 1, 2017, according to data from CoinMarketCap.

What is Ethereum Classic?

Ethereum Classic was formed in 2016 after a disagreement on how to handle a DAO attack on the Ethereum (ETH) network. A DAO is a decentralized decision-making mechanism made possible by smart contracts that follow pre-agreed rules. Unfortunately, the Ethereum DAO was hacked shortly after its release.

Without going into too much detail, what followed was an ideological debate about whether it is okay to interfere with the decentralized mechanism and undo those unwanted losses. One group wanted the blockchain to return to the way it was immediately before the hack, which they did, creating the crypto that is now known as Ethereum. Another group considered that this went against the spirit of decentralization. Ethereum Classic was not forked and continues on the original blockchain.

The Ethereum Classic website boasts that it “has never stopped or will interfere with smart contracts implemented on it.” It is a smart contract crypto, like its big brother Ethereum. But, as we’ll see in more detail, you don’t have as many applications running on your network and you don’t have the same level of development activity.

Should you buy?

One of the main points in favor of Ethereum Classic is that it is relatively well established and has stayed afloat while many other projects went under. It is a reflection of the relative newness of the entire crypto industry that surviving more than five years is something to celebrate, but it is. Also, projects that have weathered one big drop in cryptocurrency prices are more likely to weather another.

However, longevity alone is not a reason to invest in any crypto project. So what else does Ethereum Classic have? First of all, Ethereum Classic has a fair amount of developer activity, although not as much as on the Ethereum mainnet. That means the project continues to evolve and move forward. Ethereum Classic is also available on many major crypto exchanges, including platforms like Robinhood, which only lists a handful of cryptos.

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One consideration for investors is that Ethereum Classic uses a proof-of-work validation model, which consumes large amounts of power. Ethereum is undergoing a major upgrade and will be moving to a Proof-of-Stake system that will reduce its power consumption by over 99%. Ethereum Classic has no plans to make a similar move. Sticking with proof-of-work may appeal to investors who worry proof-of-stake hasn’t been fully tested and aren’t put off by environmental considerations.

Ethereum Classic hosts a few projects in its ecosystem, but falls behind in terms of total value locked (TVL), the amount of money in its ecosystem. According to DeFi Llama, Ethereum tops the list of programmable cryptocurrencies with a TVL of almost $50 billion, where Ethereum Classic is in 104th place with just over $120,000.

It’s not entirely fair to compare just ETC to ETH, as Ethereum is the king of programmable cryptocurrencies. But even if we look at it alongside other smart contract cryptocurrencies, he doesn’t fare that well. Ethereum Classic uses older technology that has been superseded by many newer projects and its TVL is much lower than many other programmable cryptos. Overall, it’s hard to see how it can compete with faster Ethereum alternatives that garnered significant market share last year.

Bottom line

If the general cryptocurrency downturn and the collapse of Terra (LUNA) have made you nervous about new cryptocurrency projects, it might be worth looking deeper into Ethereum Classic. However, as with any cryptocurrency investment, only invest money that you can afford to lose and make sure you understand the risks involved.

The difficult question is to predict how Ethereum Classic could perform in the next five, 10 or 20 years. Keep in mind that it is very unlikely that you will get another 1400% return. Ethereum Classic could carve out a niche for itself as a reliable traditional crypto, especially if the Ethereum upgrade does not go as planned. But Ethereum Classic could also continue to be overtaken by shiny new products, especially if it fails to grow its ecosystem and attract new projects.

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