Ethereum Classic Is Bitcoin but With Smart Contracts

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The Two Most Important Inventions: Proof of Work and Smart Contracts

Most people think that Bitcoin (BTC) is a brilliant invention, and it is, but the truth is that nearly every component of the system already existed before Bitcoin for a considerable time.

What was the brilliant discovery by Satoshi Nakamoto was that the proof of work (POW) cryptographic stamp not only could be used to create the analogy of gold on the internet, called “Bit Gold”, but that the information of the POW itself could be a focal point for all the nodes of the network globally to be on the same exact state of the database, all at the same time, in their complete isolation, without the need to consult with any other source or authority. This was the key to decentralization.

Smart contracts are the second most important invention of the blockchain industry.

Because of technical problems with its design, Bitcoin did not support smart contracts inside its highly secure POW environment. This is why Vitalik Buterin invented Ethereum Classic (ETC), which is the original Ethereum, to be a POW blockchain, with digital gold, and that it could be programmable.

How Does Bitcoin Work?

In its essence Bitcoin is a very simple system. It is just a ledger that accepts new transactions to move BTC from account to account. Nothing more!

The main goal of the network was to create this fully replicated ledger that would be hosted in many computers around the world so that it could be as redundant as possible, thus as resilient as possible.

As we said before, the key was to use POW to get all the computers in the network to be insync in a decentralized manner.

Bitcoin’s Nakamoto Consensus rules consist of the network constantly receiving new transactions; then having those transactions retransmitted and copied in every node of the system; then having a subset of the machines, called miners, hash batches of those transactions with a cryptographic stamp, doing a lot of work, spending a lot of electricity; and then sending those blocks of data to the rest of the network for verification.

When the rest of the nodes of the system receive these stamped blocks, it is very easy for them to verify the cryptographic hash and to see that it is the correct block in each round, thus to be insync with the rest of the nodes in a decentralized way.

Why Is Bitcoin Digital Gold?

Each time a new block is verified in Bitcoin, the network issues and credits in the account of the miner who built the block a newly minted amount of BTC.

Because Bitcoin uses POW to reach consensus, and this proof of work requires a lot of work and energy to produce, and because only after this work is done is that the BTC are printed to pay the miners is that it is considered “digital gold”.

The above is affirmed by the fact that the supply schedule of BTC is capped, meaning that only 21 million coins will exist in the history of the system.

This is because Bitcoin started paying 50 BTC per block to miners, but it is programmed to discount this by 50% every four years. This decreasing schedule of creation of coins, which is at the day of this writing paying 3.125 BTC per block, guarantees the limited supply of the money, thus making BTC similar to gold in the real world.

Satoshi Nakamoto Actually Wanted Smart Contracts in Bitcoin!

We wrote before that smart contracts are one of the two most important inventions of the blockchain industry. Smart contracts are such an important concept that Satoshi Nakamoto even wanted smart contracts in Bitcoin!

Proof of this is that he wrote the following in 2010:

“The design supports a tremendous variety of possible transaction types that I designed years ago. Escrow transactions, bonded contracts, third party arbitration, multi-party signature, etc. If Bitcoin catches on in a big way, these are things we'll want to explore in the future, but they all had to be designed at the beginning to make sure they would be possible later.”

-- Satoshi Nakamoto

BitcoinTalk:

https://bitcointalk.org/index.php?topic=195.msg1611#msg1611

How Does Ethereum Classic Work?

This brings us to Ethereum Classic!

As we mentioned in the first section of this post, Vitalik Buterin invented ETC and launched it in 2015 precisely because Satoshi, and many others for that matter, couldn’t add smart contracts to Bitcoin.

ETC is basically the same design as Bitcoin. It is a network of nodes that constantly receives new transactions; these transactions are grouped in batches and hashed by miners; then the blocks are sent to the rest of the network for verification; and the network pays the miners a reward per block.

However, the brilliant invention by Vitalik was to add smart contracts in ETC by adding a virtual machine to the system that is replicated on all nodes of the network; creating the gas system to pay for computational power to miners; adding a programming language to the system; and enabling the ledger to host these smart contracts inside the highly secure POW blockchain.

Why Is ETC Programmable Digital Gold?

Not only does ETC use the same base POW design as Bitcoin, making it truly decentralized, but it also uses a very similar supply schedule as BTC.

In ETC, the payments to miners are also decreasing as time passes by. In 2015, Ethereum Classic started by paying miners 5 ETC per block as a reward for their work. After that, every 5 million blocks it reduces that payment to miners by 20%.

Because the block time of ETC is 13 seconds, this means that every two years the reward to miners is cut by 20%.

At the day of this writing, ETC is on block 19,857,092 and is paying 3.20 ETC per block to miners, but when it hits block number 20,000,000 it it will reduce that payment to 2.56 ETC per block.

This schedule eventually diminishes, putting a cap in the supply of ETC that will ever exist of 210,700,000.

So, if BTC is digital gold, then, because ETC shares the same base design as Bitcoin, but it is programmable, then ETC may be considered “programmable digital gold”.

Bitcoin and ETC Should Be the Largest Blockchains in the World

As Ethereum Classic is the base design of Bitcoin but programmable, it can host what are called decentralized applications (dapps) to manage its scarce programmable digital gold resource, which is its currency, ETC.

This programmability not only makes it more versatile than Bitcoin, but it has positioned it as the largest POW smart contracts blockchain in the world.

As the largest POW smart contracts blockchain in the world, applications in ETC are the most secure apps in the world.

This is an extremely valuable positioning for ETC that proof of stake and proof of authority networks such as Ethereum and Ripple could never claim because they are centralized systems.

As Bitcoin is the largest blockchain in the world, and ETC is like it but programmable, which is the next most important invention after POW, then it stands to reason both BTC and ETC should be, together, the largest blockchains in the world.

Thank you for reading this article!

To learn more about ETC please go to: https://ethereumclassic.org