Ethereum Classic Fundamentals

Ethereum Classic is a project spontaneously forged through free market consensus. Although Ethereum and Classic share the same roots, each project is treading on their own separate paths. 

The first week of trading ETC was very profitable yet the market has been on a slow decline since then. The ETC market is unique because all ETH holders were given ETC after the hard fork and many of them had a vested interest in crashing the price. Classic is seen as a competitor to Ethereum, so there’s been a lot of revenge dumping in the markets. 

Even though ETC has its fair share of haters, these are still natural participants in the market. Suppressing the price will only help Classic supporters to accumulate at lower levels. Eventually when all the dumpers are priced out of the markets, the supply will change hands and buyers will be in control. When buyers take control, bull markets are born.

After making some really nice profit during the first week of trading, I started reaccumulating ETC at around 0.0019 BTC and cost averaging down with larger orders. The accumulation strategy is a longer term play that requires strong hands and seeing the forest from the trees. Even hardcore ETH supporter may want to consider having some ETC as a hedge. Smart money doesn’t let emotions or politics get in the way of their trading decisions. 

Based on the low price and solid fundamentals, I believe that ETC may have a nice bull trend in 2017. Here are some of the reasons why:

Development

Developing in Ethereum Classic is hard, as you’re picking up other people’s code, which is hard enough as it is, but it’s made much more difficult by the complexity of the systems and the number of different languages involved with all the clients.

As a result the mammoth responsibilities of CTO have been reluctantly filled by Igor Artamonov. He has pretty much taken on the key efforts around leading technical analysis and change in general, but with primary focus on the Geth client. He has developed and seen through ETC’s first hard fork for gas price change and the delay of the diff bomb. After Geth he has moved his attention to Parity, where he is also making changes for the delay of the bomb.

It has to be noted that Ethcore has been supportive by accepting key pull requests from Igor. But as ETC is now working on bringing in more Go developers to support with the Geth client he is starting to focus on parity, but he is still overseeing the testing and recruitment of potential new devs.

The ETC project is also looking for rust devs to support Igor in making further changes in Parity. Igor is overseeing a lot of analysis, coordination and support activities related to core dev work. Everything from understanding client usage across the network to prioritise change to supporting issues from users and testing work with other core devs.

There are also other highly skilled and dedicated core devs who are doing key work around driving the success of ETC. These include Elaine Ou, who has been instrumental in analysis and support for the first hard fork. She is working on the cpp client to ensure it is fixed/updated for ETC. In addition there are other key dev players that include Daniel Kaminski de Souza who is updating the Mist client. Eric Somdahl and Cody Burns on analysis and infrastructure.

The team is slowly expanding with people who are actually contributing, either through dev, analysis or support. These efforts are being seen more and more clearly, and in most cases these people are doing this on their own time with little or no financial contributions. 

There is also another dev team coming on board to rewrite an ETC client in Scala. Recently I spoke with Charles Hoskinson over the phone to talk about his take on Ethereum Classic’s development roadmap. He’s the founder of IOHK, a company that specializes in blockchain research and development. 

His company has committed to hire 3-5 full-time developers to fix many of the bugs and security problems that Ethereum has been experiencing. Rather than writing hasty code and making impulsive decisions, Charles wants to make sure that any changes undergo an extensive peer review process and community discussion. 

There are currently two teams of developers competing to accomplish a test and IOHK will hire the best team. Ethereum Classic development is heading in its own direction and will offer new innovations in the blockchain space. 

ETC Investment Trust

Barry Silbert indicated that he’s building an ETC investment trust that will trade on the OTC Markets. The Bitcoin investment trust was launched in 2015, when BTC was in an accumulation zone before the bull trend. It currently manages over $100M worth of BTC. 

An investment trust will give institutional investors exposure to ETC. It seems that Barry has been accumulating a sizeable position in ETC and we may see an increase in buying pressure before the trust is launched. This type of news event for 2017 could trigger a lot of FOMO in the markets and lead to a bull trend. 

When asked about his involvement with Ethereum Classic, Barry stated the following in the slack:

etcdcg 

Monetary Policy 

The ETC community is in the final stages of firming up a new monetary policy for the project. Unlike Ethereum, Classic wants to hard cap the supply to around 210-222M coins and reduce the inflation rate with block reward halvings. This approach has a successful track record with bitcoin and will give confidence to ETC investors. 

POW Mining

Ethereum Classic froze the mining difficulty bomb and intends on remaining as proof-of-work mining. Either it will stay pure POW or a hybrid POW/POS system. Keeping Classic as POW will ensure that miners will always have a future with ETC. Evidence shows that POW coins tend to be more secure and have a better long term price performance. 

When Ethereum migrates over to a pure POS system, it’s possible that ETC will soak up most of its hashing power. POS doesn’t require any additional resources beyond buying coins and is a system that tends to favour whales. Proof-of-stake will give the Ethereum Foundation more centralized control over the network because they still have a sizeable amount of ETH. 

The Chinese mining community has taken a liking to ETC. People like Chandler Guo have been very vocal about backing ETC and Chinese exchange BTCC plans on listing it over ETH. 

Decentralization 

Ethereum Classic was born spontaneously out of chaos, which happens to make it a more decentralized and community driven project. Similar to Bitcoin, the members of the Classic community came together and contribute as volunteers. There is no centralized company or foundation that controls it and decisions are made through community debate. 

Increased centralization is one of the main reasons why Classic supporters left Ethereum. The DAO bail-out shows how much control the Foundation has over the network. There is a cult following around Vitalik, which gives him too much power to arbitrarily make decisions for the network without extensive community debate. 

Rocky

I have a passion for Bitcoin and the crypto markets. I work full-time as a cryptocurrency trader, investor and analyst. I also run a crypto trading school at skillincubator.com
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