Before understanding the difference between Ethereum and Ethereum Classic, let’s have a brief overview of the Ethereum technology first.

At the core of Ethereum is the blockchain technology. The blockchain technology can be used to support a wide variety of different applications as in Bitcoin, the blockchain is used to manage the record of transactions and ownership of the Bitcoins. To understand blockchain technology, consider the analogy of the Internet and E-mail. Internet is a technology which has thousands of different applications, while Email is one of the application of the internet technology. In a similar way, Bitcoin Blockchain is one of the hundreds of the applications of the Blockchain technology. The Ethereum blockchain is differs from Bitcoin blockchain in a way that it enables to run program code of decentralized applications or Dapps as they are commonly referred.

The Ethereum technology facilitates the developer to develop and deploy the decentralized applications, a decentralized application may perform a particular job. The decentralized applications designed to run deployed using Ethereum technology run on Ethereum Blockchain. They are called decentralized applications because there is no central entity to control the application as in case of client-server application architecture.

Smart Contracts and Decentralized Autonomous Organizations (DAOs)

Using Ethereum, Smart Contracts can be created. A smart contract as, the name implies, is a kind of contract which executes when a certain condition is met. They are programmed using computer code and execute just as they programmed to avoid fraud and third party intervention.  A smart contract automatically manages the enforcement and payment as per contract terms.

Using on Ethereum technology Decentralized Autonomous Organizations (DAOs) can be build. A DAO is autonomous organization with no center of control, hence the name decentralized. DAOs are programmed using computer code which defines the structure of the organization. DAOs are based on multiple smart contracts that run over Ethereum blockchain. The ownership of a DAO is exhibited by tokens; those who purchase the tokens of a particular DAO, own it. The tokens give the owners of the DAO a right to vote and the votes from the owners decide the direction in which the DAO moves.

The Hack

As mentioned above, the Ethereum technology can be used to make Decentralize Autonomous Organizations; in early 2016 a DAO named “The DAO” was launched. The objective of The DAO was to create a digital venture capital firm which had no human intervention, the investors would send the money to The DAO and in turn receive the tokens and the tokens would allow them to vote how the DAO dispersed their funds.

To fund the organization initially, a crowdfunding campaign via token sale was launched which still remains one of the largest crowd funded campaign to date as the fund had raised more than US$150 Million by late May 2016, US$50 Million of which were in the form of Ether (the value token of Ethereum Blockchain).

Briefly after the funds had been raised, The DAO organization was attacked anonymously and the hacker stole US$50 Million worth of Ether at that time. The attack resulted as technical flaw in the implementation of The DAO organization and not the Ethereum platform itself. Either way, the founders of Ethereum were then pressurized to deal with this debacle.

The Hard Fork

A hard fork refers to a permanent branching from the previous version of blockchain to a newer version in order to correct a security flaw in the previous version. By splitting the path of the blockchain at certain point, the transactions in the previous blockchain beyond that certain point are invalidated.

The event of The DAO hack ignited a debate among the Ethereum community regarding whether to retrieve the stolen funds by issuing a hard fork. Most of the Ethereum community agreed unanimously to issue a hard fork in order to recover the stolen funds. The issued hard fork relocated the funds associated with the DAO to a new smart contract, created with the sole purpose of enabling the original owners of the DAO tokens to withdraw their invested funds at the rate of 1 ETH for 100 DAO tokens.

However, there still remained a small number of people who didn’t agree with original decision to go with the hard fork technique, this in turn sparked a controversy and intense debate. The reason for debate is the fact that Ethereum is based on blockchain technology and a blockchain is supposed to be irreversible and tamper proof, however the hard fork and the rewriting of blockchain protocol goes against the very basic ideology of blockchain and threatens its purpose in a way that if a change is required every time a major negative event occurs, then the blockchain doesn’t remain secure, anonymous and resistant to modifications.

The Split

As a result, since the majority voted for the hard fork and retrieve the investors’ money, the small minority that didn’t agree with the decision, decided to stick with the old blockchain and hence two parallel blockchains exist now.

For those members of the community, who believe that no changes should ever be made to the protocol of the blockchain regardless of how large amount is involved and severity of attack, there is Ethereum Classic. This part of the community backs the concepts such as immutability and code is law for the Ethereum Blockchain. People who adopted Ethereum Classic never had their investments in the DAO returned.  

However, for the larger part of the Community, who are pro-fork and prefer decentralized decision making and conflict resolution, there is Ethereum. The people who adopted updated blockchain and voted for hard fork had their investment in the DAO organization returned.

Ethereum Classic is however not officially supported by Ethereum Foundation but has support of a wider crypto-community who reject the forks based on the blockchain’s core ideology. The blockchains of Ethereum and Ethereum Classic are identical up to block 1920000, as this is the block where the hard fork was applied and hence the two separate blockchains were created, thus marking a major core difference in the two types of Ethereum.