The beginning of the new year has not been kind to either of the Ethereum chains — Ethereum Classic (ETC) or Ethereum (ETH). A number of internal and external factors have played a role, but both chains have faced substantial setbacks, leading to decreased consumer confidence and price stagnation.
These setbacks, however, are quite different for the each chain, leading to conjecture regarding exactly what the greatest risks are for each. With neither chain ‘out of the woods’ just yet, while the threats to each have the potential to be extremely harmful.
ETC's biggest threat: external malicious actors
ETH's biggest threat: internal development teams
— dontpanic 🤫⚡ (@DontPanicBurns) January 18, 2019
Outside the ETC Walls
For ETC, the dangers are mostly external. The chain’s relatively small hash rate leaves it open to a potential 51 percent attack, which already occurred just last week. Previously only conjecture, the attacker was able to rent enough hash power to take over the chain, producing double spends totaling as much as $400,000.
While the attacker did return some of the money stolen, the motives of the return remain unclear. The potential for the attacker to make money by shorting the coin after the theft would mean that the return was not as philanthropic as it may have seemed.
The attack highlighted that the challenges facing ETC are real. As the smaller and less heavily used chain, the Proof-of-Work (PoW) protocol provides a relatively simple back door for hackers. Even with more safeguards in place by exchanges, the reality that the chain is vulnerable has come to light. Blood is in the water and things will likely continue to be tough for ETC.
The dangers have led consumers and users to remain guarded about the chain. With the potential for external attacks so great, confidence in the platform has declined substantially, even with the original PoW protocol in place.
ETH Rotten Within?
The ETH blockchain is facing very different demons. The proposed Constantinople hard fork, a solution that was touted as the greatest upgrade to the chain because of a shift from PoW to the beginnings of PoS, was cancelled on Jan 15.
The news was sour for ETH devotees, as the fork was offered as the ‘consensus’ solution for the move away from PoW. While PoS has been suggested as an ‘upgrade,’ many have viewed the recent course changes as a sign that the chain will be governed by centralized authorities. Rather than following the original blockchain vision of decentralization, the PoS protocol would only further centralize control on the chain to a few power players.
The danger for this sort of change is that it would create a sort of aristocracy on the ETH chain, making it very difficult for the decentralized protections of blockchain to flourish. Further, the changes and delays the governors propose may or may not be helpful, but the community will have no say.
With so much centralization apparently in play, consumer confidence regarding the viability of the chain has declined. A simple perusal of crypto Twitter accounts reveals a general malaise about the chain, and the risks associated with centralization.
Together, both ETH and ETC are facing substantial hurdles within just two weeks of the start of 2019. This has led to substantial reductions in consumer confidence, but also a stagnation in prices.
Both ETH and ETC started the year off in a positive motion, but have since faced challenges, especially in light of the dangers both face. The price of ETH has retraced from an early high over $156 back down to $125 — a decline of over 16 percent.
Meanwhile, ETC has decline from a Jan 1 high of $5.25 to below $4.50 — a similar drop of nearly 15 percent.
Do you think the recent dangers faced by both Ethereum chains are fatal? Are these just bumps on the road to stability? Let us know your thoughts in the comments below!
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