Ethereum Classic (ETC) Has Added USD 8.6 Billion To Its Market Cap Over The Past Week

May 6, 2021 02:45 PM
Crypto Story of the Day

Crypto Story of the Day




Crypto was broadly up this morning with Cardano (ADA) and BCH outperforming in the Top 10. Dogecoin (DOGE) was the exception, selling off. 

Crypto Story of the Day

Ethereum Classic (ETC) added roughly USD 8.6 billion to its market cap over the past week. The move is despite major technical issues with little fundamental justification that the network has faced over the past year, issues that are typical of recent alt-coin action.

The creation of ETC is tied to the hack of Ethereum-based DAO (Decentralized Autonomous Organization) in 2016. Launched the same year, the DAO raised USD 150 million and was meant to serve as an investor-managed investment firm. Several months after its launch, while the DAO’s fundraising was ongoing, the protocol suffered a hack via vulnerabilities in its smart contract code. 

The hack involved the syphoning of about USD 50 million-worth of ETH to a smart contract that locked the funds for 28 days. This 28-day lock gave the DAO community time to develop a response before the funds could be sold by the hacker. Developers suggested an upgrade which would reverse the transactions that withdrew funds from the DAO. The upgrade was implemented in a way which allowed users to decide whether or not to enable the new software. 

This led to the creation of 2 chains: Ethereum Classic, where the hacked coins remained in the possession of the hacker, and Ethereum, where transactions on the blockchain were essentially deleted, returning ETH to the DAO’s investors. Before its recent performance, ETC reached record highs in December 2017 and would subsequently see flat trading until April 2021. 

In 2020, the network suffered numerous 51% attacks, where hackers took control of the network and, in one such incident, artificially created roughly USD 5.6 million-worth of ETC by manipulating the blockchain. 

ETC’s rally over the past week, which has seen its market cap grow by about 225%, is difficult to tie to any particular fundamental justification, other than the asset being 1 of 6 offered on Robinhood. At a market cap of about USD 14 billion, the coin's valuation is in line with staid American institutions Hasbro (HAS) and American Airlines (AAL). 

The coin, largely esoteric since its controversial creation, drew attention over the past several years only when a series of attacks arguably rendered its blockchain useless. Having failed to gain any traction, its parabolic appreciation at a moment when smart contract platforms in the Top 10 have a shared market cap of about USD 577 billion is reflective of the frenzied alt-coin rallies that have characterized crypto trading in recent weeks.

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