The Ethereum Trilogy Part II – The Two Chains

Written by Laurence Kirk

Aug 16, 2016

$50m Ethereum heist had no easy answer

I wrote my first post about the DAO heist expecting it to be the end of the story. If it were a film, it would end with the successful hard fork, defeat for the attacker and our heroes triumphantly setting the blockchain back to normal.

However, the story didn’t end there. A hard fork creates two incompatible blockchains: in this case the forked chain where the attacked funds were recovered, and a classic chain where the attacker kept his funds. After the successful fork it was expected that unused the classic chain would fade away.

Not everyone, though, was in favour of the hard fork, and mining support for the classic chain grew to the point that it could be used, and then the exchanges (Bitfinex, Poloniex, Kraken) allowed trading in ETC, the version of Ether existing on the classic chain.  This produced an unexpected windfall for Ether holders because if you held 100 ETH before the fork, you now own 100 ETH plus 100 ETC, though ETC is currently trading at a lower value than ETH.  Instead of fading away Ethereum Classic was, if not exactly flourishing, at least surviving.

The opening up of ETC trading is of course good news for the DAO attacker. There has been some movement of funds away from his accounts, if he can sell his ETC on an exchange he could get away with a few million dollars, albeit at the risk of revealing his identity. His opponents, the white hat team who before the fork managed to recover some of the Ether from the attacker, have now been accused off trying to kill off Ethereum Classic by dumping on the exchanges the seven million ETC that they recovered.

Ethereum Classic still faces problems. There have been and still are threats to disrupt the ETC blockchain, though at time of writing these threats are not seen to be serious. The animosity between supporters of each chain is certainly real enough, this split has complicated the pro and anti Ethereum factions that have always existed.

What the eventual outcome will be is still up in the air, we will bring you the third and final part of this trilogy when it has played out.

 

 

About Author

About Author

Laurence Kirk

Laurence Kirk runs Extropy, a consultancy in Oxford helping startups develop blockchain applications. After a career in the City of London he became excited by the potential offered by the Ethereum platform, becoming an evangelist, educator and developer for Ethereum and blockchain technology.

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