Causes and consequences of the division of Ethereum – split on 2 camps

Division of Ethereum logo

Nowadays, no one is surprised by cryptocurrency. The days of Bitcoin are over, and more and more virtual “coins” are taking its place. One such coin is the Ethereum and its forks. Recently, it has been gaining a lot of popularity. 

The Ethereum project had some shortcomings that caused the network to split into two camps, and the result of all this was the emergence of a new cryptocurrency. This is what we will talk about next – we will look at the reasons for the division of Ethereum.


The situation around The DAO

To understand what “The DAO” is, as well as what happened to it, it is necessary to look into the past, namely in the process of emergence and development of the ETH cryptocurrency. It is no secret that Ethereum has aroused serious interest from investors almost from the very beginning, and quite large ones. Moreover, the network itself was growing rapidly. Against the background of this success, a project called The DAO was created in parallel. This is a kind of investment fund that worked autonomously and had its own tokens that were used within the network. This network ran on the Ethereum platform, which means that it also supported a decentralized management model.

The startup, co-founder and chief operating officer of which was Stefan Tual, was involved in the creation of this fund. The fund’s affairs went quite well, there was a tendency of constant growth. And the founder of the Ethereum network himself stood behind this project. However, there was one flaw in the network code, which was used by hackers. A few days before the attack on June 13, 2016, the media reported that over the past 24 hours, The DAO has seen strong growth of almost 16% against the US dollar, as well as more than 5% against Ethereum.

However, it turned out that not everything is so smooth. Earlier, two weeks before the fall of the network, a series of publications appeared that revealed several vulnerabilities of The DAO project. Stephan Tual himself then stated:

“So it’s important to understand there was never a hack on Ethereum. There’s been a few DDoS recently, though, something that will be mitigated by having a healthy client implementation distribution”.

At the same time, investors and project participants began to sound the alarm, about a serious attack on the network. As it turned out, one of the hackers found a vulnerability in the network code and “stole” tens of millions of dollars (to be exact, 3 641 694 ETH, which at the 2016 exchange rate was about 50 million dollars). Naturally, this provoked strong panic in the cryptocurrency market. Along with the collapse of The DAO, the Ethereum course collapsed. ETH developers, together with Vitalik Buterin, also came under fire. However, the culmination of the strongest controversy was without exaggeration the epic appearance of the same hacker who used the vulnerability of the network, who stated literally the following:

“I have carefully examined the code of The DAO and decided to participate after finding the feature where splitting is rewarded with additional ether. I have made use of this feature and have rightfully claimed 3,641,694 ether, and would like to thank the DAO for this reward. It is my understanding that the DAO code contains this feature to promote decentralization and encourage the creation of “child DAOs”.

However, it is worth noting that Vitalik Buterin himself said,

“The code is the law.”

This was the policy of the Ethereum network. And once the code allowed to receive such reward, therefore, everything is legal. And it was from this moment that the split in ETH community and the division of Ethereum began.

Birth of Ethereum Classic

Immediately after the attack, the hacker, who received a large jackpot, could not use the funds received, as the smart contract allowed the use of tokens only after 28 days. In this regard, several options have been proposed to solve this problem:

  • Do nothing and leave everything as it is.
  • Release softfork.
  • Release the hardfork.

And from that moment the camp was divided into two fronts. On the one hand, a group of developers advocated freezing the “hacker’s” account and canceling transactions to return deposits to investors and ordinary users. Which was a gross violation of the whole philosophy of this network and all cryptocurrencies in general. At the same time, to eliminate the vulnerability, it was planned to release a fork on the same platform, but with fixes. And the majority of votes were inclined to this option, so it was decided to release a softfork.

On the other side of the “barricades” was a group of developers who advocated the legitimacy of the attacker and the continuation of the policy – “The code is the law”, and once it is found a loophole, there are no violations. Many supported this idea and the preservation of a decentralized network. Thus, there was a division of Ether and the birth of a new cryptocurrency, called Ethereum Classic.

Ideas and principles of the new currency


The philosophy of the new cryptocurrency is quite simple – in spite of everything, the preservation of the principles of the blockchain. Decentralized system without transaction cancellation. In essence, support the philosophy of the blockchain and any cryptocurrency, without violating these laws under any circumstances.

It should be noted that most investors and developers still remained supporters of the original Ethereum. This, in turn, significantly slowed down the commercial development of ETC (Ethereum Classic). However, ETC is evolving (though not as fast as the airwaves) and has some prospects for the future. Already today, many exchanges are working with these tokens. Moreover, large investors paid attention to it, and the capitalization exceeded $ 1 billion.

About Angela Keith 29 Articles
Angela Keith is a mass communications specialist who has worked in this field for over 5 years. In addition to being a writer, she’s very interested in exploring blockchain technology and believes that it could be a game changer in the global economy. She also invests in various coins using his knowledge of the crypto market.

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