What is ETC?

The origin of ETC?

ETC is a hard fork of the original Ethereum $ETH that was launched in July 2016 as a result of disagreement on whether to revert the Ethereum blockchain state to before “the DAO” hack. Just to give you a bit more insight, the hack has probably nothing to do with Ethereum’s code, but at that time, it had a huge impact on Ethereum’s reputation.

There were 2 main schools of thought, with one being reverting Ethereum’s state to before-the-hack, basically Ctrl+Z the whole thing, and the other was to leave it as it is. The final outcome was a hard fork as consensus was not reached. Ethereum Classics came out as the original untouched chain where the hack happened, while Ethereum was the chain that reverted the state.

I personally feel ETC stayed true to the idea of decentralization, permissionless, trustless that Bitcoin and its mysterious founder laid out. The rest is history. Ethereum became number 2 in market cap and is the foundation of the new decentralized economy as we know it today.

ETC vs ETH

Well, in short, they are very similar except:

• ETC has a hard cap on the total supply of 210,700,000 coins, while ETH does not have a cap.
• Mining algorithms of ETC and ETH are slightly different (Etchash and Ethash)
• ETH is backed by Vitalik and Ethereum Foundation (which is backed by super whales like JP Morgan, Citigroup), while ETC is community-led
• ETC will, for the foreseeable future, remain a Proof of Work while ETH is moving to Proof of Stake very soon (and this is the main discussion of this topic)

ETC since the hard fork

ETC did not enjoy the same amount of support as ETH, especially from operators resulting in significantly lower computing power compared to ETH’s for its Proof of Work consensus. In fact, ETC network has suffered many 51% attacks, with thousands of blocks being reorganized. It was cheap enough to purchase enough computing power to arrange a 51% attack on ETC while almost impractical to do so in larger networks such as BTC and ETH.

“The Merge” of ETH?

It is commonly known as phase 1.5 on the pathway to ETH2 (which is now abandoned by the Ethereum Foundation to avoid confusion), in which, the mainnet of Ethereum will be moving from the controversial, energy-hungry Proof of Work to a green Proof of Stake consensus.

The Ethereum Foundation has been running its Beacon chain in parallel with the current mainnet since December 2020 and the two chains will finally become one very soon, hence the name “the Merge”. In many different technical forums, it is highly speculative that the Merge will happen around June ‘22.

The earth will become greener since a significant amount of GPU and hardware being used to mine Ether will become useless. I thought so at first and I was super naive and stupid. Not that simple!

What may happen to Ethereum’s miners?

Miners, bear the small ones joining large pools, are mostly whales, just like Bitcoin miners. Some of them are even publicly listed companies. They have cash power that can move the market, frankly speaking, and of course, they have a huge amount of mining hardware like GPU, and ASIC machines.

Once “the Merge” happens, they will be out of business, and existing mining hardware will be sold at a ridiculously cheap price. No, not gonna happen.

First of all, most existing miners should be already validators on the new Beacon chain since the requirement to become a validator stake is only 32ETH so I trust that most current pro miners are already validators and they will be earning upward of 10%APR on ETH.

What about the current mining rig? Well, first of all, Bitcoin and ETH are not the only layer 1 blockchains that utilize Proof of Work consensus, there are many others so the most reasonable course of action that these miners will do is to shift all mining rigs to other Proof of Work (PoW) blockchains and keep on earning on its existing investment.

And amongst the remaining PoW candidates, ETC is the one that should require a minimal change in configuration to get the existing hardware up and earning.

A theory on ETC price

Understanding of block reward in Proof of Work

Similar to BTC, ETH, and other PoW protocols, miners are rewarded for producing the block with a fixed amount of the protocol’s native coin. For ETC, it is currently at 3.2ETC/block.

PoW protocols generally employed a difficulty scheme to ensure the block time is kept unchanged regardless of the total amount of computing power being deployed to the network. In other words, if a lot of miners (computing power) come in, the difficulty is higher to ensure the time required to produce block remains unchanged.

To simplify, producing a block in PoW protocol generally requires a huge amount of computing power to find the right hash for a block. Hashing is easy but finding the right hash requires miners to repeatedly do a trial and error loop. The genesis block of BTC took more than 2 billion trials until the right hash is found.

ETH vs ETC computing power

Below are the current computing power consumed by the two networks. ETH is 1.1PH/s or 1.1 Quadrillion hashes/second. Basically, all the mining hardware in the ETH network can do 1,000,000,000,000,000 hashes/trials in 1 second. And FYI, all that trials and errors normally take 12 seconds to get the right hash for a block.

ETC is now at 23.96TH/s, which means ETH at. 1.1PH/s is about 42 times of ETC’s.

At the time of writing, at the price of $3200 for ETH and $48 for ETC, the yield for mining ETH and ETC is similar in Dollar terms for a particular hardware mining rig.

Computing power shifting?

Now assume that 25% of current ETH miners, after the merge, will shift their rig to mine ETC what would happen?

That means around 275TH/s will be joining ETC’s current 24TH/s, which will effectively enlarge approx 12x in computing power for the ETC network. If the price of ETC remains unchanged, that will make the yield decline by 12x, and that would leave no profit at all for all the miners. Dead end!

However, remember, these miners are large whales who possess massive power to move the market in their favor. From a conspiracy theory point of view, they can and will drive the market price as well as push the media and market sentiment. It’s (speculatively) entirely feasible for these whales to move the price up to the point that is profitable for them to mine.

To simplify the calculation, in order for the mining of ETC to be the same as the time of writing this article (ETC at $48), assuming that 25% of current ETH’s computing power will move to ETC (12x increase in computing power) then the price of ETC will need to increase by 12x ~$576 for all the miners for the mining profit to remain unchanged.

I don’t want to make a prediction here but rather present the math framework, you can run different sensitivities to arrive at different price points. The above framework relies on the assumption that mining profit to remain the same as of today ETC’s price, current computing power and that 25% of ETH’s computing power will move to ETC.

Other considerations for ETC

The points discussed above are pure mathematics, but that’s not all. ETC itself holds a very good story for degen maximalists.

• First of all, they were the chain that was keen on uncensorship, and decentralization when they decided to keep the chain unchanged to help the DAO hack.
• Secondly, once a huge computing power moves into the ETC network, it will become much more secure since the cost of doing a 51% attack would increase exponentially.
• ETC itself has basically the same technology as Ethereum. It is a turing-completed machine and can run dapp just like Ethereum.
• ETC is promoting itself as a combination of Bitcoin inspiration and ETH capability. ETC will have a limited supply, just like Bitcoin. It will be run by a community with no known leader, just like Bitcoin. It has full dapp capability, just like Ethereum.

Final words

This is not financial advice, please do your own research. My intention is only to present a framework for possible price points of ETC and I welcome all feedback and comments. I am also not a miner at all, so my knowledge of mining may be very limited, if not totally wrong.

Have a nice day!