Anyone with any interest in cryptocurrencies will have started to sit up and take notice earlier this year when it was announced that Ethereum Classic was to start courting institutional investors via the Ethereum Classic Investment Trust (ECIT).
The Trust was set up by Grayscale Investments, a subsidiary of Digital Currency Group, and is handling 3.6% of the Ethereum Classic supply. Grayscale already has a good track record in successfully helping investors profit from cryptocurrencies through its Bitcoin Investment Trust so it’s no surprise that by August the net assets of ECIT had reached over $53 million.
In the already complex world of cryptocurrencies the fact that there are two different versions of Ethereum, Standard and Classic, may add to the confusion. So, before we move on to talking a little more about why the latter is starting to make waves, it’s worth explaining how the split occurred.
Counterintuitively, Ethereum Classic was not the original version but came about when a hard fork in the cryptocurrency took place in June 2016 following the hacking of the Distributed Autonomous Organisation (DAO) who had, up until then, collected over $150 million worth of the Ether currency. An estimated $60 million worth was taken and it was felt that urgent steps were needed to alter the blockchain programming in order to try and get the currency back.
However, a group of developers believed that altering a blockchain to reverse a transaction would be wrong as it would represent censorship and intervention. So, while the original Ethereum blockchain was changed, a small group led by a developer using the name Arvicco developed Ethereum Classic using the original, unaltered blockchain. This was good news for Ethereum holders of the time because it duplicated their holdings across both versions, effectively giving them free currency.
Now, although the value of Ethereum Classic is considerably less that Ethereum, there are a number of reasons why it could be a good investment. A key one is the buzz around the possibility of its use in the emerging Internet of Things. In a paper released by Grayscale in August of this year states that, “…we believe Ethereum Classic may one day be the substrate for a global, secure, and decentralized Internet of Things.”
The same paper also estimated that even if only 10% of the data transactions that the IOT is projected to generate by 2025 are carried out using ETC, each one would be worth $150 compared with its current value which hovers around the $10 mark.
Already considerable legitimacy is being conferred on the cryptocurrency both by the fact that it is gaining popularity as a method of payment – and liquidity is vital if it’s truly going to be a success – as well as the appearance of Ethereum Classic on major trading sites.
So, while it currently stands at number 5 in the list of major cryptocurrencies, there are many signs that Ethereum Classic could soon be heading up the list. Of course, much depends on just how innovative and unique it proves to be as well as the role it will play in the Internet of Things. But with considerable momentum behind it, plus the chance of major investment on the way, success would seem to be the most likely outcome.