The Ethereum Classic network’s hash rate has reached an all-time high. What is the reason for this?

August 27, 2022 by cryptobreak

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Etherium’s upcoming transition to the new Proof-of-Stake (PoS) consensus algorithm will have a major impact not only on ETH itself, but also on other coins. In particular, Ethereum Classic (ETC) holders are likely to see the biggest change. The day before, the altcoin network set a new hash rate record, further increasing its protection against a hypothetical 51 percent attack. The increase in hash rate itself is due to the migration of miners from ETH to ETC, as they will be replaced by validators there after the switch to PoS. We tell you more about the situation.

And now a bit of theory in the form of Ethereum Classic history. The project is considered to be the "original Ethereum" because it is the original ETH network, which was continued after the hacker attack on The DAO. The DAO was an Etherium-based venture capital fund that managed to raise around $150 million in ETH in an initial coin offering (ICO) in April 2016. A few months later in July 2016, hackers exploited a vulnerability in one of The DAO's smart contracts, allowing them to steal 3.6 million ETH from the funds raised during the ICO.

There was disagreement in the community over how to solve the problem. Some felt that blockchain reversal, i.e. erasing the hack from the network’s history and the hackers’ corresponding transactions, was necessary to preserve Etherium itself. Others were convinced that “rolling back” to The DAO was contrary to the ethics of the crypto-world and rejected the process. The disagreement led to a hardforward on block number 1,920,001, and the legacy chain, which did not change the transaction history, was renamed Ethereum Classic.

Ethereum developers

In addition, Ethereum Classic now continues to run on a consensus Proof-of-Work or PoW algorithm, meaning that transaction confirmation and block creation on this network is handled by miners. In mid-September, when the Eth blockchain moves to PoS, ETC mining using video cards will still be possible. This, among other things, explains the current popularity of the cryptocurrency among miners, who are gradually switching to mining Ethereum Classic.

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The most popular cryptocurrencies on the 2Miners mining pool

What will happen to ETC Ethereum Classic

According to analytics platform Messari, the hash rate, or the total processing power of all the miners’ devices on the ETC network reached an all-time high this week. As you can see from the chart below, the growth to the peak has been rapid, meaning that an impressive group of miners have joined the Ethereum Classic network in a short period of time. They most likely plan to mine ETC after Ethereum moves to PoS.

Ethereum Classic network hash rate over the past year

There are now three possible scenarios awaiting miners. The first is the separation of the Ethereum blockchain itself and the emergence of a new fork, in the blockchain of which they will continue to mine ETH in the old scheme. The second is the aforementioned transition to Ethereum Classic as the most similar and quite profitable altcoin to mine. Finally, the third is a move to another Ravencoin RVN-type altcoin.

Ethereum Classis page on the 2Miners mining pool

According to Decrypt’s sources, the second option will lead to a significant strengthening of Ethereum Classic’s protection against attack 51. As a reminder, a 51 attack is the seizure of control of at least 51 percent of the cryptocurrency’s hashrate based on the Proof-of-Work consensus algorithm.

With more than 51 per cent of the hashrate in their possession, attackers can:

Prevent other miners from finding blocks;
Conduct double-spending of coins;
Organise new forks;
Introduce censorship, i.e. not confirming certain transactions.

Ethereum Classic exchange rate chart from March 1, 2022

It is important to understand that they will not be able to get into someone’s wallet, as the address will still be protected by cryptography. On top of that, the fraudsters will not be able to create coins out of thin air and put them on their balances. That is, the network continues to operate according to previously defined rules even during a successful attack.

In January 2019, Ethereum Classic went through a blockchain reorganisation, which became a financial problem for miners. As you might guess, almost any PoW coin is vulnerable to an attack, and only the hash rate level protects against it. That is, the higher the hash rate, the less likely it is that a single group of interested parties will be able to grab most of the capacity. At the very least, as the hash rate increases, it will become less and less profitable in terms of the cost of leasing computing capacity.

The growth of the Ethereum Classic network's hash rate will have a really good effect on its security. That said, further developments will depend on what happens to Ethereum. If miners continue to support the existence of the PoW fork Eth, then the ETC blockchain hash rate will not have many new miners. Otherwise, we will see a global relocation of computing power to other networks, which will also benefit them.

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