Ethereum Classic lost more than US $25 million in market value at one point earlier in the evening, bringing the total market capitalization of the beleaguered crypto asset below US $50 million briefly.
'Classic' is an activist variant of the Ethereum protocol, except one where the community's most recent hard fork never took place. Ethereum, the second most valuable cryptocurrency network after Bitcoin itself, is valued at US $1.11 billion.
Cryptocurrency services giant Coinbase added Ethereum to its main site last week, sparking a fresh wave of excitement around the nearly year old smart contracts platform avec currency.
In fact, the addition of Ether prompted Coinbase to redo their homepage text, from a welcome message that had long read "BUY AND SELL BITCOIN" to one that now reads "BUY AND SELL DIGITAL CURRENCY: Coinbase is the world's most popular way to buy and sell bitcoin and ether."
In my view, the addition of Ether was a strong show of leadership from Coinbase founders Brian Armstrong and Fred Ehrsam at a time when cryptocurrency has been frankly floundering to find its larger role, and in need of new direction.
Prior to its addition, something had felt "off" in cryptocurrency land: lingering arguments over block size direction leading nowhere, and a strange feeling that the 25 BTC to 12.5 BTC block size halving that kicked in earlier this month simply did not produce the outcome that 99.5% of Bitcoin users were looking forward to. Block halvings only come along once every four years, and I don't think many Bitcoiners in 2013 -- when the total market cap of the currency was several billion dollars higher than it is today -- expected the post-halving July 2016 price of Bitcoin to be so low compared to where Bitcoin has already been in headier times.
UNDERSTANDING THE ETHEREUM 'CLASSIC' SCAM
If you aren't at all crypto savvy and you don't know your hard forks from your hashrates, Ethereum Classic is the moral equivalent of a petstore selling a snake skin to a child who thinks he has just bought a live pet snake with his allowance. It is the equivalent of selling an empty PS4 box to a bidder who believes he has just won a PS4 console. It's a rusted out sham, in my view.
'Classic' takes a decidedly dogmatic tone, attempting to split the community over an issue that was already decided after a month of exhaustive public debate and discussion anyone could participate in (and many did).
It also attempts to make a 'hard fork' sound like a cardinal cryptographic sin within the Ethereum ecosystem, when Ethereum has already successfully undergone three hard forks, with at least two more planned. The Ethereum ecosystem -- as users from its earliest days were told -- is so ambitious that it will be rolled out over time by the developers, progressively in four stages: Frontier, Homestead, Metropolis, and finally Serenity.
The billion dollar cryptocurrency that some Bitcoiners love to hate is now only in its second of those stages, Homestead, and a hard fork was successfully used to roll out that version, as significant protocol changes were made from the initial version.
The analogy I like to use is that a hard fork within Ethereum is like AOL upgrading to a new version. Horribly outdated analogy, yes, but that's all a hard fork is within the Ethereum development community -- yet a wave of hysterical Twitter and Reddit accounts, the majority of them pseudonymous, began relentlessly promoting 'Classic' over the last 48 hours... as if there was some worthy mutiny we should all be aware of, and participating in.
Those that oppose Classic are attacked. What fascinates me about this turn of events is how close it is to the debate that has held Bitcoin back for more than a year: the blocksize.
Core, Classic, et al divided the Bitcoin community and killed the momentum in a way that is frankly impressive. If that year long brouhaha wasn't some kind of astroturf campaign or PR operation to slow the adoption of cryptocurrency and divide its user base, it could certainly be studied as one, because that was the outcome.
Bitcoin's market cap is more than US $3 billion below its all time high. The community is fractured. Many Bitcoin entrepreneurs refuse to visit Bitcoin's most popular community on Reddit, as it has become so "troll infested" that sensible discussion about product launches or expansion ideas turn into the most wildly ad hominem, unprofessional attacks within minutes. Bitcoin companies, including Coinbase, are regularly pounded over the rocks by Bitcoin's Reddit community for complying with various laws that even the smallest financial institutions, like a local credit union, must comply with as well.
And the blocksize debate, far from being resolved, is a very serious issue. Earlier in the year, a Bitcoin transaction I made was among more than 40,000 transactions stuck in the mempool for hours, even though I paid the recommended tx fee. Several other transactions I've made using Bitcoin this year, including one just yesterday, did not confirm until more than an hour later.
For comparison's sake, Ether value transfers confirm and settle fully in an average of about 14.07 seconds.
Again, what mainly bothers me here is that the same division that has brought Bitcoin to a bitter standstill for a year -- the division between Bitcoin Classic, Bitcoin Core, and others -- is now being imported to peaceful, productive Ethereum land.
If Ethereum wants to survive and thrive, I think it's probably sensible for the community to look at the time that has been lost over Classic so far, and whether there has been any return on investment there. Before Classic even came along, many Ethereum users were quietly exasperated by the month long flogging from media and peers over the DAO crisis -- Ethereum users were ready to get back to business as usual, and now Classic is one more thing they have to deal with first.
Certainly, it is unacceptable practice for every planned hard fork moving forward to be met with its own listed non-fork coin. If I wanted to destroy the long term viability of any cryptocurrency project based on a blockchain, including Bitcoin, I would create community dissent after a hard fork and then do exactly what Classic has done - try to package the failed chain into an actual competing financial cryptographic asset, get it trading on exchanges against the Mother chain, and so on. Nothing like a little market cannibalization and loss of fungibility to make everyone lose their minds.
And marketing the failed chain after a mathematically significant majority of miners have begun mining on the new dominant chain -- again, after a month of discussion and debate -- is quite different from marketing or launching an "altcoin". Although I think altcoin blockchains mostly should trade against each other, on as many liquid markets as possible, that's a far cry from grabbing a failed, dying chain that is less than 5% dominant and flash marketing it as the future of Ethereum. That's simply wrong. It's devious and it's a theft of the good reputation and value the Ethereum community has earned for itself.
This marketing of failed chains is phenomenally toxic stuff for a variety of reasons, as you can probably gather. If you want to see cryptocurrency succeed, in any form at all, please be vigilant against this form of "divide & conquer". When you think about it, it's been highly effective against Bitcoin, and now it's proving somewhat effective against Ethereum, too.
Every fire they have to put out, after all, means less time spent on active development, less time bringing us closer to a reality where cryptocurrency is used freely by hundreds of millions, all over the world.
WHAT'S DRIVING THE HATE?
One user on Ethereum's trading Reddit community believes the recent Classic-led attacks have a clear source: "A certain group of very toxic individuals who want a small block Bitcoin to be the only game in town are attacking everyone else. They've been executing cyber attacks against and relentlessly smearing anyone involved in large block implementations of Bitcoin, and now they're attacking the next potential source of cryptocurrency adoption."
The user continued his explanation: "Large block implementations of Bitcoin were subjected to massive DDOS attacks. They were so large that entire ISPs were knocked offline. Now Ethereum saw its biggest dapp hacked, and the HF to reverse the hack made as contentious as possible largely as a result of support for the orphan chain from long time advocates of small block Bitcoin and dozens of throwaway accounts swarming the Ethereum subreddit to verbally attack the main chain and its developers. This is no conspiracy. This is all happening out in the open."
It does make some sense.
What I like about this theory is that it is grounded in someone's clear economic self interest, it's not a vague conspiracy theory. Certainly, the hostility is coming from somewhere, for some reason. Perhaps misguided Bitcoin hoarders -- fearful of anything that isn't a scarce, tiny, crowded blocksize, or another blockchain -- simply lash out when their economic hoarder interests are threatened.
If that's the case, I have a strong feeling markets are going to clear out that lingering case of tiny blocksize myopia. Ethereum is still above a billion dollar valuation, even after all the controversy and attacks, for a reason. The world wants "blockchain" in some form, that much is clear. What's less clear is how long the world will tolerate the bad manners, high fees, slow confirmation times, and size-restricted blocks of the First Blockchain.
You can do whatever you want, until real competition comes along.
And I'd argue Ethereum becoming accessible to Coinbase's 4.1 million users, as well as Ethereum's market value, suggest that some proper competition has perhaps finally arrived.
So what exactly makes Ethereum so different from Bitcoin? Watch our video explainer below:
Full disclosure: Not financial advice, provided for educational purposes only. Not intended as a recommendation to buy or sell any cryptocurrency or asset. At time of publication, I do hold some bitcoins and ethers in my long term portfolio.