Ethereum Classic wants to play in the decentralized finance (DeFi) space of the blockchain from which it contentiously split in 2016.
Announced Wednesday, Ethereum Classic Labs, the ETC blockchain’s biggest supporter, released Wrapped ETC (WETC) – an ERC-20 token that lets ETC holders participate in Ethereum-based DeFi services like trading, lending and borrowing.
“We wanted to make sure ETC could go to a different ecosystem and use different applications on top of that ecosystem,” said James Wo, founder and chairman of ETC Labs. “I expect at least 10% of ETC holders will want to participate and use WETC.”
Wrapping is the act of taking a blockchain asset like bitcoin and issuing an equivalent representation on another blockchain such as Ethereum. Wrapped Bitcoin (WBTC), for instance, is an ERC-20 token that’s backed on a 1:1 basis with bitcoin held in reserve by qualified custodian BitGo Trust. More recently, Zcash announced a wrapped, DeFi-ready version of the privacy coin.
Wo of ETC Labs pointed out that WBTC tokens are backed and guaranteed by BitGo, a centralized entity. “What we have done here is use a smart contract so people can easily exchange ETC for WETC using a smart contract which is totally decentralized,” he said.
WETC can be transferred or stored in any ERC-20-compatible wallet or storage mechanism, said Wo. Under the hood, ChainBridge, a decentralized application that interfaces with both the Ethereum Classic blockchain and the Ethereum mainnet, allows ETC tokens to be transferred to the Ethereum mainnet via the bridge. Then a specified amount of ETC is locked in a smart contract and a corresponding amount of WETC is minted on Ethereum.
The release of WETC follows the launch of a DAI-ETC bridge, said Wo, which enables ETC users to gain access to MakerDAO's dai, a popular stablecoin in DeFi.
Ethereum Classic has something of a checkered history, beginning with its emergence in July 2016 from the Ethereum fork that followed the infamous DAO hack.
ETC, which trades at about $5 today, reached an all time high of $47 back in December 2017, thanks in no small part to the enthusiastic support from crypto investor Barry Silbert, CEO of Digital Currency Group, which is also the owner of CoinDesk. For context, Ethereum’s native asset, ether (ETH), is now trading at nearly $500.
The ETC blockchain was subjected to a series of 51% attacks in August. Wo agreed the emergence of WETC will help rebuild ETC’s reputation.
“I will say that right now ETC network is very secure, so you can trust it,” he said. “We are also directly building applications on top of the ETC network, as well as using WETC to go through the Ethereum network.”
In any case, Wo sees a bright future as ETC sticks to its proof-of-work (PoW) mining guns while Ethereum embarks on the difficult and extended jump to proof-of-stake (PoS).
“Not everyone trusts PoS. Some projects believe in PoW,” said Wo. “So I think some of the ecosystem will probably stick to ETC or other PoW versions of a blockchain that can do smart contracts.”
Correction (Nov. 18, 15:14 UTC): Technically, Ethereum "forked" from what became Ethereum Classic. The opening paragraph has been modified to make that more clear.
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