This Top Crypto Has Gained Over 1,400% in 5 Years

Find out more about Ethereum Classic -- the original Ethereum.

Five years is a long time in crypto. Not only have many of the projects that were popular in 2017 fallen off our radars, some have failed completely. As a result, a large part of Ethereum Classic's (ETC) appeal is that it's still in the top 50 cryptos by market cap after five years. It's also produced solid returns for investors with a 1,400% gain since Jan. 1, 2017, according to CoinMarketCap data.

What is Ethereum Classic?

Ethereum Classic was formed in 2016 after a disagreement on how to handle a DAO hack on the Ethereum (ETH) network. A DAO is a decentralized decision-making mechanism, made possible by smart contracts that follow pre-agreed rules. Unfortunately, Ethereum's DAO was hacked shortly after its launch.

Without getting into too much detail, what followed was an ideological debate about whether it's OK to interfere with the decentralized mechanism and undo those unintended losses. One group wanted to roll the blockchain back to how it was immediately before the hack -- which they did, creating the crypto that's now known as Ethereum. Another group felt that this was against the spirit of decentralization. Ethereum Classic did not fork and continues on the original blockchain.

The Ethereum Classic website boasts it "has never and will never stop or interfere with smart contracts deployed to it." It is a smart contract crypto, like its big brother Ethereum. But, as we'll cover in more detail, it doesn't have as many applications running on its network, and it doesn't have the same level of development activity.

Should you buy?

One of the major plus points for Ethereum Classic is that it's relatively well-established and has kept its head above water while many other projects sank. It's a reflection of the relative newness of the whole crypto industry that surviving over five years is something to be celebrated, but it is. Moreover, projects that have made it through one major downturn in crypto prices are more likely to make it through another.

However, longevity alone is not a reason to invest in any crypto project. So what else does Ethereum Classic have going for it? First of all, Ethereum Classic has a healthy amount of developer activity -- though it's nowhere near as much as on the main Ethereum network. That means the project continues to evolve and move forward. Ethereum Classic is also available on many top crypto exchanges, including platforms like Robinhood, which only lists a handful of cryptos.

One consideration for investors is that Ethereum Classic uses a proof-of-work validation model, which consumes huge amounts of energy. Ethereum is in the process of a major upgrade and will move to a proof-of-stake system that will reduce its energy consumption by over 99%. Ethereum Classic has no plans to make a similar move. Sticking with proof-of-work may appeal to investors who worry that proof-of-stake hasn't been fully road-tested and aren't put off by the environmental considerations.

Ethereum Classic hosts some projects on its ecosystem, but it lags behind in terms of total value locked (TVL) -- the amount of money on its ecosystem. According to DeFi Llama, Ethereum tops the list of programmable cryptos with a TVL of almost $50 billion, where Ethereum Classic is in 104th place at just over $120,000.

It's not entirely fair to only compare ETC with ETH since Ethereum is the king of programmable cryptos. But even if we view it alongside other smart contract cryptos, it doesn't fare so well. Ethereum Classic uses an older technology that's been superseded by many newer projects and its TVL is a lot lower than many other programmable cryptos. All in all, it is hard to see how it can compete with faster Ethereum alternatives that took significant market share last year.

Bottom line

If the general crypto downturn and Terra (LUNA) collapse has made you nervous about newer cryptocurrency projects, Ethereum Classic might be worth a deeper dive. However, as with any crypto investment, only invest money you can afford to lose and make sure you understand the risks involved.

The difficult question is predicting how Ethereum Classic might perform in the coming five, 10, or 20 years. Be aware that you're extremely unlikely to get another 1,400% return. Ethereum Classic might be able to carve out a niche as a dependable old-fashioned crypto, especially if Ethereum's upgrade doesn't go as planned. But Ethereum Classic might also continue to be overtaken by shiny new products, especially if it can't grow its ecosystem and attract new projects.