Blockchain technology introduces various digital assets, but not all tokens operate the same way. A common point of confusion is distinguishing between a blockchain's native currency and tokens created on its network. This guide clarifies the distinctions between Ethereum Classic's native ETC coin and ERC-20 tokens built atop its protocol.
Understanding Native Cryptocurrencies
A native coin is the fundamental currency of a blockchain network, issued directly by the protocol itself. Bitcoin (BTC) pioneered this model, where new coins are generated as block rewards for miners. Ethereum Classic (ETC) follows a similar issuance model.
These native coins are often termed "community fiat tokens" because they are created to compensate miners for securing the network through proof of work (PoW). Their value stems from unforgeable scarcity—new coins are only issued after significant computational work consumes substantial electricity. This process earns them the "digital gold" moniker.
Beyond block rewards, native coins like ETC serve a foundational economic purpose: paying transaction fees. This dual utility—compensating miners and facilitating transactions—provides inherent value and stability.
The Programmability of Ethereum Classic
Unlike basic ledger systems that only handle simple transactions, Ethereum Classic is a programmable blockchain. This means it supports more than just transferring value from one account to another.
Developers can deploy smart contracts—self-executing code stored decentralized across the network. These contracts enable complex applications, transforming ETC into a programmable native coin. This programability allows users to engage in advanced activities like trading on decentralized exchanges, purchasing NFTs, or setting up automated inheritance plans, all using ETC.
What Are ERC-20 Tokens?
The programmability of Ethereum Classic enables the creation of non-native tokens through smart contracts. The most common standard for these tokens is ERC-20.
ERC-20 tokens are units of value created as applications on the blockchain, not inherent to its base protocol. Unlike native coins, they lack foundational economic roles like paying block rewards or transaction fees. Their value is derived from assigned utilities within decentralized applications (dapps), such as granting access to services, enabling governance voting, or representing other assets.
Examples of ERC-20 Tokens on Ethereum Classic
The Ethereum Classic ecosystem hosts several prominent ERC-20 tokens, each serving unique purposes:
- HebeToken ($HEBE): Issued by HebeBlock, this token is integral to a suite of applications including HebeSwap (a decentralized exchange), HENS (a naming service), a wallet, and ETCInscribe.
- ETCPOW ($ETCPOW): Created by ETCMC, this token rewards users who utilize their services, which include a plug-and-play hardware node, a mining pool, and a decentralized exchange.
- **Wrapped ETC ($WETC):** A special type of token that represents ETC on a 1:1 basis. Users deposit native ETC into a smart contract and receive $WETC, making the value usable within dapps designed for the ERC-20 standard.
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The Purpose of Wrapped Tokens
A natural question arises: why wrap a native coin like ETC into an ERC-20 token? The answer lies in interoperability and historical development.
The ERC-20 token standard emerged after the launch of Ethereum and Ethereum Classic. Consequently, most dapps were built to interact with this new standard, creating compatibility issues for native coins. Wrapped tokens bridge this gap by locking native coins in a smart contract and issuing a corresponding, dapp-friendly ERC-20 token.
This allows the value of ETC to flow seamlessly into the expansive world of decentralized finance (DeFi) and other applications. Furthermore, wrapped versions of ETC can be issued on other blockchains, enabling cross-chain functionality while the original ETC remains secured on its native chain.
Comparing Monetary Policies
The monetary policies of native coins and tokens differ significantly, impacting their value proposition.
Ethereum Classic has a fixed, predictable monetary policy modeled after Bitcoin. It launched with a block reward of 5 ETC, which reduces by 20% approximately every two years (every 5 million blocks). This deflationary model ensures a hard cap of 210.7 million ETC will ever exist, enforcing digital scarcity.
In contrast, ERC-20 tokens can have any monetary policy their creators design. For instance:
- ETCPOW has an inflationary model, perpetually issued as rewards for network participation.
- HebeToken has a fixed supply of 500 million tokens, with a portion already in circulation.
A token's value ultimately depends on its utility, adoption, and the perceived soundness of its economic design.
Frequently Asked Questions
What is the main functional difference between ETC and an ERC-20 token?
ETC is the native currency of the Ethereum Classic blockchain, used to pay for transaction fees and secure the network via mining rewards. An ERC-20 token is a custom asset created using smart contracts on the ETC network, designed for specific applications like governance or access to dapps.
Can I use ETC directly in all Ethereum Classic dapps?
Not always. Many dapps are built to work specifically with the ERC-20 standard. To use your ETC in these applications, you will likely need to convert it to a wrapped version (WETC) first, which represents your ETC as an ERC-20 token.
Who controls the supply of ERC-20 tokens?
The supply of an ERC-20 token is entirely determined by the rules coded into its smart contract by its developers. This can range from a fixed supply to an inflationary model, unlike ETC's algorithmically fixed supply.
Is wrapped ETC (WETC) as secure as native ETC?
WETC's security relies on the smart contract that holds the locked native ETC. While the native ETC itself is secure, it's crucial to trust the audibility and integrity of the wrapping protocol. Always use well-established and audited services.
Why would a project create a new token instead of using ETC?
Projects create new tokens to define their own economics, utility, and governance rules specific to their application. This allows them to create custom incentives for their users that wouldn't be possible by using the native coin alone.
How do I know if I'm holding ETC or an ERC-20 token?
You can identify them by their contract address in your wallet. Native ETC will have no contract address, while all ERC-20 tokens will have a unique smart contract address associated with them on the blockchain.