ETC production cuts: Difficult to resolve the weak ecological dilemma

Author: Kyle / Hive Tech

During the downturn in the cryptocurrency market, ETC (Ethereum Classic) has shown unusual activity. Between March 16 and 21, ETC rose from $25.6 to a peak of $41.1, an increase of 60.5%, becoming one of the few standout crypto assets recently.

The upcoming halving is clearly the catalyst for this surge. According to Viawallet data, ETC is expected to undergo a halving on May 1, 40 days from now, when its block reward will decrease from 3.2 ETC to 2.56 ETC, a reduction of 20%.

Additionally, as ETH is expected to transition to a PoS consensus mechanism in the coming months, its current PoW hash power will flow to other public chains, allowing ETC to potentially benefit and strengthen its network.

However, whether it's the halving or the influx of ETH's hash power, it cannot fully "quench the thirst" of ETC at present. Despite the emergence of various applications on its chain, including DEX, NFTs, and games, there are still significant gaps in terms of application richness, asset accumulation, and user numbers compared to other emerging public chains.

During the halving fermentation period, although ETC has entered a bullish trend, it needs to further build its on-chain ecosystem to maintain competitiveness. After all, halving only reduces supply, and the value generated is limited and cannot create demand.

ETC Rises 60% Amid Halving Expectations

If it weren't for the news of the block reward halving starting to gain traction, ETC (Ethereum Classic) might still be in a forgotten corner. Over the past year, new public chains like Solana, Terra, and Avalanche have siphoned off some traffic from the once-glorious Ethereum, leaving older chains like ETC and LTC somewhat desolate in this tide.

As Ethereum moves towards a PoS (Proof of Stake) consensus layer, ETC has finally re-entered the crypto community's view after a long absence. Even though the current crypto circle is dominated by scenarios like NFTs and the metaverse, the term "halving" still resonates with many in the community.

According to Viawallet data, ETC is expected to undergo a halving on May 1, 40 days from now, when its block reward will decrease from 3.2 ETC to 2.56 ETC, a reduction of 20%.

ETC Halving Countdown

In recent years, cryptocurrencies like BTC and LTC that use the PoW (Proof of Work) consensus mechanism have sparked market speculation whenever they approach a block reward halving. This is mainly because halving changes the supply-demand relationship in the market; when block rewards decrease, it means the inflation rate of the crypto asset slows down. Theoretically, if market demand remains stable, a reduction in supply will lead to an increase in asset prices.

As a once-mainstream asset, ETC's halving plan has attracted considerable attention. Between March 16 and 21, ETC rose from $25.6 to a peak of $41.1, an increase of 60.5%, becoming one of the few standout crypto assets recently.

On March 21, ETC's 24-hour trading volume surged to sixth place across the network, and it climbed to third place on the popular list of OKX, only behind BTC and ETH. As the halving approaches, the market's speculation around ETC has already begun to rise.

On social media, discussions about ETC have noticeably increased, and amid the upward trend, some have proclaimed, "ETC is the true Ethereum."

However, the value-boosting effect of halving is limited, and the market often hides various uncertainties. The last halving for ETC occurred on March 17, 2020, when the block reward decreased from 4 ETC to 3.2 ETC. Before that halving, the crypto asset market experienced the infamous "3.12" crash, with ETC dropping from a high of $13.2 to a low of $3.1 within 40 days before the halving.

Ultimately, halving often serves merely as a booster; ETC's future performance will depend on its ability to create more market demand.

ETC's On-Chain Ecosystem Lags Behind New Public Chains

Interestingly, beyond the halving expectations, ETC has also gained some extra attention due to Ethereum's upcoming launch of version 2.0.

On March 19, Ethereum co-founder Joseph Lubin expressed confidence in the upcoming ETH 2.0 release in the next few months, revealing that it will address the energy consumption issues of ETH's proof-of-work and significantly reduce transaction costs.

This news has excited ETH investors and users, but for existing PoW miners of Ethereum, it means they will soon be unable to mine ETH with their hash power, raising the question of where that hash power will go.

Previously, ETC's Asia-Pacific head Xu Kang stated that during Ethereum's consensus transition, some hash power would flow to other chains, and ETC is the most suitable PoW blockchain to absorb Ethereum's hash power.

Currently, ETC has published a hash power migration guide on its official blog, welcoming the displaced Ethash miners. It points out that ETC has the capacity to absorb most of the abandoned Ethash hash power. However, the mining version that ETC operates is a modified version of Ethash, called ETChash. ETH miners migrating to ETC will need to upgrade their firmware.

With ETC's official promotion, many believe that ETC's hash power will increase, indicating a growth in its network scale. According to data from OKLink on March 21, ETC's largest mining pool, etc.ethermine, saw an 8.27% increase in hash power within 24 hours, which is a positive sign for ETC.

However, whether it's the halving or absorbing ETH's hash power, it cannot fully "quench the thirst" of ETC at present. As emerging public chains vigorously build their on-chain ecosystems and demonstrate value through practical applications, ETC has not done enough in this regard.

As a smart contract platform that upholds "code is law," ETC has also attempted to increase blockchain use cases in recent years. Currently, it has established gaming projects like Commonwealth Tribes and Aqua Bank, as well as DEX projects like HebeSwap. Additionally, there are several NFT projects on the ETC chain, including ETCPunks and Lazy Lions.

Current On-Chain Application Landscape of ETC

However, in terms of application richness, asset accumulation, and user numbers, ETC struggles to compare with the emerging public chains in the market. According to DeFi Llama data, the top five public chains by total locked value are ETH, Terra, BNBChain, Avalanche, and Solana, while ETC is far behind, ranking over 80th.

In terms of on-chain activity, according to statistics from OKLink, the number of daily active addresses for ETC has remained around 1,000 over the past week, with daily on-chain transaction volume around 100,000 ETC. In contrast, new public chains like Avalanche and Solana have daily active users reaching tens of thousands.

The weakness of its on-chain ecosystem has long been a problem for ETC, causing its market capitalization to drop from the top ten in the crypto market to its current 24th position. Although ETC has entered a bullish trend during the halving fermentation period, it needs to further build its on-chain ecosystem to maintain competitiveness. After all, halving only reduces supply; value still needs demand to provide it.