During the downturn in the crypto market, ETC (Ethereum Classic) has changed. From March 16th to 21st, ETC rose from $25.6 to a maximum of $41.1, an increase of 60.5%, becoming one of the few crypto assets that has performed well recently.
The impending production cuts are clearly the catalyst for this rally. Viawallet data shows that ETC is expected to reduce production on May 1, 40 days later, when its block reward will be reduced from 3.2 ETC to 2.56 ETC, a reduction of 20%.
In addition, since ETH is expected to switch to a PoS consensus mechanism in the next few months, its current version of PoW computing power will also flow to other public chains, and ETC is expected to take a piece of the pie and grow the network.
However, whether it is to reduce production or to undertake the computing power of ETH, it cannot completely “quench thirst” for the current ETC. Although multiple applications including DEX, NFT, games and other tracks have been born on its chain, there is still a big gap compared to other emerging public chains in terms of the richness of applications on the chain, the amount of assets deposited, and the number of users.
During the period of production reduction and fermentation, although ETC went out of the rising market, it still needs to further build the ecosystem on the chain if it wants to maintain its competitiveness. After all, production cuts only reduce supply, generate limited value, and fail to create demand.
ETC rises 60% on expectations of production cuts
If it wasn’t for the news of block reward reductions starting to ferment, ETC (Ethereum Classic) might still be in a forgotten corner. In the past year, new public chains such as Solana, Terra, and Avalanche have taken part of the traffic from the gleaming Ethereum, while the old public chains such as ETC and LTC have been slightly lonely in this trend.
As Ethereum moves towards the consensus layer of PoS (Proof of Stake), ETC finally returns to the vision of the crypto community after a long absence. Even though the current encryption circle is already dominated by scenarios such as NFT and Metaverse, the word “production reduction” still touches the nerves of many insiders.
According to Viawallet data, ETC is expected to reduce production on May 1, 40 days later, when its block reward will be reduced from 3.2 ETC to 2.56 ETC, a reduction of 20%.
Countdown to ETC production cut
In the past few years, BTC, LTC and other encrypted assets adopting the PoW (Proof of Work) consensus mechanism will trigger a wave of market hype whenever the block reward is halved. This is mainly because the reduction of production will bring about changes in the relationship between supply and demand in the market. When the block reward decreases, it means that the inflation rate of encrypted assets will slow down. In theory, if the market demand is stable, the reduction in production will lead to an increase in asset prices.
As a once mainstream asset, ETC’s production reduction plan has attracted a lot of attention. From March 16th to 21st, ETC rose from $25.6 to a maximum of $41.1, an increase of 60.5%, becoming one of the few crypto assets with outstanding performance recently.
On March 21, ETC’s 24-hour trading volume jumped to sixth on the entire network, and it also jumped to third on OKX’s popular list, second only to BTC and ETH. With the production cut approaching, the market hype around ETC has already blown up.
On social media, the discussion about ETC has increased significantly. Under the upward trend, some people shouted the slogan “ETC is the real Ethereum”.
However, the upside of value brought about by production cuts is limited, and the market often hides various uncertainties. The last ETC production reduction occurred on March 17, 2020, and the block reward was reduced from 4 ETC to 3.2 ETC. Before the production reduction, the famous “3.12” plunge occurred in the crypto asset market. ETC was 40 ETC before the production reduction. It fell from a maximum of $13.2 to a minimum of $3.1 within the day.
In the final analysis, production cuts often only play the role of a booster, and the future performance of ETC also depends on whether it can create more market demand.
The ecology on the ETC chain lags behind the new public chain
What is interesting is that in addition to this wave of production reduction expectations, ETC has also received some additional attention because Ethereum is about to launch version 2.0.
On March 19, Joseph Lubin, co-founder of Ethereum, was full of confidence in ETH 2.0, which will be released in the next few months. He revealed that the energy consumption problem of ETH proof-of-work will be solved by then, and transaction costs will be orders of magnitude cheaper.
This news makes ETH investors and users especially excited, but for the existing PoW miners of Ethereum, it means that they will soon be unable to use the computing power to mine ETH, so the question of where the computing power will go.
Previously, Xu Kang, head of ETC Asia Pacific, said that ETH will have computing power flowing out to other chains during the consensus conversion process, and ETC is the most suitable PoW blockchain to undertake Ethereum computing power.
At present, ETC has published the hashrate migration guide on its official blog, expressing its welcome to the disenfranchised Ethash miners. And pointed out that ETC has the ability to absorb most of the abandoned Ethash computing power. However, the mining version that ETC runs is a modified version of Ethash, called ETChash. If ETH miners migrate to ETC, firmware upgrade is required.
Under the official momentum of ETC, many people believe that the computing power of ETC will increase, which means the expansion of its network scale. According to the data of Ouke Cloud Chain on March 21, ETC’s largest mining pool, etc.ethermine, has increased its computing power by 8.27% within 24H, which is a good sign for ETC.
But whether it is reducing production or taking over the computing power of ETH, for the current ETC, it cannot completely “quench thirst”. When emerging public chains are vigorously building on-chain ecology and reflecting value through practical applications, ETC has not done enough in this regard.
As a smart contract platform that respects “code is law”, ETC has also tried to increase the use cases of blockchain in recent years. Currently, game projects such as Commonwealth Tribes and Aqua Bank, as well as DEX projects such as HebeSwap have been established on its chain. In addition, there are also several NFT projects on the ETC chain, including ETCPunks, Lazy Lions, etc.
ETC’s current on-chain application map
However, whether it is the richness of applications on the chain, the accumulation of assets or the number of users, ETC is difficult to compare with the emerging public chains in the market. According to data from DeFi Llama, the top five public chains in terms of total lock-up value are ETH, Terra, BNBChain, Avalanche and Solana, while ETC is far behind, ranking more than 80.
In terms of on-chain activity, according to the statistics of Ouke Cloud Chain, in the past week, the number of ETC’s daily active addresses has remained at around 1,000, and the daily on-chain transaction volume has been around 100,000 ETC.In contrast, new public chains such as Avalanche and Solana have tens of thousands of daily active users.
The weak ecology on the chain has become the crux of ETC for a long time, and its market value has also dropped from the top ten in the encryption market to the 24th today. Although the current ETC has gone out of the rising market during the fermentation period of production reduction, it still needs to further build the ecosystem on the chain if it wants to maintain its competitiveness. After all, production cuts only reduce supply, and value needs to be delivered by demand.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/etc-production-reduction-is-difficult-to-solve-the-ecological-weak-dilemma/
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