At the core of Bitcoin is special software with open source. Each user with the appropriate technical skills can access and modify it, including creating their own projects.
Modifications to the source code are called branches or hard and soft «forks.»
If we speak in an understandable language, the fork is a process of changing the initial set of rules that the Blockchain library (or a chain of subsequent blocks and their data) works on, and its originality is identified. What does it serve for? Both forks, although different in their mechanism, are meant to upgrade and enhance cryptocurrency networks in the event of the lack of a central authority.
Hard forks VS Soft Forks
It is customary to distinguish two types of forks, of which a soft fork is consequently a soft form of its manifestation while the hard ones remain a more rigid and cardinal change in the source code.
Let’s deal with each species in a more detailed way.
A hard fork (maybe also written as hardfork) refers to blockchain technology and represents a more radical alteration of a network’s protocol that makes previously invalid blocks and transactions valid, and vice-versa. Using a hard fork supposes that all bitcoin network users or nodes have to stay updated with the latest version of the software protocol. A soft fork is a contrast notion to a hard fork, and it is not followed by compulsory software upgrades to implement the new rules and is backward compatible.
The two types of blockchain forks are therefore launched in response to old rules by developers and crypto communities who grow dissatisfied with functionalities in the protocol software proposed by already existing blockchain applications. So may they appear as a crowdsource funding method for various technology projects or cryptocurrency offerings.
The Forks’ Work Principle
Not only Bitcoin is prone to a blockchain fork – it may happen in any crypto-technology platform. The reason is, blockchains and cryptocurrency own a similar work principle regardless of the crypto platform they are working on. It is easier to imagine the blocks in blockchains as so-called cryptographic keys that administer your memory’s capacity and features (similarly, the hip blockchain miners define the rules that transfer the memory in the blockchain network).
Nevertheless, the content of a valid block in the chain and the related rules are expected to be confirmed by almost all miners. In case you wished to alter those rules, you would need to refer to the fork process— as an indicator of an important change in the protocol or any diversion in the network.
Have you ever asked yourself why there have been so many Bitcoin-like cryptocurrencies set up recently? (You’ve much likely heard of bitcoin cash, bitcoin gold, and so on). This is due to that forking mechanism. If you’re new to cryptocurrency investing, it is surely hard to define the peculiarities of all those cryptocurrencies and to draw a deep notion of each of them. Yet, there are manifold articles disclosing the back story of the most crucial bitcoin hard fork types on the market, which we advise getting acquainted with.
Hard Fork Mechanism In More Detail
A hard type of fork is when nodes of the newest version of a blockchain no longer accept the older version(s) of the blockchain, which creates a permanent divergence from the previous version of the blockchain. The new nodes and old nodes that are not altered dismiss the updated rules, and this is a factor that generates a divergence, or hard fork, in the blockchain.
Adding a new rule to the code essentially creates a fork in the blockchain: one path follows the new, upgraded blockchain, and the other path continues along the old path. Generally, after a short time, those on the old chain will realize that their version of the blockchain is outdated or irrelevant and quickly upgrade to the latest version.
A hard fork can be contrasted with a soft fork.
- A hard fork creates and leads to a drastic diversion to the blockchain network’s protocol that efficiently splits into two branches, one that obeys the previous protocol and another one that pursues the new version.
- Token holders in the hard fork of the initial blockchain are given tokens in the new fork, but miners are expected to select a particular blockchain to proceed with verifying.
- A hard fork may happen in any type of blockchain, and not only Bitcoin (where, for instance, hard forks have implemented Bitcoin Cash and Bitcoin SV, along with many other types).
What Happens During a Soft Fork?
The softfork is not accompanied by mandatory software updates to enforce the new rules. Even if some nodes from the common network cannot be changed, this will not prevent them from interacting with other nodes that have accepted the rules.
You can give a similar example with languages. If all the nodes in the network before the introduction of the fork understood English of the American type, and after the introduction of new rules it is necessary to switch to the British type, then all “Americans” will be able to interact comfortably with the “British,” and vice versa.
It can be summarized that softfork is a reversible code modification, which does not violate the essence of the protocol.
What Is The Essence of Hard Fork?
Now let’s look at the concept of the hard fork.
Here everything is not so simple, and the entered changes will contradict the old ones, so the nodes with the source code cannot correctly handle the work of the nodes that act in the qualitatively new way.
Again, referring to the example with languages, the old nodes are given English, and the new ones – Chinese. In the case of hard fork changes, the essence of the protocol, so the network is divided into two parts, each of which will work independently. This phenomenon is explained by the fact that the original blocks of one direction will not be identified by those in the fork.
Hard Forks vs. Soft Forks
What are the core characteristics of the “hard” type of forks vs. soft forks, and vice versa? As it has been made clear in previous chapters, hard forks and soft forks are mostly the same in the way that if the existing code of a cryptocurrency platform is altered, two separate networks are generated, and an old version remains on the network while the new chain version is in the process of being created. When a blockchain splits into two potential ways, it can be either regarding a network’s transaction history or a new rule defining the validity of a transaction and creating new valid blocks. Yet the hard type of forks as a new blockchain version are usually processed in the event when there is majority support from the crypto miners community (which typically means that 90 to 95 percent are expected to come up with positive replies towards the fork upgrading process), and if so, the blockchain developers begin altering and upgrading the existing code.
In contrast, a soft fork is believed to occur when a change in the software protocol maintains its backward compatibility, which implies that the new forked chain will comply with the freshly updated rules as well as the old rules while the initial chain will still obey the old rules (for instance, a block size decrease can be processed by soft-fork mechanism). Contrary to a hard fork, which would not be processed unless almost all nodes agree to update the fresh version, soft forks only demand most mining pools to stay up to date to make the freshly updated rules take effect.
Fork For Cryptocurrency
If you design a branching process for the cryptocurrency, then for the fork, you mean changing the rules of the code with the need to change the protocol. This makes Bitcoin safer and more reliable.
Core Consequences Of A Hard Fork
To start with, three possible cases may happen if a crypto miners community implements hard-fork:
- One blockchain prevails over the hard fork, while other networks gain low community adoption and value (such as Bitcoin Unlimited and the traditional Bitcoin);
- Both blockchains are approved and thus are functioning autonomously with roughly equal community adoption and value (Bitcoin Cash, for instance);
- Both blockchains are introduced, yet one of them is more preferred to another and thus dominates in value and adoption rates (such as the Ethereum network).
After introducing updated rules of hard type, one of the new chains can simply die out, although there is a chance that it will continue to exist. Here, the hashing power factor for each direction already matters. The more power, the more likely to survive.
A striking example of what happened is the Ethereum network when last summer’s changes were made to the protocol, and a new ETH chain appeared, which exists in parallel with the original version of Ethereum Classic.
Are All Cryptocurrencies The Cryptocurrency Forks Of Bitcoin?
Taking into account the above information, the fork of the source code of a separate cryptocurrency project can become the basis of another cryptocurrency that can be new.
If you take Bitcoin’s source code and create your own product based on it, then, in fact, even with minimal changes, it will be a separate project of cryptocurrency. For it to be recognized and successful, invite friends and acquaintances into the project, ensure the issue of the order in a million coins, and who knows, maybe, indeed, you will become the founder of a serious project.
How To Distinguish The Original From The Fork?
Not all cryptocurrency projects are actually forks because there are still colored coins, metacoins, and other complex tokens that do not belong to the branch group or altcoins.
What Is Altcoin?
The altcoin is any other digital currency except Bitcoin. But do not confuse it with the clone because it is not. These are two completely different concepts that can even be applied to one project but independently of the other.
How To Understand The Difference?
Altcoins include cryptocurrencies, which are fundamentally different from other projects. This is the same Etherium, NXT, Dash, or MaidSafe. The forks are the Dogecoin, being a branch of Litecoin, Expanse – fork of Ethereum, Stellar as a branch of the Ripple cryptocurrency.
Through the years, bitcoin has already spawned a large number of forks. Though it’s hard to make predictions on such a volatile market as cryptocurrency and blockchain, it’s highly likely that in the future, the cryptocurrency will continue to test and further implement both soft and hard forks, gradually expanding the cryptocurrency community and growing the number of crypto coin holders and at the same time making the overall process more and more sophisticated.
Summing it up, cryptocurrency market size has ever-expanding prospects, as it is expected to grow from USD 1.6 billion in 2021 to USD 2.2 billion by 2026 (to find out more statistics, apply market research on related crypto websites). This opens up a great range of opportunities to grab for a newbie in this industry, yet we do not offer any investment advice in our article and always recommend consulting the professionals before delving into the new exciting world of crypto mining.
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Is a hard fork good or bad?
The situation is a bit more complicated and debatable since hard forks and soft maybe both good or bad for the crypto community, so there are divided opinions on it. The bottom line is, hard forks create a permanent split in blockchain and are a sign of cryptocurrency instability. So, if the hard fork occurred, it implies more downtime and the overall increase in volatility of cryptocurrency price on the crypto market.
What are hard fork coins?
A bitcoin hard fork refers to consistent change to the bitcoin model and blockchain protocol which efficiently led to two branches, or bitcoin fork types, one that follows the previous protocol and one that implements the new version. Due to that forking process, several digital currencies have been elaborated, such as bitcoin cash (which still remains the most successful hard fork of the first cryptocurrency) and bitcoin gold. So bitcoin cash is the result of such a hard fork; in total, there are 105 “hard” bitcoin cash fork projects.
What does a fork mean in Crypto?
When the underlying source code of blockchain and, for example, the bitcoin platform is altered in order to enhance a certain feature, a mechanism called a hard fork happens. In the event when the developers wish to expand the blockchain’s capabilities by increasing the capacity of transactions in a block, a hard fork mechanism is required to implement these blockchain features. Hard fork demands upgraded nodes and results in constant blockchain splits; the new and improved blockchain will be managed by the enhanced codes. Blockchain technology was originally meant as the technology behind Bitcoin, the first decentralized cryptocurrency ever made.
What are the two types of forks Blockchain?
Blockchain forks (or, if put shortly, splits in blockchain network) comprise two core groups, accidental and intentional forks; accidental forks occur in case two or more blocks are created simultaneously, while intentional forks are divided into hard forks and soft forks. In turn, both forks produce a network split, but a hard fork, being not backward compatible, leads to two blockchains (or detached networks), and a soft fork results in one, can go with old software and does not require new software updates. To learn more about how soft forks and hard forks work, refer to our article.