A blockchain fork is simply a change to the protocol of a blockchain network. When a blockchain fork occurs, it splits into two separate networks with two separate blockchains. In this guide, we will discuss the process of how a blockchain fork happens and some of the most famous forks in history.
A blockchain fork is a technical event that occurs when miners on the network discover a block at nearly the same time, resulting in two blocks being created simultaneously on different parts of the network.
Forks can occur as part of planned protocol updates, by community-driven initiatives to add new functionality or enhance existing functionality, and as a result of attacks on the network. Anything that is designed to be decentralized is done so at the risk of forks, with numerous cryptocurrencies having been forked into smaller fractions multiple times now.
Blockchain Fork Definition
A fork in the blockchain is when a single cryptocurrency splits in two. This can be done for various reasons, but it is typical when there are disagreements between groups of people that all have control over the coin supply. If these people don’t agree with how the coin is being managed they will initiate a fork splitting the blockchain into two separate chains.
A fork can be thought of as a permanent divergence in the blockchain and occurs when miners discover blocks simultaneously. It is possible for two or more blocks to both point to valid transactions that occurred within a certain timeframe, resulting in a fork being created on the network.
Forks are usually resolved by miner consensus choosing one branch of the fork as the valid branch. In some cases, however, a fork can result in permanent divergence of a cryptocurrency’s blockchain history. If this happens, two separate and incompatible ledgers will co-exist on the network for some time before consensus is reached on which ledger is considered valid and which is not.
Why Blockchain Forks Occur?
Any time someone uses Bitcoin (BTC) software without making changes to it, they essentially get an updated version of Bitcoin Core with every Bitcoin transaction, so no fork occurs. But if someone makes any changes, even just one character in the software, this is considered a fork because the new version of the software will not be compatible with previous versions of it.
Most forks are done for planned upgrades so that everyone gets the latest security and features of the protocol. However, there are some occasions when someone suddenly finds an exploit or bug in the Bitcoin software, and this results in a fork without any warning. In these cases, it is usually a small group of developers who quickly fix the bug and release new versions of the software. They may only be available on GitHub for a few hours before they get majority hashing power and become permanent.
Types of Blockchain Forks
A fork is an occasion when the blockchain splits and changes directions and there are now two chains. The previous chain will become stagnant and stop growing, while the new one begins to grow even larger than before.
There are several types of forks, all of them can be divided into accidental and intentional ones.
An accidental fork is when there are long blockchain branches that occur after the network diverged into two or more directions, due to a bug in the code or an abnormal hash rate fluctuation. Accidental forks cause nodes to see blocks being generated on top of the older block(s), causing them to think they are working on an invalid chain.
Meanwhile, an intentional fork, sometimes called a personal fork, is created when a node operator decides to start their own blockchain and generate blocks on it. Notably, intentional forks can be either soft or hard. A soft fork is a change in the set of rules used to validate transactions and blocks. These changes can be implemented by a soft fork only if they are accepted by a majority of participants. A hard fork occurs when nodes in the network can’t reach a consensus on the rules of protocol operation (i.e., what makes blocks valid). This can happen as a result of a lack of consensus between participants as well as bugs in the system that alter block validity criteria.
What Is a Hard Fork?
A hard fork, as the name implies, is a type of software upgrade that is not backward-compatible with older versions. In other words, if you choose to install and run the new software, your old version won’t work anymore and vice versa. A hard fork is a radical change to a network’s protocol that requires all nodes or users to upgrade to the latest version of the protocol software.
As opposed to soft forks, which are compatible with older versions of the software, hard forks are said to be “irreversible.” If you don’t upgrade your software, the new implementation won’t recognize you as part of the network.
Hard forks are controversial because of this lack of backward compatibility. What happens if some people start using the new software while others don’t? What happens if people running the older version of the software disagree with how things are changing? To answer these questions, one needs to understand what causes hard forks in the first place.
Hard forks work as a form of “democracy.” If enough people support the change, then the new version gets adopted and the old one is no longer viable. This way, everyone can collectively decide if they want to upgrade or not. Usually, if more than 50% of all miners support the hard fork, it will activate and become permanent (i.e., there is no going back).
However, if miners representing less than 50% of the computing power want to create an upgrade that deviates from the original rules of the network, they can do that by adding replay protection. This way, only one chain will be considered valid and “true”.
There are two major benefits of hard forks. Firstly, they solve the problem of scaling. By increasing the block size, hard forks allow for more transactions to be processed simultaneously, which means lower fees and shorter confirmation times. In other words, bigger blocks can hold more transactions without having to pay higher fees or wait hours or even days for a single confirmation.
Secondly, hard forks solve the problem of consensus. The original Bitcoin software has a limitation that was placed there on purpose (it’s not an accident). Originally, Bitcoin was designed with 1 MB blocks because developers wanted to limit supply in order to push up prices and make early investors rich.
Soft Forks vs Hard Forks
A soft fork is an upgrade to a system that makes it more secure or efficient, but can still understand older systems that have not been updated. It is called “soft” because all the blocks created by old software versions are still recognized by new software. If everyone switches to using the new version, there would be no difference whatsoever from a user’s perspective. As a result, miners and users will adopt the update very quickly (usually within a few days). Soft forks require only a majority of the miners to upgrade their software.
A hard fork is a change in protocol that makes previous versions incompatible with new releases. The goal of a hard fork is to make an upgrade, but the change is not backward compatible. In order for this type of upgrade to work, everyone needs to switch over at the same time, because if some people continue using the old version, then there would be two different types of coins and this could cause problems with transactions between users of different versions. If there is a split, the two groups will use separate currencies.
Hard forks are not compatible with the previous versions because these usually change things that make it harder for people to continue using pre-upgraded software. For this reason, hard forks require widespread consensus, like 95% agreement among everyone who uses the coin. This is very rare (for example, there was no consensus to hard fork Bitcoin into Bitcoin Cash).
Unlike soft forks, which only require miners to be updated, hard forks require every single participant in the network to upgrade their clients, or otherwise, they cannot remain part of the cryptocurrency ecosystem (and also lose all their money). These types of forks require lots of planning and can even make cryptocurrency less secure if not implemented correctly.
Soft forks are the most common type of blockchain upgrade because they are backward compatible and require only a majority of the miners to upgrade their software, but sometimes they can result in people using different currencies if there is a split, like with Bitcoin Cash (BCH). A hard fork is not compatible with previous versions and requires everyone to use similar clients so that one currency does not become two, but it requires near-unanimous consensus among participants.
Prime Examples of Forks
A fork can be more than one domain name and actually involve several different domain names. This might happen if a single organization starts using another domain in addition to the main one while keeping content similar on both domains. For example, if two companies that own competing brands start up their own blogs then there would be nothing stopping them from naming them after both of their brands and keeping them separate just like any other company with multiple social media accounts for their products would do.
The best examples of blockchain forks are the Bitcoin fork and Ethereum (ETH) fork.
As Bitcoin is an open-source technology, anyone can take the Bitcoin source code and make their version of it. Bitcoin has had three major (and two minor) forks in its history. These forks have led to several new cryptocurrencies, all stemming from Bitcoin’s original source.
Previously, Bitcoin forks were typically planned events that took place for weeks or months as the Bitcoin community discussed new features and improvements they’d like to see on Bitcoin. However, the Bitcoin Cash fork in August 2017 was anything but typical. As Bitcoin reached an internal crisis due to an increasingly congested network, Bitcoin Cash was created with a larger block size limit to facilitate greater transaction throughput.
Although Bitcoin Cash started as an interesting experiment, it has since become one of the top cryptocurrencies in the world. However, it attracts fraudsters and other unsavory forks, which has led Bitcoin Cash to become embroiled in several controversies. Bitcoin Gold (BTG) is another Bitcoin fork that took place in October 2017 and was driven by greed and controversy. Bitcoin Gold wanted to solve Bitcoin’s growing centralization problem. However, it did so with a proprietary mining algorithm (Equihash) instead of the original Bitcoin’s decentralized proof-of-work algorithm (SHA256). Bitcoin Gold was publicly criticized by Bitcoin’s core developers and tumultuous existence.
As for Ethereum, its fork Ethereum Classic (ETC) was created in July 2016 after a hack on the decentralized autonomous organization (DAO). In May 2017, there was another fork for Ethereum, known as EtherZero (ETZ). It appeared as a smart contract development platform with unique and expanded features compared with its predecessor Ethereum.
Conclusion
A blockchain fork is a split of the blockchain into two separate chains. This can happen when there is a disagreement among the miners about the proposed changes to the blockchain. When this happens, the miners will split off into two groups, and each group will continue to mine its own version of the blockchain. Obviously, forks foster further upgrade and development of a blockchain.