Fork
Cryptocurrencies use blockchain technology as a public record of all transactions in their history. While this cannot be changed, the rules by which a particular blockchain operates can to some extent change. These “upgrades”, known as forks, can play an important role in the future. In this article we will learn about forks.
Explaining the forks
Similar to most information technologies, blockchains can receive some updates. These updates are referred to as forks in Greek translated as forks. It is similar to how you need to update certain programs on your computer from time to time and this is similar to an upgrade to a cryptocurrency one that is deemed necessary. An update can be small or large with significant changes in the way a cryptocurrency works. For example, in 2017 Bitcoin underwent an upgrade introducing SegWit to the network. It has since become the dominant form of address used to manage BTC. Bitcoin will immediately undergo another key upgrade to the system, with the integration of the TapRoot upgrade that took place last November 14, 2021.
Forks can help cryptocurrencies by providing more flexibility and allowing patches to be added for security, usability, scalability, etc. A big difference between regular networks and blockchains is that there is not just one governing body. On the contrary, everyone involved in the network must agree to the proposed change. In other words, they must reach unanimity.
Hard and soft forks
You may have heard the term soft fork and hard fork before. They may look completely the same however, there is a big difference between them.
Soft forks are much easier. These updates are fully compatible. This means that the blockchain itself does not need to be changed for these updates to take place and would have little to no effect on the user. It’s like having an update for Microsoft Word, instead of having to install a brand-new version of the program.
On the contrary, hard forks can be compared with the need to install this new Microsoft Word program. Unlike soft forks, hard forks are not totally compatible. Updating a hard fork conflicts the current state of the blockchain. Since blockchains are immutable, this means that a whole new blockchain must be created one that enters the same transaction history. The impact here is clearly much greater and may require quite a bit of development from wallet providers. Fortunately, as a user, you are not the one who should be doing this.
Both ultimately have the same effect: they bring an update to the network that could add new features or rules-changes to it. However, for hard forks they may be different if opinions on the proposed update differ.
What happens when a network is shared?
At the beginning, we mentioned that a successful fork must reach unanimity to be implemented. This is especially true for hard forks, as they create new blockchains. If everyone involved in the network agrees on a fork, it means that everyone will start offering their services on the newly created blockchain. As a user, any wallet provider will update their software to connect to the new blockchain created for you, which means you won’t have to do anything. Your coins will be on the new blockchain and the old one will no longer be used as no one supports it.
This is not always the case though. During Bitcoin’s history, there have been a few forks where consensus could not be reached. There were members who disagreed with the fork, while much was still in favor. The most well-known example is the proposed Bitcoin fork “BIP91”. There was a fairly large number of members who decided not to support this fork. So, what happens when there is no consensus on a hard fork?
The network is divided. Two different, sustainable chains are created. This includes the old, existing chain and the new updated chain. In the case of the BIP91 fork, most miners chose to support the update, the chain of which continued to be known as Bitcoin. The other chain also had a lot of support and brought to the market a brand-new cryptocurrency: Bitcoin Cash. This meant that someone who had 2 Bitcoin (BTC) before the split, now owned both 2 Bitcoin (BTC) and 2 Bitcoin Cash (BCH). Although it may seem as if you were given a new cryptocurrency for free, this comes at a cost. It can be accompanied by a decrease in network stability, and therefore security, as the network becomes smaller due to disruption.