The deeper you dig into the crypto world, the more crypto terms you encounter. This is typical of the crypto sphere, and you are lucky we are here to help you understand them. Usually, the value of digital currencies goes wild as and when it approaches a phenomenon known as ‘fork.’
These wild trends can either be positive or negative. Regardless of which direction it takes, crypto traders and investors can make profits by acting smart. For those who have been in the crypto world for a while, you must have heard of at least two or three ‘fork’ events.
So, what is so special about crypto forks and why exactly are they termed as forks?
Crypto Fork
‘Fork’ or ‘Forking’ is a type of software upgrade/update accomplished in a way that it can be backward-compatible or cannot be backward-compatible. In other words, ‘Fork’ is simply a fancy term for a software or protocol update.
A Fork is a software or protocol update
Likewise, updating a crypto protocol or code is known as ‘Fork.’ Crypto forks generate different versions of a blockchain, enabling two blockchains to function concurrently on different parts of the network, based on which fork is happening.
In the crypto space, we have two types of forks: Soft Fork (Backward Compatible), and Hard Fork (Non-Backward Compatible).
A Hard Fork
Any protocol modification or software upgrade, which makes former guidelines out-dated and applies another code base as the driving force, is known as a hard fork. This category of a fork is permanent and demands each node and user to upgrade to the newest version of the protocol software/wallet. A hard fork is not non-backward compatible.
For instance, one cannot open an MS Excel 2016 document in MS 2007 software minus a compatibility pack.
Likewise, when a digital currency like Bitcoin is hard-forked, the former rules become out-dated, and another version of the earlier blockchain evolves from that moment. Hard forking is typically done because of the integration of a new feature or modification of primary rulebooks like block size or change of proof-of-work function.
Hard forking is done to integrate another feature or because of alteration of primary rules like the block size
Bitcoin ecosystem has not experienced a non-contentious hard fork yet but, has undergone several contentious hard forks like Bitcoin Gold.
A Soft Fork
A soft fork is different from a hard fork in that all the new guidelines generated do not make the previous guidelines obsolete thus, making it backward compatible. A soft fork does not require a universal update of nodes or software since the initial nodes are compatible with the change made. However, this type of fork needs most miners to upgrade to enforce the soft modification.
For instance, it is possible to open an MS Excel 2007 in an MS Excel 2016 since it is backward-compatible.
A good example of a soft crypto fork is Segwit, which was an anticipated Bitcoin scaling solution via a soft fork of Bitcoin’s ecosystem. It was launched in August 2017 to solve Bitcoin’s slow transaction speeds.
Reasons Why Crypto Forks Happen
Forks happen because of several reasons but, the core ones are to divide communities and to incorporate another feature. However, forking is mostly done to split a crypto community.
So, in other words, a hard fork is a type of split or separation where a specific crypto community decides they will no longer adhere to the guidelines of the original protocol on the same blockchain. They modify the instructions and come up with another blockchain. Therefore, another version of the old blockchain is invented from that block.
This is why Bitcoin experienced a hard fork since a group of users, miners, and inventors desired bigger Bitcoin blocks. Thus, they forked Bitcoin into another version known as “Bitcoin Cash” in August 2017.
Crypto Forks Wrapped Up
One of the primary values behind the public, open-source crypto projects is security. Forking usually tightens security, although hard forks can be problematic. For crypto traders and investors, there is nothing to worry. So, cast away your worries. For crypto miners running their codes, there is need to keep track of your project’s progress and current community consensus.
The most recent forks that the crypto sphere has experienced are Monero’s Bulletproof and Zcash’s Sapling hard forks. ChangeNOW is happy to remind you that both of these forks have been successfully supported by our platform!
Hope you liked this one! We’re looking forward to meeting you on ChangeNOW, where you can swap and buy more than 150 cryptos, easy as cake.