Last updated on January 2nd, 2018 at 07:27 am
Back in August 2017, the first coin created from a Bitcoin fork came into existence: Bitcoin Cash. However, since then, two other coins have also been “forked” from Bitcoin: Bitcoin Gold (October 2017) and Bitcoin Diamond (November 2017). Most people are still wondering what these forks are, how they happen, and how one can profit from them. Here’s my take on all of this.
What the hell is a Bitcoin fork?
We discussed Bitcoin forks back when Bitcoin Cash was just coming out. If you want the full explanation, you can read the original post. If you want the quick and dirty explanation, keep on reading this post.
A fork is basically an alteration of the current Bitcoin code (or protocol). It means someone is changing the rules.
Imagine you’re playing a game with thousands of people from all around the world and then someone says, “Let’s change the rules.” Normally, for the game to work properly, everyone needs to agree on the rules being changed. If that happens, then the change is implemented and everything continues as normal.
If there isn’t a large consensus about the change, two versions of the game will be created (one with the old rules and one with the new rules)—in other words, there will be a fork in the game.
The same can happen with Bitcoin’s code. Generally speaking, when a fork happens, you’ll have an “original Bitcoin” and a “new Bitcoin.” For example, Bitcoin Cash changed the block size from 1 MB to 8 MB so more transactions could be processed with each block. There were those who supported this change and switched to a new coin called Bitcoin Cash (or Bcash), and there were those who decided to stay with the original rules and keep using the original Bitcoin.
Of course, this is a very simplified explanation of forks—not all forks are created equal. There are soft forks, which allow the new rules to play well with the old rules, and there are hard forks, which don’t allow this and create a totally different coin. All of the Bitcoin forks you’re hearing about lately are actually hard forks.
Why should I even care about a fork?
Great question! There are several reasons you should care about a fork:
You may want to switch over to the new rules and the new coin because you think it’s better than using the original Bitcoin.
The fork could have an impact on the Bitcoin community, Bitcoin’s adoption, and even Bitcoin’s price (we’ll get to that later on).
You may want to profit from the fork by selling the new coins that are delivered to every Bitcoin holder.
Wait, what? I get free coins?
Yes. Let’s go back to our game analogy.
Imagine your game has been running for a very long time, and you’ve managed to accumulate a considerable amount of points in it. Now someone wants to change the rules but doesn’t want everybody to lose their points, so the new game will start at a certain point in time, and everyone will have the same amount of points they accumulated up until that point.
If, for example, you had 150 points in the original game, you could switch to the new game and still have 150 points. You could also play both games in parallel and have 150 points in each. Now let’s see how this works with Bitcoin.
When a fork occurs, the people who decide on forking Bitcoin say, “Look, we don’t like the original rules—we want to create new rules. So starting from block number 453,342 (for example), we’ll change to the new rules.” Anyone who had Bitcoins at the time of the fork will now have two Bitcoins: the original one and the new one. You can decide which one to use, or you can even use both.
If for example, you have 1 Bitcoin in your possession when the fork occurs, you’ll still have that 1 Bitcoin, but you’ll also be able to claim 1 “new Bitcoin” on the network that’s running the “new Bitcoin rules” (since that coin didn’t start out from scratch and is continuing the original Bitcoin’s history).
It can get a bit confusing, but the main point to remember is this:
When a Bitcoin fork occurs, anyone holding any amount of Bitcoins will get the same amount of the new currency as well. This doesn’t happen automatically; you do need to claim these coins, but each new coin has a different claiming mechanism, and we won’t be able to cover them all.
Once you claim your new coins, you can then hold on to them or sell them if they’re being traded on an exchange. This means that you can basically generate money for nothing; all you did was claim coins from thin air and sell them on an exchange.
Easy money! Or is it?
The dangers of Bitcoin forks
When the forking trend started out with Bitcoin Cash, it seemed that the fork was a legitimate way of expressing discontent with the road Bitcoin was taking (hence a fork in the road).
However, it seems like the more recent forks are pretty similar to each other, and the main reason for creating them has more to do with marketing than actual ideology. If someone thinks they can create a better coin than Bitcoin, they can create a brand new altcoin—there’s no need to create a Bitcoin clone.
Devs decide to fork Bitcoin for three main reasons (in my opinion, at least):
Marketing buzz: Bitcoin forks are the new ICOs. Everyone is looking to get free coins, so people are actively looking for information (you’re reading this article, aren’t you?). What better way to get eyes on your project without a lot of work? Just say you’re forking Bitcoin and you’re done.
Quick money for devs: Some of these forks aren’t really copies of Bitcoin’s history. The rules are changed in such a way that devs receive a large initial amount of the new coin, which they can then dump onto the market once the coin starts trading.
Scams: Some forks are flat-out scams. There’s already been one reported scam: Bitcoin Platinum. Scams can come in the form of forks that are created to short Bitcoin’s price (e.g., Bitcoin Platinum) or something more elaborate such as forks that are created to steal users’ real Bitcoins in the process of claiming the new coin (e.g., Bitcoin Gold fake wallet).
As you can see, claiming coins from a fork entails a considerable amount of risk from the user’s side.
How to safely claim coins from a fork
First, I’d suggest reading a bit about the project. Find out who the developers are, what their track record is, how far along they are in their road map, what have other publications written about them, and the like. If all that makes sense to you, then perhaps the fork is indeed legit.
However, even if a fork is legit, it doesn’t mean it’s worth going through the hassle of claiming its coins. The claiming process is usually complicated, and you risk losing your coins if you don’t know exactly what you’re doing. Say you’re holding 0.5 Bitcoins, and you’re eligible for 0.5 Bitcoin Gold. I’m not sure the immediate profit is worth the risk. This is, of course, a personal decision you should make.
For example, one of the most important things that a forked coin has to implement is something called replay protection. It basically means that the network will be able to separate the new coin from the original one and not accidentally send the original one to the new coin address when claiming the forked coin.
If, in the end, you decide you want to claim your coins, I suggest that you follow guides only from well-known wallets (i.e., TREZOR, Ledger, etc.) or credited publications. Keep in mind that in the end, it’s your money, and no publication will be able to take responsibility if you do something wrong along the way—even if they accidentally published misinformation (as we unfortunately once did in the past).
What I’m trying to say is that it’s a risky business. Make sure to understand the process and make your own choices.
If you do decide to claim forked coins you need to make sure your Bitcoins are in a wallet that allows you access to the private keys. This means you need to get your Bitcoins off exchanges and other web wallets before the fork occurs. If you don’t have access to your private keys you won’t be able to extract the forked coin.
Once the fork occurs you’ll need to do two things:
Send your Bitcoins to a new wallet with a different private key
Upload your old private key to a wallet that supports the forked coin
Since each fork is different it’s hard to say which wallet will support each fork. Usually the official fork site will display the wallets and exchanges that support it. If you leave your coins on an exchange that supports the fork there’s a good chance you can avoid extracting the coins yourself and that the exchange will do it for you, however you are basically at their mercy.
Remember, the one rule you should always follow before trying to claim any coins is to move your Bitcoins to a new wallet with a new seed phrase. This move will reduce the chances of you losing your Bitcoin to almost zero.
Upcoming Bitcoin forks for 2018
Now that we’ve got that out of the way, let’s review the upcoming Bitcoin forks for 2018.
Super Bitcoin (SBTC)
Fork Date: 12/12/2017 — Block 498,888
Changes from original protocol: smart contracts, Lightning Network, zero-knowledge proofs, 8 MB block size
Distribution method: 1 BTC = 1 SBTC
Super Bitcoin aims to “make Bitcoin great again,” although the developers accept the idea as an experiment. It incorporates the best proposals from the Bitcoin community to see how all the forefront technologies combine.
BitcoinX (BCX)
Fork Date: 12/12/2017 — Block 498,888
Changes from original protocol: combining zero-knowledge proof, smart contract, DPOS consensus, crosschain technology data, SegWit, Lightning Network
Distribution method: 1BTC = 10,000 BCT
BitcoinX is designed to release the full potential of Bitcoin in a scalable way for the future. By combining speed, smart contracts, and privacy, the development team is looking to build a cryptocurrency to suit modern society.
Lightning Bitcoin (LBTC)
Fork Date: 18/12/2017 — Block 499,999
Changes from original protocol: DPoS Consensus, three-second block time, 2 MB block size, no difficulty adjustment, smart contracts
Distribution method: 1BTC = 1 LBTC
Lightning Bitcoin pushes the boundaries of blockchain speed with bigger block sizes that are created in seconds rather than minutes. The addition of smart contracts and DPoS consensus should allow for a truly high-speed autonomous network.
Bitcoin Platinum (BTP)
Fork Date: 18/12/2017 — Block 500,000
Changes from original protocol: No pre-mine, 2.5-minute block time, SegWit2x, difficulty adjustment every block
Distribution method: 1BTC = 1 BTP
Bitcoin Platinum holds some pretty simple upgrades that make it slightly similar to Litecoin thanks to a 2.5-minute block time. The inclusion of the controversial SegWit2x could offer a more scalable solution to Bitcoin Legacy. However, reports of a scam are haunting Bitcoin Platinum.
Bitcoin God (GOD)
Fork Date: 25/12/2017 — Block 501,225
Changes from original protocol: no pre-mine, proof of stake, smart contracts, Lightning Network, large block size
Distribution method: 1 BTC = 1 GOD
Some details are still to be confirmed for Bitcoin God, but the branding is rather catchy. Proof of stake, smart contracts, and Lightning Network will make for an interesting change to the usual Bitcoin protocols.
Bitcoin Cash Plus (BCP)
Fork Date: 2/1/2018 — Block 501,407
Changes from original protocol: No pre-mine, SigHash, emergency difficulty adjustment (EDA), 8 MB block size
Distribution method: 1BTC = 1 BCP
Bitcoin Cash Plus throws more confusion into the Bitcoin industry. Is it that much different from the hotly tipped Bitcoin Cash? Zero pre-mining is a healthy way to start, but little information is available on its website.
Bitcoin Uranium (BUM)
Fork Date: Around 31/12/2017 — Block not yet announced
Changes from original protocol: No pre-mine, one-minute block time, SegWit, unique address format
Distribution method: 1BTC = 1 BUM
Bitcoin Uranium wants to send rippling shockwaves through Bitcoin and reinitiate a truly decentralized currency. Quick block times combined with Equihash will allow GPU/CPU mining aims to open up mining to everybody.
Bitcoin Atom (BCA)
Fork Date: December 2017 — Block not yet announced
Changes from original protocol: Hybrid consensus (PoS and PoW), Lightning Network, Hash time-locked contracts
Distribution method: 1 BTC = 1 BCA
Bitcoin Atom focuses its efforts on consensus modeling and off-chain transactions. A new form of combined Proof of Stake and Proof of Work may allow for increased security, while the Lightning Network creates “atomic swaps.”
Bitcoin Silver (BTCS)
Fork Date: December 2017 — Block not yet announced
Changes from original protocol: 30-second block time, SegWit, every block difficulty adjustment
Distribution method: 1BTC = 1 BTS
Bitcoin Silver remains mysterious, especially given that there’s no working website or cohesive Github. Speedy block times mixed with SegWit is an interesting scaling idea, but we’ve yet to see any details that are set in stone.
Additional forks can be found here.
Source: 99Bitcoins | Buy Bitcoin, Bitcoin Guides & Reviews for Bitcoin Newbies / Ofir Beigel )
Ofir Beigel
Blogger and owner of 99Bitcoins. I've been dealing with Bitcoin since the beginning of 2013 and it taught me a lesson in finance that I couldn't get anywhere else on the planet. I'm not a techie, I don't understand "Hashes" and "Protocols", I designed this website with people like myself in mind. My expertise is online marketing and I've dedicated a large portion of 99Bitcoins to Bitcoin marketing.