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how hard forks impact this industry

The immutability, decentralization, transparency and security that came with blockchain changed the course of the world and put it on the path to decentralization.

By allowing anyone to participate in the network’s operations, blockchain technology laid the foundation for a community-run world where users make important decisions. But for a community-run system, there is always the possibility of disagreement among participants.

What happens if network users are torn between two sets of rules or two potential paths to follow? This might seem like a tricky situation to analyze, which is precisely why forks exist.

A fork is a situation where new rules or changes are made to the blockchain network and there is a deviation from the older version of the chain. There are basically two different types of forks. While a soft fork is like a software upgrade to an existing network, hard forks split the blockchain network and put it on two different paths.

The hard forks of blockchain networks have been instrumental in creating a diverse crypto ecosystem.

hard fork

The participants of a blockchain network, often called nodes, are primarily responsible for running the system. These nodes occasionally propose changes to the network to bring new functionality or adopt new rules. If there is unanimous agreement on the changes, the changes are implemented and the blockchain continues as a single network.

In case the nodes are split between whether or not these changes need to be implemented, the blockchain network splits and a new chain that implements these new features is created. This is what is called a hard fork. However, hard forks are also sometimes performed on purpose by the entire set of nodes on a blockchain to leave the older network behind and move to a newer, more efficient one.

Technically speaking, a hard fork occurs when the code changes are so significant that the new blocks that arrive are no longer compatible with the previous blocks. The network is split into two chains, where one runs the older version and the other runs the latest version with a new native cryptocurrency.

Over the years, hard forks in the cryptocurrency industry have helped to diversify the space by introducing new digital assets. Litecoin and DogeCoin, for example, are hard forks of the Bitcoin network that use its underlying architecture and even have their own unique features. These forks allow the network to evolve beyond its initial domain, adding new features and functionality.

The downside is that there is a risk of increased volatility with hard forks. However, hard forks can significantly improve the performance, speed and scalability of a blockchain network and give traders more choice of digital assets to trade in the long term.

Bitcoin Cash

It is the most well-known hard fork of the Bitcoin network. When Pieter Wuille, one of the main developers of Bitcoin, first presented his idea in 2015, it was accepted as a soft fork. However, the idea of ​​reducing the size of Bitcoin transactions did not seem to work well with miners and after a few years they started a hard fork to avoid it. This gave rise to Bitcoin Cash in 2017.

Litecoin

Litecoin is one of the first Bitcoin forks and was released in 2011. The fork was created to decrease block generation time, modify the existing graphical user interface (GUI) and increase the number of coins available for staking.

Ethereum Altair

The Ethereum network has also had its forks over the years, with the Ethereum Altair the most recently. This fork is a significant upgrade to the Beacon Chain, a proof-of-stake chain that runs parallel to the Ethereum mainnet.

The aim is to merge the Ethereum and Beacon chains to create Ethereum 2.0, which is expected to offer better performance, scalability and security. The Ethereum Altair fork is a significant step in that direction. The update aims to introduce lightweight clients, smaller nodes that can run on smartphones, and downtime penalties + mitigation.

While hard forks have proven important to the cryptocurrency ecosystem time and time again, the community is still divided on whether or not hard forks should be undertaken. Some blockchain networks have even gone so far as to create blockchains”unforkable” to preserve the original principles of the network.

However, the fork gives users the power to control the direction of the network and, if well planned, can readily expand the cryptocurrency ecosystem in the coming years making this technology even more attractive.

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