A fork is most often created by a software change in the fundamental program that runs a cryptocurrency’s blockchain. A small percentage of other forks can be caused by hacker’s fraudulent manipulation of the blockchain. A casual cryptocurrency user will usually not even know that a fork occurred unless they happened to read about it in the news. Generally, forks are adding or changing some feature(s) of the software.
Forks come in two general forms. They can be considered a Soft fork or a Hard fork.
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Soft Forks
Soft forks are usually the result of mild changes to the software rules such that the new rules won’t conflict with previous rules. This makes Soft forks backward compatible so that nodes using either old or new software can work together, creating new blocks to be added to the blockchain. The only caveat is that the old software might not know what to do with all aspects of new data in blocks added by the new software – but this would not create a conflict nor invalid blocks. The new software will fully recognize blocks created by older software. For this reason, it is not REQUIRED that old nodes update to the latest software – but it is preferred so that all the new features will be fully utilized. Any fork that is not backward compatible is not considered a Soft fork.
Hard Forks
A hard fork, on the other hand, is a much more drastic software change. Usually, a hard fork is usually implemented to:
- Fix a critical flaw in the original software
- Reverse some previous hacked transactions
- Add/change some fundamental rule(s)/feature(s).
Hard forks are not backward compatible. Nodes running the pre-fork software can not interoperate with the new nodes.
Sometimes the Hard fork can arise due to a philosophical disagreement in the blockchain’s development community. Such as when two or more large groups of developers of that blockchain want different rules.
In this case, a new cryptocurrency similar to the original may be created. One cryptocurrency will build future blocks with the new rules, and the other will continue with the old rules. Both blockchains will be based on and continue to accept all of the previous blockchain transactions. But from there, the blockchains will diverge. When the fork creates a new currency, existing coin holders will keep the exiting coins and be eligible to receive an equal number of new coins on the new chain. This is called a Split Coin.
When Hard forks happen, nodes must decide which fork they want to follow. Those who agree to implement the new software will form a new network. New transaction filled blocks will break off of the original blockchain to begin growing a new branch. Because of a blockchain’s decentralized nature, nodes are not forced to comply with any particular fork. Nodes that do not update will continue to use the original software. They will continue adding new blocks to the original blockchain.
There may be a period of transition time when nodes try to decide whether to follow the new branch. It is possible that one or the other branch may not be supported by enough nodes so that ultimately the branch dies out.
Advanced Planning
Both soft and Hard forks may be planned well in advance and based on extensive input from the development community to improve the software. These well-planned forks are often executed as a series of changes over time laid out in a “road-map” of changes.
If a fork does not have a sufficient number of participating nodes in the network, then the danger grows of a 51% attack on that network. This is because it becomes easier for a hacker group to harness more than 51% of the network’s hashing power and start to create fraudulent blocks. If the total number of nodes supporting the original blockchain was small to begin with, then this split could expose both chains to the attack.
Examples of Well Known Forks
Ethereum hard forked to fix a hack in 2016. It discarded the previously hacked transactions but maintained all other transactions from before the hack. This was a very controversial decision since it violated one of the core tenants of cryptocurrency: previously accepted transactions should never be changed. They should always and forever be immutable. But not all developers agreed with this fix, and a new chain and currency were created. Hence now there is Ether and Ether Classic.
Bitcoin cash hard forked from bitcoin 2017. All holders of bitcoin before the fork were eligible to receive an equal number of the new bitcoin cash. This action caused what is called a Split Coin. Since that time, there have been several other forks off of the original bitcoin blockchain, such as Bitcoin Gold, bitcoin SV, others
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