Have you heard of the term “Fork” on blockchains or cryptocurrencies?
Ever wondered how changes or updates are carried out on a blockchain? Or how disputes about the direction of a blockchain in blockchain communities are resolved? Or why do we have Bitcoin Cash and Bitcoin Gold? Ethereum, Ethereum Classic, and Ethereum 2.0?
Cryptocurrencies like Bitcoin and Ethereum are powered by blockchains 🔗, which are decentralized, open software that anybody can contribute to. Blockchains are so-called because they’re built up of blocks of data – think of a long railway – that can be tracked all the way back to the network’s first transaction. They also rely on their communities to maintain and develop their underlying code because they are open source.
When a community modifies the blockchain’s protocol or basic set of rules, a fork occurs. When this happens, the chain divides, resulting in a second blockchain with the same history as the first but heading in a different direction.
Why is a Fork important 🤷🏽?
Most digital currencies have their own development teams in charge of network updates and upgrades, similar to how changes in internet protocols allow web browsing to improve over time. As a result, a fork may occur to improve the security of a coin or to provide new features.
However, a fork can be used by the developers of a new cryptocurrency to create entirely new coins and ecosystems.
Types of Forks
- Soft Fork ☁️
Consider a soft fork as a blockchain software upgrade. It becomes a currency’s new set of criteria as long as all users adopt it. Soft forks have been used to add new features or functionalities to both Bitcoin and Ethereum, often at the programming level. The adjustments are backward compatible with the pre-fork blocks because the end outcome is a single blockchain.
- Hard Fork 🪨
When the code changes so much that the new version is no longer backward compatible with previous blocks, a hard fork occurs. The blockchain divides in two in this scenario: the original blockchain and a new one that follows the new set of rules. This results in the creation of a completely new cryptocurrency, as well as the origins of a number of well-known coins. Hard forks resulted in the emergence of cryptocurrencies such as Bitcoin Cash and Bitcoin Gold from the original Bitcoin blockchain.
❓Why do forks occur?
Just like all software needs upgrades, blockchains are updated for a variety of reasons:
- To add or improve functionality 👨🏼🔧
- To address security risks 🔐
- To settle a community dispute over the cryptocurrency’s future direction 🫂
❓How are forks changing the crypto landscape?
- When specific criteria are met, the Ethereum blockchain is meant to perform "smart contracts," which are bits of code that automatically execute a series of specified actions. Games, logistical tools, and DeFi dapps are all examples of smart contract applications.
- The Ethereum blockchain, as the platform that runs all of these applications, can be compared to a computer’s operating system. The multiple Ethereum forks – Ethereum, Ethereum Classic, and Ethereum 2.0 – might be compared to updated versions of an operating system that provide features or efficiency that previous versions may have lacked.
- An earlier fork may remain a stable, well-proven platform, while a subsequent fork may provide developers with completely new methods to engage with it. (Older and newer versions may combine in the future or continue to diverge.)
- Consider a soft fork to be a "software upgrade" (similar to when your phone prompts you to update to the current OS) and a hard fork to be a completely new operating system (like Linux and Mac OS are evolutions of the half-century-old UNIX platform).
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