Blockchain hard forks is a term you are familiar with if you like cryptocurrencies. Do they make sense? What is a hard fork and why does it happen? What is the difference between a hard fork and a soft fork? And why are they so important to the blockchain?
In addition, Bitcoin Cash and Ethereum Classic were recent hard forks.
What is a “hard fork” in blockchain technology?
A hard fork splits the blockchain, with a change in the network code resulting in two different copies of the blockchain.
A hard split creates two separate versions of the blockchain. An updated blockchain will not allow your nodes to recognize transactions made on a non-updated blockchain. Each node must agree on a hard fork in order for it to take place.
Why do blockchains get hard forked?
The community usually initiates a hard fork of the blockchain to increase the utility of the coin. Users may need a new version of the software due to issues, new features, or debate among bitcoin users regarding the future of the currency.
The long-awaited Beacon Chain Ethereum 2.0 hard fork should bring several improvements to Ethereum 2.0, including the ability to run nodes on mobile devices.
It is also possible to use hard forks as part of advertising a new cryptocurrency. In October 2017, an airdrop was held for everyone who had Bitcoin at that time, and they received an equal amount of Bitcoin Gold. This was done to commemorate the difficult split of Bitcoin into Bitcoin Gold.
Any blockchain can be hard forked, not just Bitcoin or Ethereum, as happened with the Cardano Mary hard fork in March 2021.
Other reasons for hard forks
Apart from the reasons mentioned above, there are various reasons why hard forks can occur.
One of the reasons for the hard fork is to compensate users in the event of a security breach in the blockchain network. In this case, transactions made from the date specified by the attackers cease to be valid. This is because developers usually fix recently exploited vulnerabilities quickly after a breach.
Such a vulnerability in the code of the DAO project caused the Ethereum Classic hard fork – we will talk about this in detail later.
In a popular protocol like Bitcoin, various coders around the world are constantly working to improve it by coming up with specific upgrades. In the case of Bitcoin, there is a whole list of BIPs (Bitcoin Improvement Proposals). As for Ethereum, there is a list of EIPs (Ethereum Improvement Proposals).
A great example of what happens during these forks came from Ethereum founder Vitalik Buterin in 2019.
“Over the next two years, we will be upgrading the Ethereum ecosystem to a new, more secure version…plus, so new developments coming soon, new developments in scaling technology, security improvements including wallets including clients including a lot of things, usability improvements, privacy improvements.”
Hard forks vs. soft forks
The next part of the talk will focus on the differences between soft forks and hard forks, but first let’s define soft forks.
It is possible to upgrade to the latest version of the blockchain, without breaking compatibility with previous versions, through a soft fork. These miners can still participate in verifying and confirming transactions even if they haven’t updated the software to the latest version yet.
Soft forks are easier to perform than hard forks since most miners need to upgrade.
Even if you haven’t upgraded, a soft fork will still hurt you.
Let’s say you’re not an updated miner producing a 1 megabyte block. You can still check incoming transactions. However, the new update only allows you to add blocks with a maximum size of 8 megabytes. Therefore, it will exclude your blocks from the ecosystem.
In other words, soft forks force miners to update their software or risk disabling or restricting certain features.
Examples of hard forks
There are three possible outcomes of the hard fork community’s decision.
- After a hard fork, one block chain remains dominant, resulting in limited community acceptance and limited value of other block chains.
For example, only a few mining pools now support Bitcoin Classic (BXC) and Bitcoin Unlimited.
- In terms of community acceptance and value, both blockchains have the same value and coexist in the same space.
Although there are no particularly notable cases, Roger Ver’s Bitcoin Cash network, which introduced an 8MB block size increase in 2017, serves as a ballpark (and a 32MB block size in 2018). Now that BCH, the digital asset created on this platform, is among the top 20 most valuable cryptocurrencies, it is safe to say that the platform has been successful.
If you look at the other hard forks listed here, you will see that they are all under $1!
- However, one of the two blockchains is used more widely than the other. In terms of acceptance and value, one of the two channels is in the lead.
This is where Ethereum Classic comes in, so let’s take a closer look at it.
In addition, in April 2016, DAO was founded on the Ethereum blockchain to form an investor-led venture capital fund.
In July 2016, hackers exploited a vulnerability in DAO coding and stole $50 million in ETH. At block 1,920,000, Ethereum split to recover lost assets. Due to the hard fork, two separate blockchains and currencies were created.
Here, Ethereum is the overwhelming force. Currently, Ethereum Classic is among the top fifty cryptocurrencies by market cap.
We have all heard that Bitcoin is the most popular cryptocurrency and we have talked about it before.
The craze for “digital gold” has only increased in recent years. Consequently, curiosity about his past, especially his use of hard forks, grew.
An overview of Bitcoin hard forks over time can be found here.
- Bitcoin Classic – A planned hard fork attempted to increase the maximum transaction block size of Bitcoin Core (Bitcoin). Despite some early promises, the Bitcoin community has not embraced Bitcoin Classic.
- Unlimited Bitcoin – allows the user to use larger blocks. However, it also failed to take off due to concerns that miners with more resources could dominate profit taking.
- SV Bitcoin – A “civil war” between two factions of Bitcoin Cash led to the creation of this currency. Backed by entrepreneur Roger Ver and Bitmain CEO Jihan Wu, Bitcoin ABC (BCH) advocates keeping the block size at 32 megabytes (MB). After the split of the Bitcoin complex, it was the most successful coin to come out of this process. As a second option, Craig Wright and Calvin Eyre created the Bitcoin SV version “Bitcoin Satoshi Vision” which increased the block size limit to 128MB.
- Bitcoin Gold – October 2017. This fork was built in the hope that graphics cards (instead of expensive ASICs) would make mining more accessible to ordinary people.
How many ideas to improve Bitcoin have been put forward in the last ten years?
How much is the answer? There were 350 of them, but not all of them made it to the hard fork.
Although the blockchain is still in its infancy, we can expect to see many more hard forks in the coming years.
Hard forks require all nodes on the network to update to a new version of the blockchain, which is why they are known as hard forks (which support reconfigured features).
Alternatively, a “soft” or “soft” fork is a software update that is compatible with previous versions of the blockchain. Non-updated miners can still validate transactions.
The development of the network requires hard and soft forks. Although there is no central authority, they allow the community to make the necessary changes and improvements.
Hard forks allow blockchains and cryptocurrencies to introduce new features and improvements as they become available quickly. The ecosystem would not be able to function without a centralized server that would keep track of everything. We are lucky that we do not deal with centralized servers, but hard forks are necessary.
Using White Label SaaS NFT Marketplace NFTICALLY, you can choose from a wide range of blockchains, each with its own set of benefits depending on your business goals for each collection in the store.