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What Is Cryptocurrency Fork

monero hardfork

There are two types of cryptocurrency forks: hardsoft and softfork. 

Hardfork

HardFork is a discrepancy with the current version of the blockchain with nodes on the new blockchain, not interacting with the old chain and not recognizing its nodes or transactions. Hardforks are significant changes that lead to the creation of a new blockchain when transactions are incompatible between versions. That is, the transactions of the old blockchain are not recognized as new, and vice versa. Nodes that continue to use the old version of the software will consider the new transactions as invalid. To run active blocks in a new blockchain, all nodes of this network must be updated to new rules.

Softfork

Instead, the softfork is considered "backwards compatible" in the sense that old transactions can be recognized with new nodes. Unlike hardfork, the uninitiated nodes will still consider the new transactions to be valid. However, if the non-renewed nodes continue to mine blocks, then such units will be rejected by the updated nodes. Therefore, softfork require the majority of network hash power to succeed. If the softfork is supported only by a minority hash power, it can become the shortest chain and lose network protection (orphaned).

How do forks create

Forks can planned and managed by the main team, and can be initiated by a group of developers who are dissatisfied with any side of the project. In the second case, the hardfork, as a rule, is preceded by lively disputes, related, for example, to the proposed solutions to the problem of scaling and how to properly implement them. Fork success requires that developers believe in a new approach and recognize it. Thus, forks are characterized by open source code and democracy. Forks are proposed and implemented quite often, and they are usually accepted as a normal component of the cryptocurrency ecosystem. This approach allows the community to assess and decide which ideas are most promising. This also means that no group has absolute control over the fate of the cryptocurrency project.

Recent large forks

Over the past year, bitcoin has 19 new versions. Motives are different. Some supporters of the ecosystem are making efforts to, in fact, improve bitcoin. Others just look for an opportunity to make quick profit.

The last major planned hardfork was Byzantium at the Ethereum in October 2017. This was the first part of a two-phase planned update of the ethereum network, designed to address the scalability and implementation of private transactions. Another recent planned hardcore occurred in Monero, in order to implement the RingCT protocol, which allows sending private transactions.

Two recent "controversial" harts are Bitcoin Cash and Ethereum Classic. Bitcoin Cash was proposed to increase the size of the bitcoin block from 1 MB to 8 MB, which should help to cope with the scaling problems. Hardfork was controversial because of the diminishing competitiveness of small-scale miners and the increasing influence of large ones. Ethereum Classic was committed in response to hacking. Most of the community (including the main development team) chose hardfork to reverse its consequences. However, the minority then advocated the preservation of the detachment. The smaller group made the hardfork, and the old chain (including the hacked part) became known as Ethereum Classic, while the main development team and most of the community canceled the hacking effect and retained the name "ethereum", partially rolling back the blockchain.

Future Forks

Forks will continue to be an important part of the cryptocurrency landscape. They will remain a reality of the cryptocurrency ecosystem in the future, as the teams of many existing projects are busy with solving issues of scaling and confidentiality. Forks allow cryptocurrencies to be flexible and update protocols as necessary, which in the long run ensures the promotion of the best ideas.

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