Skip to content

Know what is a fork in cryptocurrency: a full guide

Most cryptocurrencies, including the top ones like Bitcoin cryptocurrency and Ethereum, run on a technology that is decentralized and open to all. This is known as the blockchain. They get their name because of how they’re structured–an array of data blocks that is so long that if you keep going, you will reach the very first transaction that was ever conducted on the blockchain. As we mentioned, blockchains are decentralized, which implies that the community members have the shared responsibility of maintaining the sanctity of the data system and the code it runs on.

When this community adds a new update or changes something in the blockchain’s protocol or rules, a fork is created. An update like this causes a split in the data chain which results in the creation of another blockchain whose history is identical but it moves in a completely new direction altogether. Read here the truth about blockchain

Why does it happen?

As internet protocols evolve, browsing the web improves over time. But who leads the change in the case of the internet? There are standalone development teams that drive the change through constant innovation. Something similar happens in the case of most cryptocurrencies as well. Thus, in certain cases when a fork is formed, it could make the system much more safe and secure or go on to add some cool new features. How you get a software update on your mobile phone’s operating system, cryptocurrencies also require upgrades for different reasons such as:
Improving functionality
Addressing security concerns
Mediate disagreements that could occur in a community due to a cryptocurrency’s movement.
Soft fork:
For the sake of simplicity, look at a soft fork like a software update, except this time it affects a blockchain. If all the users across the blockchain start accepting the fork, it becomes the currency’s new norm. In the case of Bitcoin or Ethereum, soft forks have been helpful in bringing new features or updates in Bitcoin or Ethereum’s programming. Since typically the final result is just one blockchain, the new changes can be synced with the existing features through pre-fork blocks.
Hard fork:

When a hard fork occurs, there is such a dramatic change in the codes that the new updates cannot be synced with the older blocks. If this happens, the entire blockchain breaks into two different blockchains: one that is the original blockchain, and the other is an entirely new blockchain that adheres to new rules and regulations. This results in a completely new cryptocurrency such as Bitcoin Cash or Bitcoin Gold that has emerged out of Bitcoin’s hard fork.

How does fork fit into the crypto landscape!

Smart contracts are created in a way that they seamlessly operate on Ethereum’s blockchain. Now, what are smart contracts? Basically, they are digital contracts made of code chunks that automate pre-set actions as soon as a few particular criteria are met. Games, DeFi applications to logistics, and smart contracts can be inclusive of all.

To understand how these applications are run on a platform, i.e on Ethereum, consider Ethereum’s blockchain to be a computer’s operating system. By that logic, the different forks that have emerged out of Ethereum, namely Ethereum, Ethereum Classic, and Ethereum 2.0 can be equated to software updates. They have added more features with each update or have become much more efficient in their operations as newer versions came in.

Published inFinance and Investment

Be First to Comment

Leave a Reply

Your email address will not be published. Required fields are marked *