What is a hard fork in blockchain and how does it work?
Blockchain hard fork is a term you’re familiar with if you’re into cryptocurrency. Do they have any importance? What are hard forks, and why do they happen? What is the difference between hard and soft forks? And why are they important for blockchain?
Additionally, Bitcoin Cash and Ethereum Classic were recent hard forks.
What is a “hard fork” in blockchain technology?
A hard fork splits a blockchain, creating two different copies of the blockchain as a result of changes to the network’s code.
A hard split creates two distinct blockchain versions. An updated blockchain will prevent your nodes from tracing transactions made on an unupdated blockchain. Each node must agree on a hard fork performed.
Why do hard forks happen on the blockchain?
A community usually triggers a blockchain hard fork to increase the utility of a coin. Users may require a new software version due to problems, new features, or Bitcoin user debates about the future of the currency.
The long-awaited Beacon Chain Ethereum 2.0 hard fork is intended to deliver several advancements to Ethereum 2.0, including the ability for nodes to function on mobile devices.
It is also possible to use hard forks as part of advertising efforts for a new cryptocurrency. There was an airdrop in October 2017 for everyone who had Bitcoin at the time and they received an equal amount of Bitcoin Gold. It commemorated the split of Bitcoin into Bitcoin Gold.
Any blockchain can experience a hard fork, not just the Bitcoin or Ethereum network, as the Cardano Marie hard fork did in March 2021.
Other causes for hard forks
Apart from the reasons mentioned above, there are distinct reasons why hard forks may occur.
One reason for hard forks is to compensate users when security is compromised in a blockchain network. In such event, transactions made by attackers from a certain date are no longer valid. This happens because, usually, developers quickly fix newly exploited vulnerabilities after a hack.
Such a vulnerability in the DAO project code is why Ethereum Classic hard-forked — we’ll discuss this in detail later.
In a popular protocol like Bitcoin, various coders around the world are constantly working to improve it by offering specific upgrades. In the case of Bitcoin, there is a whole list of BIPs (Bitcoin Improvement Proposals). For Ethereum, there is a list of EIPs (Ethereum Improvement Proposals).
A great example of what happens during these forks was said by Ethereum founder Vitalik Buterin in 2019.
“Over the next two years, we will upgrade the Ethereum ecosystem to a new, more secure version…. On top of that, so things are coming soon, more development in rollup, more development in scaling technology, security improvements, including wallets, including clients, including many things, usability improvements, privacy improvements”
Hard forks vs. soft forks
The next part of the discussion will focus on how hard, and how soft forks vary, but first, let’s define soft forks.
A soft fork makes it possible to update to the latest blockchain version without breaking compatibility with previous versions. These miners can participate in transaction validation and verification even if they have not yet switched to the latest software
Soft forks are easier to implement than hard forks because most miners must update.
Even if you don’t upgrade, soft forks will still hurt you.
Assume you are a non-upgraded miner who produces 1-megabyte blocks. You can still verify incoming transactions. However, the new upgrade only allows adding blocks with a maximum size of 8 MB. Therefore, will exclude your blocks from the ecosystem.
To put it another way, soft forks force miners to update their software or risk having certain features disabled or restricted.
Examples of hard forks
A community hard fork decision has three conceivable outcomes.
- After a hard fork, one blockchain remains dominant, resulting in limited community acceptance and value for other blockchains.
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 co-exist in the same place.
While there is no particularly notable example, Roger Ver’s Bitcoin Cash Network, which introduced an 8 MB block size increase in 2017, serves as an approximation (and a 32 MB block size in 2018). Now that BCH, the digital asset built on this platform, is among the top 20 most valuable cryptocurrencies, it is safe to claim that the platform has succeeded.
If you look at the other hard forks listed here, you’ll see that they’re all under $1!
- However, of the two blockchains, one is more widely used than the other. In terms of acceptance and value, one of the two chains leads.
This is where Ethereum Classic comes in, so let’s take a closer look at it.
Additionally, the DAO was created in April 2016 to form an investor-directed venture fund on the Ethereum blockchain.
In July 2016, hackers exploited a DAO coding flaw to steal $50 million in ETH. At block 1,920,000, Ethereum splits to recover lost resources. Due to the hard fork, it created two separate blockchains and currencies.
Here, Ethereum is the overwhelming force. Currently, Ethereum Classic is among the top fifty cryptocurrencies by market capitalization.
We have all heard that Bitcoin is the most popular cryptocurrency and have said it before.
Fascination with ‘digital gold’ has grown in recent years. As a result, curiosity about its past, especially the use of hard forks, has increased.
An overview of Bitcoin hard forks is provided here.
- Bitcoin Classic – A planned hard fork attempted to expand the maximum transaction block size from Bitcoin Core (Bitcoin). Despite some early promises, the Bitcoin community has not taken to Bitcoin Classic.
- Bitcoin Unlimited – Enables larger block sizes for the user. However, it failed to take off due to concerns that miners with more resources would dominate profit taking.
- Bitcoin SV – A “civil war” between two Bitcoin Cash factions led to the creation of this currency. Backed by entrepreneur Roger Ver and Bitcoin CEO Jihan Wu, Bitcoin ABC (BCH) advocated keeping the block size at 32 megabytes (MB). After the Bitcoin complex split, it became the most successful currency to emerge from the process. As a second option, Craig Wright and Calvin Eyre created the “Bitcoin Satoshi Vision” version of Bitcoin SV, which would increase the block size limit to 128 MB.
- Bitcoin Gold – October 2017. This fork was created in hopes that graphics cards (rather than expensive ASICs) would make mining more accessible to the general public.
In the past ten years, how many Bitcoin enhancement ideas have been created?
How much is the answer? There were 350, but not all of them made solid forks.
Although blockchain is still in its infancy, we can expect to see many more hard forks in the coming years.
Bottom line
Hard forks require all nodes in the network to switch to the new version of the blockchain, which is why they’re called hard forks (which support resynchronization functionality).
Alternatively, a “soft” or “non-hard” fork is a software update that is compatible with previous blockchain versions. Miners that haven’t updated can still verify transactions.
For network development, hard and soft forks are important. Although no central authority exists, the community can make necessary changes and improvements because of them.
Hard forks allow blockchains and cryptocurrencies to quickly adopt new features and enhancements as they emerge. The ecosystem had no way to function without a centralized server to keep track of everything. We are lucky that we don’t have to deal with centralized servers, but hard forks are inevitable.
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