What Is a Hard Fork?
In blockchain technology, a hard fork is a significant protocol update that validates invalid blocks and transactions or vice versa. All nodes or users must upgrade to the newest protocol software for a hard fork.
Developers or crypto community members dissatisfied with blockchain implementations may fork. They might also contribute to crowdsourcing financing for new technological ventures or cryptocurrency offers.
A hard fork differs from a soft one.
Understanding Hard Fork
A hard fork occurs when nodes of the new blockchain no longer accept the older versions, resulting in a permanent divergence.
Adding a new rule to the code splits the blockchain into two paths: one follows the updated blockchain, while the other remains on the old path. Eventually, users on the old chain will realize their blockchain is outdated or useless and update to the current version.
How Forks Work
Forks in blockchains can occur on any cryptocurrency platform, not just Bitcoin. This is because blockchains and cryptocurrencies behave similarly across crypto platforms. Blockchain blocks move memory like cryptographic keys. Blockchain miners comprehend new rules that transfer memory in the network as they set them.
However, miners must agree on new regulations and define a legitimate block in the chain. To amend those regulations, you must “fork it”—like a road fork—to signal a procedural deviation. Developers can then update all software to comply with the new regulations.
This forking process created digital currencies like Bitcoin Cash, Bitcoin Gold, and others. The casual Bitcoin trader may struggle distinguishing cryptocurrencies and putting splits into a timeline. We have compiled a chronology of significant Bitcoin hard forks from recent years. Investing in Bitcoin on top cryptocurrency exchanges requires caution to avoid wasting time and money on the wrong digital currency.
Reasons for Hard Forks
Developers may implement hard forks to address security risks, add functionality, or reverse transactions, as seen in the Ethereum blockchain’s hard fork to address the DAO hack.
Following the incident, the Ethereum community overwhelmingly opted for a hard fork to reverse transactions that resulted in the theft of millions of dollars in digital currency by an unidentified hacker. This hard fork also refunded ether (ETH) funds to DAO token holders.1
The rigid fork plan did not erase network transactions. Instead, it moved DAO funds to a new smart contract, allowing original owners to withdraw them.
DAO token holders could withdraw ETH at 1 ETH for every 100 DAO. DAO curators removed and distributed any surplus tokens or ether left after the hard fork to offer “failsafe protection” for the organization.
Hard vs. Soft Forks
Hard and soft forks involve updating a cryptocurrency platform’s code, leaving the old version on the network while creating the new one.
When users implement the upgrade, only one blockchain will remain legitimate after a soft fork. The old and new blockchains coexist with a hard fork, requiring software updates to follow the new rules. Hard forks break into two blockchains, whereas soft forks split into one.
Even if a soft fork looks fine, most users and developers prefer a hard fork due to security differences. Overhauling blockchain blocks involves a lot of computer effort, but hard forks provide more privacy than soft forks.
Conclusion
- Hard forks are drastic changes to a blockchain network’s protocol that create two branches: one that follows the old protocol and one that follows the new one.
- Hard forks provide token holders on the original blockchain tokens in the new fork, but miners must pick which blockchain to validate.
- Hard forks may happen in any blockchain, not just Bitcoin (which spawned Bitcoin Cash and SV).
