Understanding Hard Forks

"Arguments are Healthy. They clear the Air." - John Deacon

October 20, 2020

Over the past few months, a tension or disagreement has build up within the BCH community, primarily by the leading figures Roger Ver and Amaury Séchet. The end result is Bitcoin Cash will undergo a hard fork on the 15th of November 2020.

So what are hard forks? Why does this happen? Is there any benefits of having it?

Before we begin, i am @BCH.Serg. Please subcribe to be updated on my newest articles.

What exactly is a Hard fork?

I will use bitcoin as a primarily example on this article, but all the concepts applies to other cryptocurrencies as well.

Bitcoin is a digital currency. This means that it is implemented by a lot of software. The software is called the bitcoin protocol and it establishes the rules to which everyone should agree if they want to use Bitcoin. This includes how large the block is, what rewards miners get, how fees are calculated and others.

Just like other software project, development on Bitcoin will never be finished. There will always be a room for improvement.

The Bitcoin developers regularly push out updates to fix issue's or to increase performance. Some of this improvements are small but others fundamentally changes how the Bitcoin works. So sometimes it happens that a group of developers disagree with the direction Bitcoin is taking. The miners can also disagree because updates to the Bitcoin protocol could reduce their profits.

If a group of people are so dissatisfied, they can choose to go their own way to create their own version of protocol and fork the blockchain.

What happens when they do this?

Bitcoin consist out of two big pieces: the Bitcoin protocol and the blockchain which stores all the transactions that happened.

If they decide to create their own fork, they start by copying the Bitcoin protocol code and start making their changes. They can do this because Bitcoin is an open source. After they have implemented their changes, they define a point in time at which there fork will become active. This is done by specifying a block number.

For example, you can say that your fork will go live when block number 300,000 is published to the blockchain. When the block number is reached, the community will be split into two. Some people decide to support the original protocol while others support the fork. Each groups then starts adding new blocks to the fork they want to support. At this point, both blockchains are incompatible with each other.

Because a fork is based on the original blockchain, all transactions that hapoened on the original blockchain, also happened on the fork. So that means, if you happened to have 100 Bitcoin before the fork, you will have the same amount of the new cryptocurrency.

Some people call this free money, but it all depends on wether or not the fork can attract actual value.

We have already seen quite a few hard forks. It happened on August 1st 2017, when Bitcoin Cash was born. In this case the developers couldn't agree whether to increase the block size of Bitcoin or not.

Now you know what are hard forks and why it is created. So is there any positive or negative effects of this hard forks?

By creating forks, you create new rules. So of course there are positives on this.

The most clear cut positive is that there is a clear update. Maybe updates for security or for transactions to be faster. Secondly is it democratic. No one tells you who you want to support. You can support the original or the new fork and this is very important in decentralization.

So while hard forks sounds like a good idea, you just need to make upgrades. There are some negative consequences that comes with it.

The most notable is there is a solit in the chain. They split in hash power. The higher the hash power is the more secure it is. Second negative is the split in manpower or split in the people that is developing the code in the blcokchain. Split in deveomlopers can result in slow development of the protocols.

Conclusion

Hard forks are a way of expressing dissatisfaction to the current protocol. It shows towards decentralization.

Creating hard forks maybe give some positive results but there will always be a negative result that comes with it.

26 days from now, Bitcoin cash will have its hard fork. What do you think will happen? Who will the majority of the BCH community will support, is it the original coin of the forked coin? Please let me know your thoughts about this by leaving a comment down below.

Thank you for the time reading this article. Have a good day ahead!

Lead image source: https://unsplash.com/photos/62H_swdrc4A