Blockchain Hard Forks

The lack of a central authority is one of most interesting characteristics of a public blockchain. Even if you find this disadvantageous, there’s no denying that the technology that makes this possible is quite an achievement.

There’s no one with power to bend the rules to their will, because everyone involved has a say in what those rules are.

However, if a large enough part of the community disagrees on something, they are fully free to create an alternative version, and move along a separate path. For that, they need to create a hard fork from the original chain.

But what does a “hard fork” mean? Since the term has roots in the underlying technical details of how a blockchain works, it can often be confusing for the average users to understand what’s happening, or what it means for their funds.

In technical terms, a hard fork happens when the rules of the network change in a way that is not compatible with the previous version of those rules. These changes usually happen in roughly this way:

  1. A change to the rules is proposed;
  2. The change is scheduled to go live on a specific block number;
  3. Everyone involved (miners, in this case) will want to decide whether they’re in favor or against the changes. Usually they signal their intent by deciding whether to upgrade their node to use the new rules;
  4. When the scheduled block is reached, anyone who supports the update will start applying the new rules, while anyone who opposes them (or who simply forgot to update the software) will keep the old version;

A lot of these forks end up being mostly transparent to the average cryptocurrency user. Ethereum has actually had many forks in the past, with most of them being planned upgrades that gathered consensus from pretty much the whole community, resulting in a smooth upgrade.

Some of those, however, may be caused by divergence in the community’s opinions on what direction the project should take. When such divergence exists, a hard fork may be proposed which effectively splits the network in two, because both sides have enough critical mass to live on. These are the types of hard forks you’re likely familiar with, from all the buzz they receive. You may have heard of two of the most famous examples:

  • The DAO fork, which caused a new separate blockchain to be created off of Ethereum. That is now known as Ethereum Classic;
  • Bitcoin Cash, which was created by forking Bitcoin in 2017.

A common misconception is that whenever a hard fork happens, a new chain will be created.

While this is technically possible, it doesn’t always happen in practice. A hard fork means that something is changing in the rules of the network (in a non backwards compatible way). A new chain will only co-exist if there’s enough critical mass on both versions for them to live on.

Many of the Ethereum forks linked above were mostly harmless, resulting in everyone moving on to the new version, because none of the proposed changes were being disputed. In some cases, it may be easier to think of these as an operating system update rather than a fork.

Vitalik’s twitter post about the January fork

Ethereum’s many forks, such as Constantinople got scheduled to the beginning of 2019, are often nothing more than technical improvements to make the chain more efficient and scalable. It is not expected that a new chain will be created from most of them.

In the event of a fork that does not generate a network split, cryptocurrency users have nothing to worry about, nor do they need to do anything to preserve their funds.

When a split does happen (as has happened with Ethereum Classic and Bitcoin Cash, for instance), both chains will have the exact same history up until the block where the fork occurred.

This means that, if you had 1 Ethereum in your wallet before the fork occurred, that is going to be part of the history of both blockchains. This essentially means that you will still have 1 Ethereum in the Ethereum network. But you will also have 1 Ethereum Classic in the new chain.

The technology is the same, your address is the same, and can probably be accessed through the same wallet software, as long as the fork didn’t introduce breaking changes that prevent that.

Of course, this only holds true if you are the sole owner of the private key of your account. Using an external wallet such as Coinbase or an exchange puts the control of this process in their hands, not yours.

Once the fork occurs, though, any new transactions you create will be written only to one of them. Spending that Ethereum you kept will have no effect on Ethereum Classic.

In a way… yes. But one can also imagine the implications that this has on the value of the currency itself. Splitting the community, the hashing power, and the entire ecosystem will probably, in the long run, dilute the original value between both chains, essentially keeping more or less the same balance.

Of course, in a market that is currently highly driven by speculation, this may not always be the case.

As stated, a hard fork has no implications on your existing balances. This holds true for UTRUST as well, whether you’re a user of our mobile wallet, or a merchant accepting payments through our system.

However, due to the higher instability that happens during a hard fork, it may be deemed necessary, for security and technical purposes, to pause all UTRUST transactions on the affected blockchain until the fork completes successfully.


Originally published at medium.com on January 16, 2019.