What Is a Hard Fork on a Blockchain?
A hard fork refers to a radical change to the protocols of a blockchain network. Simply put, a hard fork splits a single cryptocurrency into two, which results in the validation of blocks and transactions that were previously invalid or vice-versa.
In addition to hard forks, cryptocurrencies, including bitcoin, also undergo soft forks. The difference between a hard fork and a soft fork is that soft forks do not result in a new currency. Soft forks are a change to the bitcoin protocol, but the end product remains unchanged.
How Hard Forks Occur
A hard fork occurs when nodes of the newest version of a blockchain no longer accept the older version(s) of the blockchain, which creates a permanent divergence from the previous version of the blockchain.
Adding a new rule to the code essentially creates a fork in the blockchain: one path follows the new, upgraded blockchain, and the other continues along the old path. Generally, after a short time, those on the old chain will realise that their version of the blockchain is outdated or irrelevant and quickly upgrade to the latest version.
Hard fork requires every developer to upgrade to the latest version of the protocol software. Blockchain forks include two main groups — accidental and intentional forks.
Examples of Hard Forks
Bitcoin XT was one of the first notable hard forks of bitcoin in late 2014 (Bitcoin is no longer available after it lost user interest).
Another example of a hard fork is the fragmentation of the Bitcoin network in 2017 into two separate chains: Bitcoin (BTC), and a new one, Bitcoin Cash (BCH). The fork occurred because some people in the community wanted to address Bitcoin’s scaling problem. Bitcoin Cash remains the most successful hard fork of the primary cryptocurrency.
Does Hard Fork Increase Price
A hard fork can significantly impact the price of a cryptocurrency. A fork can cause a cryptocurrency to change drastically. In addition, the price of the cryptocurrency is generally very volatile around the time of a hard fork.
The best way to describe a hard fork is that it is an upgrade that occurs to introduce a new set of rules for a cryptocurrency to follow.
A hard fork on the blockchain can be triggered for several reasons such as a change in the rules governing how transactions are validated, which then leads to a split in the network. A transformation in consensus algorithms, changes in transaction formats or data structure or a change in block size limits can also propel a hard fork.
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