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Xpedition Week 7: Blockchain Forks

What is it?

Any software requires updates to fix bugs and/or increase performance, and in the crypto world, these updates are known as forks. Forks are meant to change current protocol or rules. Imagine playing a game with a group of people and someone decides to alter the rules. There will now be two versions of the game. Similarly, in blockchain technology, when someone decides to ‘change the rules’, there will be a split in the blockchain network. Such an act is allowed because the blockchain network is an open-source software whereby the code is freely available, and anyone can propose improvements as they deemed fit.

By ‘forking’ the existing crypto blockchain, new tokens can be created. Going back to the game example where players have two versions of the game, they can now decide which version to go with. Likewise, in blockchain technology, the creation of new tokens through ‘forking’ also allows users to have more options on which version of token they want to use.

Of course, with every action comes a consequence, and this is no different in forking. While forking may seem interesting and progressive, it is in fact considered disruptive for the crypto community as it affects the prices of crypto. Most prominently, forking gives rise to volatility and uncertainty in the crypto market. The split between Bitcoin and Bitcoin Cash can be taken as an example of such. The supporters of the different camps have also made various heated debates within the community. This proves that the “changing of rules” to blockchain may not always be welcomed and accepted by all. We hope that our Xplorers can do proper research in order to maximize their benefits!

Hard Forks

A hard fork is a new software update which is implemented by a blockchain or a cryptocurrency’s network nodes that is incompatible with the existing blockchain protocol, causing a permanent split into two separate networks that run in parallel.

To further understand this, let’s take Bitcoin as an example. The Bitcoin software is called Bitcoin protocol and this software establishes the rules everyone should agree on. And just like how nothing is perfect, there is always room for improvement. The bitcoin developers regularly push out updates to fix issues or improve performances. Some of these updates can fundamentally change the way Bitcoin works and sometimes a group of developers/miners disagree with the updates on the Bitcoin protocol, thus these people create their own version of protocol and fork the blockchain. If they decide to create their own fork, they copy the bitcoin protocol code and make their changes. When the fork is active, the community is split into 2, some decide to support the original protocol while some want to support the fork. At this point, both blockchains are incompatible with each other. Because a fork is based on the original blockchain, all transactions that happen on the original blockchain also happen on the fork.

One of the biggest bitcoin hard forks is Bitcoin Cash (1 Aug 2017). Bitcoin Cash was formed when developers couldn’t agree on what size each block should be. Some wanted the block size to increase from 1MB to 2MB, but others wanted to increase it even further. Thus, Bitcoin Cash was created to accommodate a larger block size compared to Bitcoin, allowing more transactions into a single block.

Soft Forks

In blockchain technology, a soft fork is a change to the software protocol, where only previous transaction blocks are made invalid. This is because old nodes will recognize these new blocks as valid. A soft fork is backwards compatible, unlike hard forks where all of the nodes need to be upgraded and agree on the new version, soft forks only require a majority of miners upgrading to impose new rules.

You might be thinking, what does backward compatible mean? This means that non-updated nodes are still able to process transactions and push new blocks into the blockchain as long as they don’t break the new protocol rules. Let’s take an example of a soft fork where there is new rule in which the blocksize is lowered from 4MB to 2MB. Older nodes will still be able to process transactions and push blocks which are 2MB or less. But when an older node tries to push a block which is greater than 2MB, newer nodes will reject that block as it violates the new rules.

That’s all we have on blockchain forks! We hope that you’ve gained some insightful knowledge! Check out our Instagram and twitter postings here:

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