What in the the world is a Bitcoin “Fork” and why should you care?

As one of the most successful Bitcoin hard forks – Bitcoin Cash – celebrates its first anniversary, it’s worth taking a look at what exactly makes a fork ‘hard’, and why these are such dramatic developments for the crypto ecosystem.

bitcoin hard forkWith the crypto market exploding with thousands of alt-coins and talk of bitcoin resonating from nearly every talk show, news article, coffeeshop and dinner discussion, it’s easy to forget that digital currencies are still an extremely new technological innovation. What started as an ambitious and revolutionary, yet somewhat obscure invention by Satoshi Nakamoto, has been evolving constantly to meet the demands of a rapidly expanding ( – even, exploding) market. As Bitcoin spread in popularity, new market demands drove additional adaptations and developments.

These changes are the ‘forks’ in Bitcoin. The phrase ‘forking’ comes from the world of open-source code, where – with a number of programmers working simultaneously on a single project – certain changes in the project can lead to a fork – the development of two, separate entities and directions for the project to grow. For Bitcoin, the first fork came about to enlarge the size limit of data transfer. When the coin was first introduced, Nakamoto had implemented a 1 mb transfer limit, allowing the network to handle 4.4 transactions per second. This was sufficient for the coin’s early years, yet, as the market expanded rapidly, this limit proved to be too small, causing massive lines and long waits for each transaction. In order to keep up with the demand, the first fork –  Bitcoin XT – was formed, increasing the block size from 1 mb to 8 mb. This was the first in a long line of forks, as Bitcoin continued to upgrade and evolve.

However, not all forks are the same – and this is important to understand as a crypto investor. Forks can be classified as either ‘soft’ or ‘hard’. A soft fork is generally a minor upgrade to the platform’s hardware, one that can improve specific aspects while still remaining compatible with the original blockchain. A hard fork, however, consists of a change more drastic – one that leads to the development of a new network incompatible with the old one. The new nodes will begin following the new platform specifications and rules, while the old nodes will be unable to upgrade. This leads to two, divergent networks that remain separate and unable to connect with each other.

This is what makes the issue of hard forks so complex – a critical mass of the crypto community must choose to adopt the upgrade such that it will be worth it for other users to abandon the old network and develop nodes on the new one. For every hard fork that ‘made it’, are a number of other alternative ones that never achieved wider adoption.

Even if you yourself are not a blockchain developer, these forks are still worth keeping tabs on. Hard forks are drastic changes that affect the whole Bitcoin (and, to a lesser extent, alt-coin) ecosystem. Generally speaking, these upgrades are introduced to offer solutions to problems in the older network. As such, they can be exciting and provide real benefits.  However, the hard fork jump can have many repercussions and can leave behind any users, developers or companies not on board with the changes.

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Disclaimer: This article was written for informative purposes only, and is in no way reflective or indicative of any Carats.io development decisions or changes.

 

 

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