A Bitcoin fork is a term describing changes in the current Bitcoin protocol or creation of a new coin. Today, we all know about Bitcoin and Blockchain, but many of us aren’t aware of how it works and what is a Bitcoin fork. For people who are just starting with Bitcoin, the concepts of forks remain incredibly complex.
Besides, there has been significant media coverage and developments in recent years about changes in Bitcoin protocol and topics discussing its scalability. People and investors have long debated about Bitcoin transaction issues and its Block time. If you have been following Bitcoin for some years, you might know the fact that the average Bitcoin block time is approximately ten minutes. Such a thing creates a lot of problems when the demand for Bitcoin is at its peak and leads to higher transaction fees.
As a solution, miners and organizations working in the ecosystem opt for Bitcoin fork to enhance the network infrastructure and provider greater feasibility to the user. So, what is Bitcoin fork and how it leads to the creation of a new Cryptocurrency?
What is Bitcoin Fork?
In simple word, a fork is software changes to the digital currency. It introduces new sets of rules and regulation to the Bitcoin chain. Bitcoin Fork is further classified into a soft fork and a hard fork. Both of these forks enable changes to the currency and come with exclusive development structure.
A soft fork is changes made to Bitcoin protocol, without the creation of a new Blockchain. Once this happens, the old version of the chain remains on the network and is recognized by the old nodes within the system. One of the significant features of this fork is that it can be rolled back to the previous version.
Hard Fork is an interesting topic in the industry. It is a new version of Bitcoin and completely splits the original Blockchain. Such an event creates a new Cryptocurrency, running with a new chain. It is also defined as a radical change to the network’s protocol, making previous blocks invalid. A hard fork happens when nodes of the new Blockchain no longer accepts the block of the prior chain, leading to the divergence of the protocols. This creates new Cryptocurrency, and both coins follow different chains after the hard fork.
Forks can be done to any Cryptocurrency
Hard Forks can occur for any Cryptocurrency. For example, Ethereum Classic is a fork of Ethereum and Ontology is the fork of Neo. Forks are done for various reasons and can happen to every Cryptocurrency. You may think of Blockchain blocks as Cryptographic keys containing data that move memory. Because the miners validate the blocks, they can set new rules or invalidate the rules they think are not scalable.
However, all miners need to agree about the alteration of new rules and what shall compromise a valid block for the chain. But it is hard to convince everyone to upgrade to a new chain that splits the community and leads to the creation of new Cryptocurrencies.
The Famous Bitcoin Forks
As per Forkdrop Bitcoin has been split into two Blockchain at different blocks for more than 70 times! In naïve terms, there are more than seventy different versions of Bitcoin, although most of them are dead. However, the most significant of them was Bitcoin Cash (BCH). The BCH fork occurred on Aug 1, 2017, and was supported by many exchanges, wallets, and miners. The focal point of this fork was to overcome the problem of delayed transactions and a high transfer fee. The fork upgraded the Bitcoin protocol through a hard fork while increasing the block size from 1MB to 8MB, making it easier for users to interact with the Bitcoin ecosystem.
There have been different kinds of Bitcoin forks for various reasons. Sometimes it is about making Bitcoin resistant to ASIC mining equipment, or to increase block generation size. However, it is essential to note that buying Bitcoin to benefit from these forks is highly speculative and can quickly make you lose a significant amount of money.