What is a hard fork?



When you first hear the term hard fork, you may think of cutlery. But it has anything but that. In fact, a hard fork is a term from the blockchain world that you're encountering more and more. That's because blockchains are becoming more common, and more and more people are using cryptocurrency.

In this article we will explain to you what a hard fork is, but first we will tell you what is meant by a fork in the first place.


What is a fork?


Let's start at the beginning by telling you what a fork is in general, and then explain what a hard fork is.

Bitcoin is based on the blockchain and the code of the blockchain is open-source, meaning that anyone can view, duplicate, or copy the code. There are no legal consequences to doing so, as there would be if you just copied a picture from the Internet and used it on your website.

With each transaction, a block of information is created, and then added to the chain. We call this chain the blockchain. Since the transactions are decentralized, the users of the network must decide on some common rules so that the blocks can be added to the blockchain.

However, it can also happen that this blockchain splits up. There are several reasons for this, which we will explain to you shortly. When a blockchain is split, we talk about a fork.

Soft fork
A fork can be for temporary, and we then call it a soft fork. It happens when, for example, several miners finish a block at the same time. In that case, the blockchain splits into several until the next block is discovered by one of these new blockchains. When this happens, the new blockchain will be longer and is considered the only real blockchain. After this, everything will return to normal, as it was before.

Miners may also need to update their software. Miners who have the new software on their machine will move to a new blockchain. Miners who have not updated their software, however, will not be as efficient as those who have.

This is because the network will more easily accept blocks mined by those with updated software. Over time, therefore, all miners will take turns updating their software to remain competitive.

However, it does not always have to be this way. Indeed, it is also possible that the blockchain will no longer come together, and thus the split will be permanent.

What is a hard fork?

Miners may also choose not to update their software. For example, because they do not agree with the content of the update. Some updates in fact cause a miner to start earning.

This then results in a permanent separation from the blockchain. As long as a community is present in each of these blockchains, they can continue to exist independently of each other. We then speak of a hard fork.

There are three different types of hard forks:

  • Planned hard fork
  • Contested hard fork
  • Launch of a new cryptocurrency
Planned hard fork
A planned hard fork has been included in the protocol (source code) of the cryptocurrency from the beginning. Since this will improve the functionality of the entire blockchain, the entire community should migrate to this update.

The old blockchain should gradually disappear, as no one is incentivized to manage it anymore. A planned hard fork does not involve the creation of a new cryptocurrency.

The transition from Ethereum to Ethereum 2.0 is also done through planned hard forks. A total of three hard forks are being implemented to make the transition step-by-step. These are the Berlin Hard Fork, London Hard Fork and Shanghai Hard Fork.

Three different hard forks were chosen here because the update is too large to implement in one go. For example, it switches to the Proof of Stake (PoS) consensus algorithm, whereas before it always used Proof of Work (PoW).

Contested hard forks
This type of hard fork occurs when the community disagrees on certain points. Some members of the blockchain will then create a new blockchain by making major changes to the code.

This was the case, for example, with Bitcoin Cash and Ethereum Classic. In both cases, however, the new blockchain did not become as successful as the original blockchain.

Launch of a new cryptocurrency
Since the source code of a cryptocurrency is open source, anyone can access it. And therefore, anyone can make the changes they want. Thus, it is also possible to create a new cryptocurrency by starting from an existing source code and making the desired changes in it.

This is the case with Dogecoin, for example. The developers of Dogecoin had copied the code of the Bitcoin blockchain, after which they had made some modifications to be able to launch Dogecoin.

Incidentally, this is also how many meme- and pump and dump coins are created. Always be careful with these types of coins, because in some cases they are scams, where only the developers of the new coin will benefit from price increases.


Distribution of a new crypto after a hard fork

Suppose you have some crypto coins of a certain cryptocurrency, and this cryptocurrency decides to go through a hard fork. What happens to your coins then? Do they go to the new blockchain, or do they remain active on the original blockchain?

When a hard fork occurs, a new cryptocurrency is distributed to the community. The creation of a new blockchain-based on an old blockchain allows members of the old blockchain to receive free crypto coins from the new blockchain.

There are 2 ways to receive the new cryptocurrency:

  • Through an airdrop
  • Giving your private keys to the new network


  • So, as a cryptocurrency owner, you always have the choice of which cryptocurrency you want to go to. Should you ever have to make this choice, it is wise to look at the prices of the hard forks that have taken place in the past. The value of the new cryptocurrency has almost never become as large as that of the original cryptocurrency.


    Conclusion

    The world is constantly changing, and so is the blockchain world. Therefore, a hard fork is inevitable these days. A hard fork can occur because it can no longer be agreed upon within the community, or simply because it has been planned from the beginning. Thus, certain updates can be carried out.

    However, it is also possible that one wants to set up a new cryptocurrency and does so by duplicating the code of another blockchain. After all, the blockchain is open-source, which means that anyone can and may make use of the code.

    As a cryptocurrency owner, however, you don't have to worry about a hard fork. No matter what happens, you will always keep your crypto coins.