Bitcoin Hard Fork: An introductory guide

The most popular cryptocurrencies, Bitcoin and Ethereum, rely on a decentralized power source called blockchain, an open-source software. Whenever there is any change in the protocol of blockchain, it is termed as a fork. 

What is Bitcoin Fork?

Bitcoin is a digital currency that implements software called bitcoin protocol. If you want to use a bitcoin network, you have to agree to rules established by the bitcoin protocol such as size of the block, award of miners, fee calculation method, etc. 

As I said earlier, bitcoin runs on software; hence there is always a need for development in Bitcoin because there is always room for some improvement. The developers at bitcoin are regularly making updates to fix issues and enhance the performance. Some updates are so significant that they can change the direction of Bitcoin. 

As a result, some developers disagree with the new development because they think it can affect their profit factor.  Some are so dissatisfied that they choose to go for their version and fork the blockchain. 

Understanding hard forks

Bitcoin has two important factors;

  • Bitcoin protocol
  • Blockchain

When developers create their fork, they start making changes in the bitcoin protocol code creating a fork. After that, they define a time when the fork will get active by specifying a block number. When that block number is reached, the bitcoin community separates into two parts.

  1. Those who support the original bitcoin protocol 
  2. Those who support the bitcoin fork

Everyone starts adding further blocks to the protocol they support. Due to which both blockchains, the original and forked ones, are completely incompatible with each other. Since the fork is based on the original blockchain, it traces back to all the transactions that happened on the original. That means if you had 6 BTC before the fork, you would get the same currency after the implementation of fork. 

Major Bitcoin hard forks

One of the biggest bitcoin hard forks is Bitcoin Cash which was born in August 2017. This happened when the bitcoin developers couldn’t agree on the size of the block. The debate was on the size between 1 megabyte to 8 megabytes. Some wanted to go for 2 MB, while some were in favour of an even bigger size. When the developers couldn’t settle on one option, they decided to go their way and Bitcoin Cash was born. 

Some other major bitcoin hard forks are:

  • Segwit – August 2017
  • Bitcoin gold  – October 2017
  • Bitcoin diamond – November 2017
  • Bitcoin private – January 2018

Why do hard forks happen?

Hard forks happen because of two main reasons;

  1. By accident due to some error or bugs
  2. Bitcoin developers implement the hard forks

Accidental hard forks are quickly resolved. While the other hard forks are implemented because of various reasons;

  • To improve functionality
  • To reverse transactions
  • Address security concerns
  • To upgrade  the software

The difference between a hard and soft fork

A hard fork occurs when the bitcoin protocol becomes completely incompatible with the original one. That means all the nodes are upgraded to newer versions, and there is no possibility of communication between the new and old versions. This change is permanent. 

While in the soft fork, some new features and functions are added that do not alter the blockchain. This makes the soft fork backwards-compatible, which means even old nodes can be recognized after implementing the soft fork. 

Key takeaway

There is a total of 105 bitcoin forks in total, out of which 74 are currently active. Miners prefer hard forks as the risk of mining invalid blocks is minimal. However, the hard forks take a lot of computational resources. On the other hand, soft forks are a quick solution for urgent software upgrades.

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