Hard Fork

Key Takeaways

  • A 'hard fork' is a major change to a blockchain protocol.
  • It results in two divergent chains: the original and the new one.
  • Often, hard forks create a new cryptocurrency.

A hard fork is a significant event in the world of blockchain and cryptocurrencies.

It denotes a fundamental alteration to a blockchain’s underlying protocol. This can make previously valid transactions or blocks invalid—or vice-versa.

Consequently, when a hard fork is implemented, it typically results in two distinct chains:

The original one and the new version.

This split may happen for various reasons, including system upgrades, vulnerability mitigation, or disagreements within the community regarding the blockchain’s direction.

In essence, a hard fork can be compared to a software upgrade, but one that’s not backward-compatible. That means nodes (computers on the blockchain network) must either update to the new version or continue running the old one, leading to a divergence in the chain.

Understanding Hard Forks

Within the blockchain world, consensus among nodes is paramount. When a subset of the community decides that significant changes are needed—changes that don’t fit within the existing protocol—a hard fork becomes necessary.

  • Chain Split: Post-fork, two chains exist. The older chain remains unchanged, while the new chain begins from a specific block but operates under the new rules.

  • Coins on Both Chains: For cryptocurrency holders, a hard fork often means they will have coins on both chains. For instance, after the Bitcoin and Bitcoin Cash hard fork, Bitcoin holders also had an equivalent amount of Bitcoin Cash.

Reasons for a Hard Fork

There are various motivations behind the initiation of a hard fork:

  • Technical Improvements: Upgrading the system for enhanced scalability, speed, or other technical benefits.

  • Security Reasons: Patching vulnerabilities in the system.

  • Philosophical Differences: Disagreements within the community regarding the blockchain’s future.

Consequences of Hard Forks

When a hard fork occurs, the community and investors need to choose which path to follow. This choice can lead to:

  • Creation of New Cryptocurrencies: The Bitcoin Cash creation from Bitcoin and Ethereum Classic from Ethereum are prime examples.

  • Potential Confusion: With two chains running, there can be uncertainty about which version to support.

  • Market Volatility: Hard forks often lead to price swings as investors speculate on the potential success of the new chain.

How to Navigate a Hard Fork

If you’re involved in cryptocurrency:

  1. Stay informed: Keep an eye on announcements from your cryptocurrency’s developers or official channels.

  2. Secure your assets: Before the fork, ensure your coins are in a secure wallet—preferably one where you control the private keys.

  3. Wait and watch: After a fork, it’s often wise to wait until the dust settles before making transactions.

Notable Historical Hard Forks

  • Bitcoin and Bitcoin Cash (2017): Stemming from disagreements on scaling solutions.

  • Ethereum and Ethereum Classic (2016): The result of differing views on how to handle the DAO hack.

Article Sources

BuyBitcoinWorldWide writers are subject-matter experts and base their articles on firsthand information, like interviews with experts, white papers or original studies and experience. We also use trusted research and studies from other well-known sources. You can learn more about our editorial guidelines.

  1. Wikipedia - Fork (blockchain), https://en.wikipedia.org/wiki/Fork_(blockchain)

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