Blockchain systems require consensus for any upgrades due to its structure. The number of blockchain and cryptocurrency projects is growing rapidly and ‘forks’ is one of the key reasons behind it. Forks aren’t mere copies of old chains, they often represent technological innovations.
In the realm of cryptocurrencies, fork refers to a blockchain network that splits into two distinct versions to create a new and independent blockchain.
Blockchain fork occurs when a blockchain network undergoes any minor or major change due to updates in the network, disagreement among developers, or improvements pertaining to security.
Depending on how they are implemented and accepted, forks can be classified as “soft” or “hard”.
In this article, we will understand fork in crypto and different types of forks in blockchain. Also we will learn whether Bitcon can be forked.
What is Fork in Blockchain?
In simple words, fork in a blockchain is a change in the protocol of a blockchain ecosystem that leads to the creation of two separate versions of the blockchain. A fork in blockchain refers to a situation where a blockchain diverges into two separate paths.
The split mainly occurs due to the changes in the blockchain network like new upgrades, disagreements among the developers or any accidental split.
Forks are essential in the evolution and maintenance of blockchain networks like Bitcoin and Ethereum.
Forks are important for upgrading and improving the blockchain network without repeatedly overhauling the entire system.
It helps developers to implement new updates and create new features and assists decentralized applications to evolve without disturbing the entire blockchain network. Further, it enhances security by solving various vulnerabilities and strengthening the network.
How Does Fork Happen?
There are various factors that lead to the creation of a fork. They are:
Proposal of Changes
When a developer of a blockchain network proposes modification to the blockchain network or introduces any change, it needs to be ensured that the changes align with the broader user base’s desires.
The biggest example of a blockchain fork due to proposed changes is the split between Bitcoin and Bitcoin Cash in 2017. This fork was mainly due to disagreements within the Bitcoin community regarding how to increase the network’s transaction capacity and scalability.
To Fix Security Issues
With the evolution of blockchain technology, it becomes exposed to various security threats. To fix these issues, developers release various versions and updates which result in a blockchain fork.
A notable example is Ethereum where in order to solve the security problem, there was a split between Ethereum (ETH) and Ethereum Classic (ETC) in 2016.
Reverse Transaction
It occurs in a blockchain when developers or a community member decides to undo some transactions due to security reasons. Since we all know that blockchains are made of code, developers can create a new version of the chain from a point before the malicious activity happens. This process removes malicious transactions and creates a fork that ensures security and protects users of the blockchain.
Types of Forks
Forks can be categorized mainly into:
Soft Fork
It is like a software update that is backward-compatible which means that it does not force users to upgrade immediately. Soft forks are mild upgrades to the blockchain network.
These are simple improvements to the blockchain’s code or rules. The new rules are added to the blockchain but they do not interfere with the old rules, ensuring that the blockchain functions properly and can be easily merged with the original version.
However, the updated version of the blockchain enforces strict rules and is responsible for validating transactions.
For example: –
- Bitcoin’s Segregated Witness (SegWit): This was activated on August 24, 2017, which solved transaction malleability and increased block capacity by separating signature data from transaction data. This boosted scalability and paved the way for second-layer solutions.
- Bitcoin’s Taproot Upgrade: It was implemented in November 2021, which introduced Schnorr signatures and improved smart contract functions, enhancing transaction privacy of the network.
Hard Fork
A hard fork is just the opposite of a soft fork. It is the change that is not backward-compatible. Under this upgrade, the old version of the blockchain protocol does not hold any newly mined blocks as valid. Thus, leading to creating a separate blockchain network.
In hard fork, mainly new cryptocurrencies come into existence which are distributed in an equal manner to all nodes with the upgraded software.
For example:
- Bitcoin Cash: In 2017, there was a disagreement within the Bitcoin community with regards to block size limit. This led to the creation of Bitcoin Cash (BCH).
The hard fork has increased the block size of the blockchain network to allow more transactions per block, with an aim to improve transaction speed and reduce fees.
- Ethereum Classic: After the decentralised autonomous organization (DAO) hack in 2016, the community of Ethereum has decided to implement hard fork.
It was done to reverse malicious transactions and restore entire stolen funds. However, some members of the community disagreed with this decision which led to the continuation of the original chain as Ethereum Classic (ETC).
Difference Between Soft Fork and Hard Fork
The key points of difference between soft fork and hard fork are as follows:
| Components | Soft Fork | Hard Fork |
| Backward Compatibility | It is backward- compatible which means a non-upgraded node that can recognize and validate new blocks. | It is not backward- compatible which means nodes that do not get upgraded will reject new blocks, leading to a permanent split. |
| Network Disruption | Limited disruption to the network | Major disruption to the network |
| Use Cases | It includes minor changes, such as introduction of optional features and fixing bugs. | It includes major changes to the network related to security and sometimes, the creation of new cryptocurrency |
| Outcome of Fork | New chain continues while the old chain dies. | Two/ both chains continue at the same time parallelly. |
Can Bitcoin be Forked in Future?
Whether Bitcoin will be forked in the future or not is mainly dependent on the growing needs of the blockchain network which include technology advancement, and also on the consensus within the Bitcoin community.
There is continuous evolution of the blockchain ecosystem which gives rise to new challenges and hence, fork is important to implement necessary changes or improvements in the blockchain network.
However, executing hard fork will require careful consideration of the community and consensus to ensure that the network remains stable and secure.
The Bitcoin community must compare the benefits of the proposed changes against the potential risk associated with that fork before implementing it.
Conclusion
Fork plays a vital role in blockchain technology which makes sure that blockchain networks work efficiently with the growing needs and the challenges. It occupies a significant position in evolving blockchain systems, enabling both technological upgrades and community-led evolution.
With soft fork and hard fork, blockchain networks undergo minor and major changes respectively to ensure the security, stability, and efficiency of the ecosystem.
