Cryptocurrency Forks – Explanation, Types and Examples
Cryptocurrency forks are sometimes must-have changes which are necessary for the development of a project. Upgrading and improving are part of the crypto technology’s daily routine, so if you’re interacting with the blockchain, it’s inevitable to experience a fork at some point. There are many different concepts and understandings when it comes to fork, so I would like to clear it out a bit for you. The current article aims to explore the basis on blockchain forks.
What is a Cryptocurrency Fork?
When we speak of forks, we always consider the open source projects. This is because their code is available for both reading and modifying, which means that everybody can change it and reuse it. Ultimately, blockchain forks are either changes in the rules of the initial consensus or a blockchain split.
Types of Blockchain Forks
As mentioned earlier, there are two types of cryptocurrency forks and one of them has its own classification. Let me present you a small schema of how exactly they are split:
Consensus Split
Q: Why and how a consensus chain might actually get split?
A: Well, if two miners find a block’s solution at the same time, the original chain result in two separate chains.
Q: How do we define which chain is the right one?
A: The chain which manages to find the next block first is considered longer, which means it’s more likely to state the truth. That’s why the shorter gets abandoned and all the participants in the network continue adding blocks to the newly established chain.
Q: Is there another reason for splitting?
A: If the community decides that they don’t agree on the same consensus anymore, the nodes participants in the network might intentionally split into another chain. This results with the creation of completely new coin.
Protocol Rules Change
Q: How does it happen?
A: Developers might change the code permanently by changing the codebase itself. This would mean that all the participant should upgrade their software with the newest changes in order to continue using the client.
Q: What might be the reason to occur?
A: Either adding some features for the purview of updating the current optionality or changing some of the network’s core rules, such as the block size.
Q: What are the specifications of the different rule changings?
A: A software upgrade can either work with the old rules – soft fork or require to have the latest version – hard fork.
Hard Forks
So, what is a hard fork? In short, a hard fork means inability to work with the old version. Users must update their software in order to continue broadcasting transactions. If not, they will no longer perform as a node in the network.
What’s interesting here is to note the ability to gain soтme coins for free. The initial chain’s duplication might lead to receiving some new coins by the improved one. This can happen via airdrops or by direct distribution using private keys in the new blockchain.
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Planned
When a hard fork is planned, it’s considered as a protocol update and it have to be announced in the roadmap of the project since its very beginning. Here all the users are going with the new chain codebase changes and no one’s supporting the old chain anymore.
Example: Byzantium
Ethereum’s scalability improvement and privacy integration.
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Contention
When there’s a disagreement between the community’s members, it might result in creating a completely new chain, which is imposing changes to the network.
Example: Bitcoin Cash
Bitcoin’s contention fork, changing the block size.
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Spin-Off
Grabbing and editing a coin’s code and using it to implement a new one is considered as a spin-off coin. It might suggest multiple changes such as different supply, algorithm or block time.
Example: Litecoin
Bitcoin’s changed block time, algorithm and supply.
Soft Forks
In a word, soft forks are updates, which are able to continue existing with the older version. Basically, users don’t need to necessary upgrade their software to continue using it. Both the new and the old editions can continue proceeding transactions within the network. What you must know is that if a user skips the update, its security enhances might be affected and its functionalities might end limited.
An example here is the BIP 66 – a Bitcoin’s soft fork, which concerns the signature of validating transactions.
Examples of Popular Cryptocurrency Forks
In the table below, I would like to give you an overview of some of the most popular forks ever created of the major cryptocurrencies on the market. Check out:
| Fork Name | Fork Symbol | Original Blockchain |
|---|---|---|
| Litecoin | LTC | Bitcoin |
| Bitcoin Cash | BCH | Bitcoin |
| Dash | DASH | Bitcoin |
| Bitcoin Gold | BTG | Bitcoin |
| Zcash | ZEC | Bitcoin |
| Bitcoin Diamond | BCD | Bitcoin |
| Qtum | QTUM | Bitcoin |
| Decred | DCR | Bitcoin |
| DigiByte | DGB | Bitcoin |
| Syscoin | SYS | Bitcoin |
| Ethereum | ETH | Ethereum Classic |
| Ubiq | UBQ | Ethereum Classic |
| Monero Original | XMO | Monero |
| Monero Classic | XMC | Monero |
| Electroneum | ETN | Monero |
| Stellar | XLM | Ripple |
| Smartcash | SMART | Zcoin |
Bitcoin’s most successive fork
I would like to say a few words on one of the most well-established Bitcoin forks ever created and explain a bit how and why it occurred. I’m speaking of the Bitcoin Cash newly launched coin in November 2017. There was disagreement between the nodes in the network if a rule change should happen or not. That is why, users who defended it caused a chain split, also known as a hard fork. This way people willing to use the old rules, continued the Bitcoin’s original chain by adding new blocs and the others started a filling block to the newly established Bitcoin Cash blockchain. There was a duplication of the existing coins for a certain period. Users willing to use both currencies received their BTC amount also in the BCH wallet.
Ethereum Classic’s most successive fork
Some of you might know that the original Ether blockchain actually came with the Ethereum Classic, not the Ethereum itself. The last-mentioned is in fact a hard fork of the Ethereum Classic. There was once again disagreement between the nodes on changing some of the consensus rules, so a chain split occurred. Some of the users insisted to continue using the old one instead of accepting the changes, so Ethereum became a separate coin. The original ETH symbol went to the Ethereum coin and the Ethereum Classic received the ETC one. At the moment, Ethereum is considered the largest and most stable altcoin regarding its market cap.
Conclusion
Cryptocurrency forks are bringing benefits to crypto users by updating constantly their tools. They ensure the node’s voice by asking users to vote on changes before developers take over it. Their nature isn’t always well understood and accepted, but finally it comes to development, which is inevitable in the modern blockchain technology.