What is a Hard Fork? Simply Explained and Illustrated

If you are interested in cryptocurrency, it is likely that you have heard of something called a Fork, or more specifically a Hard Fork.

What is a Hard Fork?

The definition of a Hard Fork is an upcoming update that will conflict with the current version. 

This article will use Bitcoin as the primary example. However, the concept works the same across many other cryptocurrencies as well.

The Bitcoin Protocol

Bitcoin is a digital currency, to implement and use their platform requires Bitcoins ‘software’. A configuration based on the standards that Bitcoin has established. This software is essentially called the Bitcoin protocol, and it establishes the rules for everyone who wants to use Bitcoin. In the case of Bitcoin, the rules are things such as: What is the size of each block? What rewards do miners receive? How are fees calculated? etc.

Just like with most software development projects, development is never complete. There is always a need for maintenance and updates, additionally, there is usually room for improvement to the product. That being said the developers at Bitcoin regularly push out updates that fix issues and/or increase the performance of the platform.

Although the majority of these updates are small, some of them fundamentally change the way that Bitcoin works. Like in any business, there can be disagreements as to the direction the company is taking. In the case of Bitcoin, this happens when developers do not agree on the right direction for the protocol. The miners can also disagree because certain protocol updates could have a direct effect on their mining profits.

If a group of people is completely dissatisfied, they can choose to go their own way and create a new version of the protocol. By doing this they would Fork the original blockchain.

What Happens when this Happens?

When we look at Bitcoin, it basically consists of the Bitcoin Protocol (the rules mentioned above), and the Blockchain that sits beneath it (the ledger that stores all the transactions). When a group decides to fork the blockchain the first step is to create a replica of the original protocol. Once the copy is created they can use the copy to start making their updates and changes. This is possible because Bitcoin, like most blockchains, is open source.

Once all the updates have been made to the original protocol, the team defines a point in time that the fork will become active. This is done by specifying a block number in the chain, for example, Block 123,000 of the chain. When that block is reached the community is split into 2. Some members will want to support the original protocol, while others will want to support the fork. Each group then begins adding new blocks to the chain that they want to support. At this point, the 2 blockchains are incompatible with each other.

What about the Transactions Before the Fork?

Because a fork is based on the original blockchain, all transactions that happened on the original blockchain also happened on the fork. This means that whatever amount of coins you had before the fork, you will receive the same amount of coins of the new currency. This may sound like free money, and that is true. However, it really all depends on what will happen with the new currency. Will it be able to attract support and value?

Some Hard Fork History

We have already seen a few hard forks happen amongst cryptocurrencies. One of the most famous Hard Forks occurred on August 1st, 2017. When block number 478,558 of the Bitcoin blockchain was created this launched the start of Bitcoin Cash. In this case, the Bitcoin developers could not agree on what the size of a block should be. Some of the developers wanted to increase the block size from 1 MB to 2 MB, others wanted to increase it even further. When they could not come to an agreement, 2 groups were formed, each going separate ways.

Other notable cryptocurrency hard forks include; Ethereum and Ethereum Classic, and Stellar forking off of Ripple.

For a detailed list of Bitcoin Hard Forks, please click the link

Hard or Soft? What the Fork?

You should have a good idea by now what a hard fork is, now let’s look at what a soft fork is and compare forks. A hard fork occurs when a change is made to the protocol that makes it incompatible with the original protocol. However, as mentioned earlier, a majority of the changes and updates that are made to the protocol are compatible with the current version. Changes that are made that are compatible are referred to as a soft fork.

I hope you have enjoyed this brief introduction into the role that a hard fork plays in the cryptocurrency landscape. Please feel free to leave your comments below.