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What Are Bitcoin Forks?
What Are Bitcoin Forks? Bitcoin forks occur when a small portion of Bitcoin users create a new version of the blockchain with different rules.
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Bitcoin forks are splits that occur in the transaction chain as a result of various user perspectives on the history of previous transactions. These splits result in the creation of various copies of the Bitcoin currency and are a logical consequence of the nature of the blockchain system, which functions decentralized and without the oversight of a central authority.
Bitcoin Forks: Definition and Example
The idea of forks as well as the technology that is behind them is incredibly complicated. Nonetheless, the simplest way to understand what Bitcoin forks do is to understand that they provide Bitcoin with a new set of guidelines to adhere to. The introduction of a new rule, often known as a fork, gives the users mining a specific Bitcoin blockchain the option of adhering to one set of rules rather than another. This choice is analogous to coming to a split in the road.
Different interpretations of the history of transactions may give birth to these forks, which can occur when there are delays in the system. As Bitcoin became more popular, the blockchain technology that it was based on slowed down. This made the whole system less stable and made transaction fees more expensive.
As a result of this slowness, Bitcoin needed to develop a solution that could grow as the number of users who purchased and sold goods increased. The forks were used at this point in the process.
Within the Bitcoin platform, forks provide a distinct development structure and the opportunity for experimentation, all without affecting the integrity of the original product. The initial Bitcoin was built on blocks that were 1 megabyte in size, which proved to be a limitation as the cryptocurrency expanded and gained more widespread use. These forks have the potential to be built on bigger blocks, which would then result in the creation of a brand-new currency.
Note
At this moment, buying and selling either the original Bitcoin or any of its forks is a highly speculative activity, and you run the risk of losing a significant amount of money in a short amount of time. Spend a little more than you can comfortably afford to replace.
How Do Bitcoin Forks Work?
Two different kinds of forks may occur in Bitcoin: "soft forks" and "hard forks." This is how the system operates.
Soft Forks
Instead of altering the final result, a Bitcoin soft fork is just a modification to the Bitcoin protocol itself. The most significant distinction between a soft fork and a hard fork is that the former is backwards-compatible, while the latter is not. Backward-compatibility refers to the fact that the new protocol will be recognized by the old nodes that are already part of the system. This also indicates that a new product will not be introduced.
Hard Forks
Bitcoin hard forks are new versions of the cryptocurrency that are fully separate from the original Bitcoin code. After a hard fork, there are no longer any transactions or communications possible between the two versions of Bitcoin. They are no longer connected to one another, and this separation is irreversible.
Note
If you are still using an earlier version of the Bitcoin program, you will not be able to communicate with users who have updated to a more recent version of the software, and vice versa. This will essentially result in the creation of two distinct forms of money. However, the currencies will not be compatible with one another.
Forks may be compared to organizational splits, in which one section of a corporation heads in one direction while another part of the company heads in the other direction. This is precisely what took place in the cases of Bitcoin, Bitcoin Cash, and Bitcoin Gold.
These are all distinct cryptocurrencies that belong to the Bitcoin family, and they all function in their own right according to their own sets of guidelines. All of these things are still cryptocurrencies, but none of them are exactly the same as Bitcoin.
Types of Major Bitcoin Hard Forks
Bitcoin Cash and Gold are the two biggest hard forks so far, but there have been others.
The Bitcoin Cash Hard Fork
On August 1, 2017, Bitcoin underwent a hard split, which resulted in the creation of Bitcoin Cash. It was conceived as a solution to Bitcoin's issues, namely latency and delayed transactions. To achieve this goal, it employs blocks that are 8 megabytes in size rather than the 1 megabyte blocks that were utilized by the original Bitcoin. This makes it simpler to grow as more users engage with the service. 1
Note
As more users join the system, the bigger blocks will be able to store more data and speed up the buying and selling process.
The Bitcoin Gold Hard Fork
A separate hard fork known as Bitcoin Gold took place in October of 2017, intending to simplify and standardize the mining process for Bitcoin such that it needs just the most fundamental tools. It is mined on regular graphics processing units instead of "ASICs," or application-specific integrated circuits, which are expensive and only used by a few big players.
The goal was to strengthen the Bitcoin concept's built-in qualities of independence and lack of a central authority.
Other Bitcoin Hard Forks
There has been a flurry of additional hard forks and experimentation inside the Bitcoin system in addition to these two primary hard forks that have occurred. The following is a list of some of the other hard forks and the time when they first appeared.
November 2017 - November 2017 - Bitcoin Diamond: November 2017
December 2017: December 2017: Super Bitcoin: December 2017
January 2018: Bitcoin Atom
November 2017: Bitcore
December 2017: Bitcoin God
January 2018: Bitcoin Private
September 2018: Bitcoin Zeo
Bitcoin Post-Quantum: December 2018
Key Takeaways
Bitcoin forks are new kinds of Bitcoin that are created when two or more parties examine the blockchain's transaction history independently.
Hard forks make bigger changes to the blockchain and create new forms of money based on the blockchain. Soft forks, on the other hand, don't lead to the creation of a new cryptocurrency.
The prices of the various Bitcoin hard forks are dramatically different, and each one seeks to do something unique. Some of them have done better than the original Bitcoin, but not all of them have been able to maintain their value.
Conclusion
In the context of Bitcoin, these three hard forks are only the tip of the proverbial iceberg. Bitcoin Cash, on the other hand, is still quite popular today, although Bitcoin Gold and, in particular, Bitcoin Diamond, have both seen their prices and user bases decline over the course of the last several years. There are currently over one hundred separate ongoing hard forks, each seeking to address a different issue or improve the way the Bitcoin network operates.
FAQ
What will happen if the Bitcoin blockchain forks?
A Bitcoin hard fork is a break in the original blockchain that paves the way for the creation of a new platform, which often comes with its own native cryptocurrency. A change that is made to an existing blockchain is referred to as a "soft fork. In other cases, a coin's code is based on Bitcoin's code, but it also makes a brand-new blockchain from scratch at the same time.
How exactly do forks on the blockchain function?
In the context of blockchain, a fork is a term that refers to the occurrence of a technical phenomenon in which a blockchain experiences a split into two distinct branches. The transaction histories of these two branches were combined up to the point when they were broken apart. After that point, they separate and go their own ways, each on their own autonomous route.
Does Bitcoin split into Dogecoin?
In the space of three hours, Markus created Dogecoin before Palmer had even had a chance to reply. He did this by forking Lucky Coin, which itself is a fork of Bitcoin. To put it simply, Markus built Dogecoin by copying essential sections of the source code for Bitcoin, Litecoin, and Lucky Coin and then modifying the code before releasing it to the public and making the project active.
How many times has Bitcoin been split into two different versions?
Since its first release, Bitcoin has undergone over 100 separate hard forks. A blockchain may experience a fork to address an issue or make operational improvements. In stages, the size of a Bitcoin Cash block was extended from 1 megabyte (MB) to 8 MB, and subsequently to 32 MB. The proof of work algorithm was modified when Bitcoin Gold was released.
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