Of course, that would render them incompatible with the previous version, so only nodes with the same protocol modifications could communicate. An example of a hard fork was the 2017 fork that saw Bitcoin fragmented into two separate chains – the original one, Bitcoin (BTC), and a new one, Bitcoin Cash (BCH). The fork occurred after a lot of arguing over the best approach to scaling.

What Are Bitcoin Hard Forks?

Your coins would be on the new blockchain, and the old one will no longer be used as no one supports it. However, not everyone in the Bitcoin community agrees that its block size is necessary to ensure decentralization. In these situations, the community (i.e., bitcoin holders) can vote to execute a fork that splits the Bitcoin blockchain into 2 separate blockchains.

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It also creates the risk of double spending in what is called a “Replay Attack”, where a bad actor can intercept a transaction one fork and repeat it on the other chain, making them both valid. A https://www.tokenexus.com/ essentially creates an entirely new currency as it is a permanent divergence from the previous version of the blockchain. One path will follow the new, upgraded blockchain and the other one follows the old path. The users of that particular blockchain can elect to upgrade and follow one path or not upgrade and stay with the other. Accidental forks happen when two or more blocks are found at the same time, and it is resolved when subsequent blocks are added, and one of the chains end up being longer than the other. The blockchain network then abandons the blocks that are in the shorter chain, referred to as orphaned blocks.

A few examples of hard forks

This has led to a heated debate between those who want to return the funds and the “code is king” purists who say that the the power of smart contracts lies in their immutability. When a cryptocurrency hard forks, there are a couple things that holders of the new currency should keep in mind. The Bitcoin Cash (BCH) blockchain is splitting on November 15, 2018. The Bitcoin Cash hard fork is the result of a rift in the developer community. The new currency, Bitcoin SV (BCHSV) will exist on a seperate blockchain. The hard form of Ethereum vs Ethereum Classic came about as the result of a $55 million cryptocurrency hack.

• When changes to the protocol layer create a blockchain that is not compatible with the previous blockchain, it is called a hard fork.
• The answer is not the same as a stock split since in a stock split, each new share is completely interchangeable and substitutable with the existing shares.
• In the beginning, we discussed that a successful fork must reach consensus in order for it to be implemented.
• Bitcoin Gold was a hard fork that followed Bitcoin Cash in October 2017.
• Bitcoin Unlimited has remained something of an enigma since its release in March 2016.
• The information herein is general and educational in nature and should not be considered legal or tax advice.

That leaves a hard fork, where the core developers of Ethereum unilaterally make the decision to essentially create a new version of the network with different rules than the original. Then, miners, exchanges, and other major apps that are built on it need to decide if they want to a part of the new version of Ethereum or the original. Sometimes, a cryptocurrency splits to restore funds after hackers or other attacks compromise the integrity of the blockchain or make off with millions in cryptocurrency. Hard forks often produce new tokens, but investors should remember that they’re not guaranteed to be valuable, and many may eventually be worthless. While the $ETH token created from the Ethereum hard fork has been successful, remember that so far, none of Bitcoin’s more than 100 hard forks have overtaken the original in market cap.

What is a Hard Fork in the Blockchain?

Sometimes, hard forks are controversial in the community involved in a blockchain; at other times, they are necessary for a blockchain to progress. This is part of the reason why we have so many cryptocurrencies. Many times, hard forks are the result of disputes among the people most affected by a cryptocurrency’s protocol. And because all of this is digital, it involves lots of software. That software establishes a cryptocurrency “protocol.” Protocols set the rules that everyone has to agree upon to use the blockchain and accept the validity of its memory, or ledger.

Hard forks happen because there’s dissatisfaction with the currently existing protocol. That’s exactly what caused the Bitcoin Cash (BCH) fork in August 2017. Lots of people think of this as “new money” or doubling your value. And while it’s true that you double the number of coins you hold, the value of the coins on the new chain will not be identical to the value of the old chain. In very simple terms, a blockchain is a way of building and moving digital memory and using complex, cryptographic math to make that memory immutable and indisputable.

• They validate, send, and receive blocks and transactions and maintain a copy of the blockchain.
• This contrasts with a soft fork, where the blockchain simply modifies its rules—no splitting required.
• One of Ethereum’s core principles is that it offers a way for developers to write decentralized applications that external parties can’t alter.
• The pay-to-script-hash function, which enhances the code without changing the structure, was also successfully added through a soft fork.
• A software fork occurs at a point where software is copied and modified.
• A soft fork can be thought of as a minor upgrade to software, similar to updates that frequently occur on a smartphone.
• In very simple terms, a blockchain is a way of building and moving digital memory and using complex, cryptographic math to make that memory immutable and indisputable.

There are usually layers of software completing different tasks, some methods for the network to reach an agreement on the blockchain’s state, and many network participants. Each layer’s underlying programming can be changed as needed, but it has to be accepted by the network’s participants to be adopted. That suggests the ether market has priced in the hard fork decision.