There’s a lot of buzz about the upcoming Ethereum Istanbul fork in the crypto asset community at the moment. Everyone is preparing themselves for a historic moment in the crypto sphere, and it’s all very exciting. You’ve probably heard about what’s happening, but maybe you’re still a little unsure about what exactly a cryptocurrency fork is. That’s okay – we’re here to help. Let’s take a look at everything you need to know about cryptocurrency forks, so that you don’t get left behind.
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What is a fork?
A cryptocurrency fork, as the name would suggest, is when a blockchain that works with a set of protocols and consensus of users is divided. There are two types of forks, a hard fork and a soft fork.
What is a hard fork?
A hard fork is a permanent split from the previous version of the blockchain. Any nodes that are running the old version will not be able to accept transactions created on the new one. This essentially creates two different versions of the blockchain.
One version continues to run on the old network, and the other runs on the new one. It also often marks the creation of a new cryptocurrency. For example, Bitcoin split into Bitcoin (BTC), and Bitcoin Cash (BCH) as a result of a hard fork on 1 August 2017. With that hard fork came the creation of a separate and entirely new cryptocurrency (BCH), with the original cryptocurrency ticker (BTC) remaining on the original blockchain.
Another example is Ethereum, which hard forked into Ethereum (ETH) and Ethereum Classic (ETC) in 2016, just under a year after the launch of Ethereum on 30 July 2015. Generally, with a hard fork, one cryptocurrency is more successful than the other. At the time of writing, according to CoinMarketCap, Ethereum has a market cap of $20,187,298,550, while Ethereum Classic has a market cap of $563,285,578.
What is a soft fork?
Soft forks and hard forks are basically the same in that when blockchain’s existing code is changed, an old version remains on the network while the new one is created. However, with a soft fork, only one blockchain will remain valid as users adopt the update. Hard forks allow both blockchains to exist side by side. Both forks intend to create a split, but a hard fork creates two networks while a soft fork results in only one.
— webnow (@webnowcompany) October 29, 2019
Why do blockchains fork?
Blockchains can fork for a number of reasons. If they’re hacked, like in the Bitcoin Overflow Incident, or if there needs to be a system update, or even if there’s a dispute between users over how to govern the blockchain. Now that we’ve had a look at everything you need to know about cryptocurrency forks, it’s pretty plain to see that hard forks are the more popular option for a reason.