What is a Hard Fork in Crypto? A Complete Guide

What is a Hard Fork in Crypto
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What is a hard fork in crypto? Forks are caused by the fact that different parties must follow the same rules in order to preserve the blockchain’s history. Alternative chains may emerge when parties are unable to reach an agreement. While most forks are temporary, some are permanent. The difficulty of reaching fast consensus in a distributed system causes short-lived forks. Permanent forks, such as protocol changes, have been used to add new features to blockchains, but they can also be used to reverse the effects of hacking or prevent catastrophic bugs on a blockchain. So, let’s find out what is a hard fork in crypto, hard fork examples, and more!

What is a Hard Fork in Crypto?

A hard fork is an event in which a blockchain “splits” into two separate blockchains that run parallel to each other, and nodes of the newest version of the blockchain no longer accept the older version(s) of the blockchain, resulting in a permanent divergence from the previous version of the chain.

During a hard fork, all nodes must upgrade to the most recent version of the protocol software.

Hard forks break crypto-asset forward compatibility. As a result, even if the transaction history and parameters are identical prior to the hard fork, the history of both networks separates after the event, and any subsequent activity beyond the fork will not reflect on the other.

Crypto Hard Fork Vs Soft Fork

Forks can be either accidental or intentional. When two or more miners discover a block at nearly the same time, an accidental fork occurs. The fork is resolved when subsequent blocks are added and one of the chains becomes longer than the other. As a result, the network abandons blocks that are not part of the longest chain; these blocks are referred to as “orphaned blocks.”

LEARN MORE: What Is A Block In Blockchain? A Quick Guide!

Intentional forks that modify the rules of a blockchain can be classified as hard forks or soft forks. Now let’s find out the difference between a hard and soft fork.

In short, in a soft fork, only one blockchain will be valid as users apply the update. In the case of a hard fork, both the old and new blockchains coexist, which means that the software must be updated to comply with the new rules. Both forks cause a split, but a hard fork results in two blockchains, whereas a soft fork results in one.

Hard Fork

A hard fork is a change to the blockchain protocol that is incompatible with previous versions and necessitates that all users upgrade their software in order to continue participating in the network. The network splits into two separate versions during a hard fork: one that follows the new rules and one that follows the old rules.

As a result, adding a new rule to the code results in a blockchain fork: one path follows the new, upgraded blockchain, while the other path continues along the old path. In general, those on the old chain will quickly realize that their version of the blockchain is outdated or irrelevant and will quickly upgrade to the latest version.

Soft Fork

A soft fork is a backward-compatible change to the blockchain protocol that allows for the introduction of new rules without requiring all users to upgrade their software. A soft fork occurs when a majority of the network’s miners adopt the new rules and begin using the updated version of the blockchain.

The rest of the network can continue to use the old blockchain version, but they will be unable to validate new blocks that adhere to the updated rules. A soft fork does not result in the creation of a new blockchain or network splitting because it is backward-compatible. Instead, it enables the network to gradually transition to the new rules while remaining compatible with the old ones.

Hard Fork Example

Hard forks are major events that are widely publicized in advance to the cryptocurrency community. They are the subject of major discussions and debates in the crypto community, as the community tries to determine the benefits and drawbacks of changing a specific feature of a project mostly the block size, rewards, and fees, etc.

Bitcoin Hard fork

The proposal to hard fork Bitcoin in 2017 in order to increase its block size from 1 MB to 8 MB for faster and more transactions, for example, was met with strong opposition from the majority of the community. As a result, Bitcoin and Bitcoin Cash now exist as two distinct blockchains, catering to distinct communities with their own set of rules and objectives.

LEARN MORE: Bitcoin Explained! All You Need To Know About Bitcoin

Since then, Bitcoin Cash has had its own hard forks, one of which resulted in Bitcoin Cash ABC (BTCA) and Bitcoin SV (BSV), and the most recent 2020 fork, which resulted in a new chain called Bitcoin Cash Node (BCHN) taking over the mantle from BTCA as the “official” BCH.

Bitcoin Cash is the most successful hard fork of the primary cryptocurrency. As of February 2023, it is the twenty-sixth digital currency by coinmarketcap, owing in part to the backing of many prominent figures in the cryptocurrency community and many popular exchanges. 

Ethereum hard fork

Hard forks can also assist smaller blockchains in reversing malicious transactions in which bad actors have hacked or scammed users out of their money. The most notable example of such a reversal was the creation of the new Ethereum chain after the original chain, known as Ethereum Classic, was hacked for $150 million in 2016 due to security flaws.

In order to return victims’ funds, the Ethereum Foundation implemented a new update that reversed the DAO hackers’ subsequent illegal transactions.

LEARN MORE: What Is Ethereum In Blockchain? A Complete Guide!

What is a Hard Fork in Crypto: Bottom line

Hard and soft forks are critical to the long-term viability of blockchain networks. They enable us to make changes and upgrades to decentralized systems in the absence of a centralized authority.

Forks allow blockchains and cryptocurrencies to incorporate new features as they develop. 

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