All You Need to Know About Blockchain Forks
First of all, it is better to get acquainted with the meaning of Fork in software. The term Fork in open source software development is used to refer to the division of a project into two or more other versions that usually do not follow the path of the original version of the project and do not go through it.
Bitcoin behind the Fork
The philosophy of Forks
In fact, by copying the source code of a project and making changes to it, a new program emerges from the heart of the previous program. In Blockchain , which is a kind of software protocol, Fork leads to “Blockchain splitting” in which the Blockchain is divided into two different chains, each of which follows its own consensus rules.
This method is often used when a specific group or project team wants to launch a new path or a new version of software at the same time. The Forks we describe in this article are Forks that are used either to change the rules of consensus, or to enforce new rules in the same Blockchain .
Simply put, Fork is one way to upgrade and modify a Blockchain that changes the original network code or protocol. Some of these changes are compatible with the previous protocol, which we call soft Fork, and others cause fundamental changes in the performance of the Blockchain that are incompatible with the previous protocol. These Forks are called hard Forks.
As you probably know, the information stored in the Blockchain cannot be changed, and when a Blockchain starts operating, no one can stop it until its users accept it. In each digital currency, a series of protocols are set by programmers, and a Blockchain continues to operate based on the same protocol and rules forever.
For example, some of the basic rules of the Bitcoin network include the following:
- The time of each block is 10 minutes
- Each block has a capacity of 1 MB
- The total supply is 21 million units
Yet, if someone is against the rules of Bitcoin or any other digital currency and wants to create their own version using the original Blockchain code, how does he do it? If a digital currency, bug or security breach is detected in the network that threatens users’ assets, how can it be fixed? What if we need to make changes to the Chinese Blockchain code to increase the capabilities of a Blockchain ?
The solution is simple. Updating or creating a new Blockchain called a Fork. When a group of programmers are dissatisfied with the terms and conditions of a digital currency, or when the network is facing problems that need to be resolved, they have a solution called Fork.
Forks can be applied backwards-compatible or backward-uncompatible in the network. In short, the term Fork is just a term for when a piece of software or a protocol is updated. In the field of digital currencies and Blockchain , Forks occur when the network is divided into two parts.
What is the root causes of Forks?
Fork is a way to update or upgrade software, add new features, enhance existing capabilities, and upgrade security protocols in a decentralized world. Because Blockchain is a decentralized, distributed network, we can’t easily upgrade it like a company’s computers or servers. But this update should also be applied to the software of all or part of the main network players (nodes).
When the rules are changed and activated, the Blockchain becomes two Forks. These rules are changed in a specific block number (Block height) and the new chain history (forged or updated) in that block number is separated from the old chain history.
The main scenarios that lead to a Fork occurrence are:
Fork as a solutions to technical disputes
When developers, founders, or even influential people in a Blockchain ecosystem disagree over network technical issues, forging a Blockchain and creating new chains will be a possible solution.
For instance, Bitcoin Cache (BCH) is one of the bitcoin Forks that was conducted in 2017 due to widespread disagreement about the scalability of Bitcoin. Dissatisfied with the speed and commission of transactions, a group of major Bitcoin developers and miners introduced a large version of the Blockchain and a new version of the protocol by making extensive changes to the Bitcoin rules and increasing the block size (from 1 MB to 8 MB).
Also in 2018 (one year after the Bitcoin Cash Fork), the community of Bitcoin Cash users and developers split into two groups, with a group (led by Craig Wright) proposing to remove the Blockchain and re-apply some of Satoshi’s technical capabilities. Nakamoto (creator of Bitcoin), who was removed from the Bitcoin protocol by later developers, created another Fork, which in turn created the Blockchain and the new digital currency BSV (Satoshi Vision Bitcoin).
Recover lost amounts, through Forks
Sometimes due to technical bugs in the Blockchain protocol, or decentralized applications built on it, a large portion of users’ assets are lost due to hacking attacks. In such a situation, the major network developers may prefer to eliminate fraudulent transactions and repay investments by making changes to the Blockchain .
Of course, such a decision is by no means simple; Because removing a transaction or a block from the Blockchain is akin to manipulating or censoring centralized networks, which could call into question the Blockchain philosophy. However, this has already happened in 2016 for the Ethereum Blockchain .
In 2016, after the DAO hack and the loss of millions of dollars in user capital, the Ethereum community of developers and founders was forced to provide a Fork in order to gain public trust. Although the Fork received a lot of criticism, with Vitalik Butrin’s support for the decision, it was finally implemented and most users migrated to the new network.
The forged version of Ethereum (due to the support of the main members and the majority of users) retained the name Ethereum (ETH) and changed the name of the old version of the network to Classic Ethereum (ETC), whose digital currency is still traded in the market and its own fans. Has.
Network Fork to update and add new features
A Blockchain network needs technical updates over time to both protect the network from impending dangers and enable new capabilities. Because these updates require protocol changes, a network Fork will be required. Yet, such Forks are often done with the consent of the majority of users and developers on the network, and in practice the Blockchain is redirected instead of branching.
The SegWit update that was made on the Bitcoin network in 2017 is an example of these Forks. Segregated, which stands for Segregated Witness, is actually a bitcoin improvement project that was implemented to address two major issues. The purpose of this Fork was primarily to provide conditions to protect the malleability of transactions and in the next step to increase the block capacity in the bitcoin Blockchain network.
Network Fork in order to divide the consensus
In some Blockchain s, Forks are used to divide the power of the network consensus between parallel multi-chains. In such cases, in order to increase the scalability and speed of transaction verification, the Chinese Blockchain is divided into several parallel and coordinated chains, each with its own validation.
This method, which is to be used in the second version of Ethereum (Ethereum2.0), is called sharding. These types of Forks do not divide the main chain rules and the user community; But in terms of implementation structure, they are considered Forks.
Another type of Fork is heterogeneous sharding, which is used in third-generation Blockchain such as Polkadat.
In heterogeneous sharding, the network is initially divided into several parallel chains by consensus rules and separate validations. Each of these chains is called a shard or parachute, which is designed for a specific application and to run a decentralized program. This initiative actually prevents the creation of Forks in the block. However, its structure is derived from the concept of Fork and the branching of the main chain.
Types of Forks
In the previous section, we reviewed the reasons for the Fork in the blockchain and looked at examples for each case. We divide the Forks into two general categories based on the type of purpose behind them: “changing the rules of the protocol” and “dividing the consensus”. The Forks for consensus sharing are the same sharding implementations we mentioned in the previous section.
Forks related to changing protocol rules, are classified into two general categories, hard Fork and soft Fork, based on whether they are compatible with the original chain. In the following, we will get acquainted with the concept of soft Fork and hard Fork, their features and types.
What is Soft Fork?
Soft Fork is a software update that is compatible with the older version or so-called backwards compatible. This means that all participants, whether or not they have updated their software, can receive new network blocks and add blockchain information to their general ledger.
Also, if the changes made to the protocol are relevant to users, such as changing the structure of network addresses, users can still use the network as before and send transactions to their old addresses.
The point is that if the majority of nodes accept the update, the non-updated nodes will not be able to create and register their own blocks. Because their proposed block will be rejected by the majority of network members (updated nodes).
SoftFork therefore demonstrates a gradual upgrade mechanism in which people who have not updated their software find sufficient motivation to do so by limiting their capabilities.
Only if the majority of nodes adhere to the old rules and the minority nodes update their software, we will see the chain halved or split. Since those who do the process of validating and building blocks with the old rules, continue and develop the main chain and in it, do not consider the blocks made with the new rules valid.
To prevent this deed, Blockchain developers gauge the approval of Blockchain supporters, nodes, and users before making any changes. This process can be done by holding a public referendum among the members or the blockchain community. For example, the method used in the Bitcoin Blockchain is Miner Signaling.
In this method, before performing an update, network miners are asked to comment on the upcoming update with green (positive) or red (negative) signals in each block they build during two-week intervals.
In this way, each green signal is considered a positive vote, and naturally miners who have a greater share of the network’s hashtag (processing power) will have more voting rights; Because they have a better chance of building blocks and sending signals.
What is a Hard Fork?
Hard Fork is a software update that is incompatible with the older version or not so backwards compatible. In the event of a hard Fork, all participants must update their software to participate in verifying transactions and registering blocks, as well as receiving blocks sent by updated nodes.
Bitcoin Cash and Ethereum Classic are the most popular hard Forks ever made, leading to the emergence of the new digital currencies BCH and ETC. Of course, hard Forks do not always create a new digital currency; Rather, in most cases, the whole community agrees on it.
Case in porint, the Shelley and Alonzo hard Forks in the Cardano Blockchain and the Homestead and Metropolis hard Forks in the Ethereum Blockchain are among those that are pre-planned and with the consensus of all members of the community.
Types of Forks in the Blockchain
Hard Forks are divided into different types depending on how they are executed and the purpose behind them. In the following, we will examine each type of hard Forks together.
Scheduled hard Fork
Planned Hard Forks are a protocol upgrade that is included in the project roadmap from the beginning. As this update is to enhance the capabilities and features of Blockchain , all participants, led by major developers, go to the new chain and update their software; Because these changes take place at the basic coding level of the network.
In programmed hard Forks, the previous chain is disconnected from a specific block number and the new chain is started. There will be no new Quinn in these Forks.
Examples of programmed hard Forks:
London Hard Fork in Ethereum Network:
The hard Fork included five Ethereum Improvement Proposals (EIPs) on August 4, 2021, with the goal of optimizing performance and enhancing the capabilities of the Ethereum Blockchain . One of these important changes is called EIP 1559, which provides a mechanism for gradually limiting the growth of ether supply, whereby a variable amount of ether is released from each transaction. This change will eventually lead to a reduction in ether transaction fees.
Alonzo Hard Fork in Cardano Network:
On August 12, 2021, Cardano launched the Alonzo hard Fork on the main network. Alonzo HardFork allows Cardano smart contracts to be written on the Blockchain using Plutus scripts. The Cardano development team introduces the script as a language developed for smart contracts and a platform for executing applications using the Haskell programming language.
Controversial hard Forks
Controversial hard Forks usually occur due to disagreements between network members and cause some participants to create a new chain that they think is better with major code changes.
Examples of controversial hard Forks:
The Ethereum network suffered a hard Fork in June 2016 in order to counteract the effects of a hack that occurred in one of its decentralized programs called the Decentralized Autonomous Organization (DAO). Vitalik Butrin, the Ethereum Foundation, the major developers of Ethereum, and the majority of network participants agreed to this hard Fork, and only a handful of positions did not give up and did not update their software, their Blockchain was renamed Classic Ethereum (ETC). Classic Ethereum is currently run by Charles Haskinson (founder of Cardano) and has been attacked 51% several times due to low publicity.
In 2017, amid an outstanding increase in Bitcoin network fees and transaction delays, a group of Bitcoin developers backed by Roger Keith Ver decided to increase the block size from 1 MB to 8 MB. This enhanced the scalability of the network and partially eliminate the problem of fees and network traffic. This hard Fork finally happened on August 1, 2017 after a long struggle and the Blockchain.
What is the impact of Forks on the price of a cryptocurrency?
Forks can effect the price of digital currencies, depending on the circumstances and for what purpose. In general, Forks can increase or decrease the price of a currency for two reasons:
Free distribution of new coins
In the event of an ambitious and controversial hard Fork (such as a bitcoin cache hard Fork that wanted to attract the majority of bitcoin users), the coins in the main chain are also copied to the Forked chain. This is because the history of pre-Fork transactions is common to both chains, and the new chain, at the moment of forcing, will chart a new path for this common history.
Therefore, if a new digital currency is born after a hard Fork occurs, users who have kept the original digital currency in their wallet will receive the same amount of the second digital currency for free. The point is, newborn currency is only available to users who have earned the initial coins before the hard Fork occurred.
Now you can guess what the effect of such a phenomenon will be on the price. When such a hard Fork is forthcoming, informed traders and investors try to increase their reserves of primary digital currency before the Fork time runs out so that they can obtain more secondary currency. This will increase the demand for main network coins and increase its price.
In the image below, you can see the price chart of Bitcoin, which has been on an upward slope since a few months before the implementation of the Bitcoin Cache hard Fork. When the hardFork bitcoin cache happened, bitcoin users received as much bitcoin cache as they had in their wallets.
Creating positive or negative public feelings about the project
The next influential factor is creating positive or negative public feelings about the project. When a planned hard Fork is about to happen for growing a Blockchain capabilities, it can be predicted that users’ general feelings about the event will be positive. This alone can be a signal of rising asset prices.
The Cardano network, for example, paved the way for smart contracts in the blockchain with the successful implementation of the Alonzo Hard Fork. This will naturally increase the popularity of the Cardano network with users and encourage users to maintain the ADA digital currency. Therefore, since the news of this hard Fork and its implementation schedule leaked to the media, investors’ desire for this currency has gradually increased and its price will increase.
Conversely, asset prices will fall if it is determined at some point that the hard Fork in question has not been successful or that the changes made to the detriment of the blockchain.
Hard forks besides Bitcoin
Although there has always been a lot of criticism of Forks throughout the history of digital currencies, we have to admit that Forks are good for the cryptocurrency community as a whole. In fact, advances in this area are taking place step by step, and for now, the only way to apply these advances is through Forks.
It is also the Forks that make the voices of all members of this community and their criticisms and suggestions heard by the developers. Do not forget that the developers and founders of the project are only part of this puzzle. To upgrade a Blockchain, various groups, from network nodes to regular users and wallet servers, must support the proposed changes and agree on the details.