In the blockchain world, a hard fork is a fundamental and irreversible change to the protocol rules of a blockchain network. This change is so drastic that blocks and transactions created under the new rules are incompatible with those created under the old rules. Basically, a hard fork leads to the creation of two separate and distinct blockchains that operate independently.
Why does a hard fork occur?
A hard fork arises out of a desire or need to improve a blockchain viz:
- Improved functionality
Technology advances rapidly, and a blockchain may need upgrades to remain competitive. A hard fork adds new functionality or enhances existing functionality.
- Fixing security vulnerabilities
If a major security issue is discovered in a blockchain, it can be fixed by a hard fork.
- Divisions in the user community
Occasionally, community members cannot agree on the direction in which a blockchain should evolve. This lack of consensus can lead to a “split,” resulting in two separate blockchains (and sometimes two different coins).
- Changes in blockchain rules
To impose stricter or more permissive rules, such as changing block sizes or introducing other sets of limits.
How does a Hard Fork work?
The hard fork process involves a few essential steps:
- Proposing the change
Blockchain developers identify a problem or an opportunity for innovation. They propose a solution that changes the existing system.
- Development and testing
The new version of the protocol is written and changes are tested to ensure that it works correctly.
- Announcing the hard fork
The user and miner community is informed of the exact date and time when the hard fork will take place. This is essential for miners and nodes to prepare to run the correct version of the software.
- Chain splitting
At a specific block in the blockchain, the new protocol starts running and the network splits in two. Miners and users must decide which chain they want to participate in.
Notable examples of Hard Forks
Bitcoin and Bitcoin Cash
One of the most famous hard forks was the separation of the Bitcoin network into Bitcoin (BTC) and Bitcoin Cash (BCH).
Why it happened. Disputes in the community over block sizes and transaction speeds prompted one group to propose larger blocks, which was not supported by the Bitcoin community as a whole.
Result: bitcoin cash was created by hard fork in 2017 and became a separate currency optimized for faster and cheaper transactions.
Ethereum and Ethereum Classic
Another notable hard fork is the one that led to the creation of Ethereum Classic (ETC) as a result of a security breach.
The backstory: In 2016, a hacker exploited a smart contract known as a DAO and embezzled significant funds. The Ethereum community decided to implement a hard fork to reverse the effects of the attack.
Result: Ethereum (ETH) became the official version, while those who chose to keep the original blockchain unchanged continued as Ethereum Classic.
Monero and the Hard Forks of privacy
Monero (XMR), known for its privacy-oriented approach, has implemented several hard forks to improve its encryption and scalability.
Recent example: in 2018, Monero applied a hard fork to combat ASIC mining, which could compromise decentralization and network security.
Result: The new blockchain was optimized to support individual miners and maintain Monero’s decentralized purpose.
The benefits and challenges of a hard fork
Benefits
- Fix existing problems. Some hard forks are implemented to fix technical deficiencies or code bugs.
- New functionality. These changes allow the introduction of innovative features.
- Community autonomy. The community can have the opportunity to choose the direction in which it wants to evolve.
Challenges
- Community division. Not all users and miners will agree with the proposed changes.
- User confusion. New coins arising from a hard fork may lead to uncertainty.
- Security threats. If the old network remains active, problems with “replay attacks” may occur.
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