Changing things in distributed cryptocurrency networks is not a simple chore. Usually, the development of a "hard fork" in a blockchain results in the creation of a fresh digital currency or improvement of blockchain capabilities. But why does a hard fork occur and exactly what is a hard fork? With interesting examples to show their influence and address the question, "Is it a blessing or a challenge for the crypto community?" This blog will investigate the technical specifics of hard forks.

What Is a Hard Fork in Blockchain?

A hard fork is a fundamental update to the blockchain protocol that makes the new version incompatible with the old one, causing the blockchain to split into two independent chains. Nodes that don’t update to the new protocol continue running on the original chain, while updated nodes transition to the new one, forming two separate digital assets.

Let's use a simplified comparison to help better show the idea of a hard fork. Consider blockchain as a set of paper boxes, each produced following guidelines and linked by a chain. Everyone is first building fresh paper boxes and then sequentially linking them with string. Someone advises one day switching these paper boxes to more robust hardwood ones. Some individuals begin to create wooden boxes and link them with chains.

Not everyone, meantime, welcomes this shift. Some say the paper boxes are sufficient and refuse to change. One group keeps using paper boxes and chains while the other starts utilizing wooden boxes and chains. The two systems are ultimately incompatible; one keeps using the old paper boxes while the other embraces the new wooden boxes. This is comparable to a hard fork—a basic modification that results in the split of the original blockchain into two incompatible chains.

Usually introducing fresh consensus protocols that change the guidelines for block additions and transaction validation, hard forks One venerable example of a hard fork from Bitcoin is Bitcoin Cash. Disagreements among Bitcoin community members about scalability in 2017 led some developers to suggest raising the block size to accelerate transactions and lower costs. Others rejected this concept because they thought it would harm Bitcoin's decentralized nature. Eventually, Bitcoin Cash broke out from the Bitcoin main chain to create a new blockchain with bigger block sizes to handle scalability concerns

How Does a Hard Fork Work?

The process of implementing a hard fork generally involves five stages, requiring months of preparation, but once activated, it is usually executed within minutes to hours:

• Proposal: Developers propose tweaks to the current blockchain system to offer fresh functionality, enhance security, or handle other problems. For example, the hard fork in 2017 Ethereum suggested in reaction to the DAO hack.
• Stakeholder Discussions: Node operators, miners, and developers discuss the proposal. The community hotly argued about whether to undo the DAO assets during Ethereum's hard fork, which finally resulted in the split into Ethereum and Ethereum Classic.
• Announcement and Preparation: Announcing and preparing the hard fork gives the community specific timing and instructions. Prepare for the software update, node operators and miners. When we look back to Bitcoin Cash hard fork, community members had plenty time to decide at that time.
• Activation: At the predetermined block height, the hard fork goes live. For example, Bitcoin Cash forked at block height 478,558, while Bitcoin Gold forked at block height 491,407.
• Post-Fork Operations: After a successful hard fork, nodes running the new protocol mine and validate blocks on the new chain, while un-updated nodes continue operating on the original chain. Like Bitcoin and Bitcoin Cash, each chain has its own network, transactions, and community.

In the Ethereum Classic hard fork, network nodes played a crucial role. Nodes that refused to accept Ethereum’s protocol changes chose to remain on the original chain, allowing Ethereum Classic to persist as its own ecosystem. Nodes must upgrade to the latest protocol to avoid missing out on mining and transaction validation on the new chain. After the Bitcoin Gold hard fork, miners who hadn’t updated their equipment could no longer process new transactions. The fork can also result in holders of the original chain’s coins receiving equivalent coins on the new chain. For example, when Bitcoin Cash split, every Bitcoin holder received an equal amount of Bitcoin Cash.

Reasons for a Hard Fork

Improvement of Security

The Bitcoin network had a hard split in 2010 in order to close a flaw allowing an unbounded coin count. Using this flaw, an assailant created almost 184 billion bitcoins—far more than the 21 million restriction allows. The community rapidly adopted a hard fork, therefore stabilizing the blockchain, in order to rebuild security and confidence.

New Features and Functionality

One hard fork meant to solve Bitcoin's (BTC) sluggish transaction handling is Bitcoin Cash (BCH). Bitcoin Cash is fit for daily payments since it can handle more transactions per second by varying the block size from 1MB to 8MB.

Community Disagreements

Common causes of hard forks in a community include differences among its members. Unable to establish a consensus, Ethereum Classic (ETC) and Ethereum (ETH) separated. While some advocated the immutability of the blockchain, others sought to provide investors impacted by the DAO hack compensation.

Bug Fixes or Attack Prevention

PreventionTo lessen the impact of ASIC miners and promote more GPU mining in 2017, Bitcoin Gold broke apart and embraced the Equihash algorithm. This algorithm change reduced the hazards of centralized mining in addition to enhancing the network's resistance to censorship.

Is a Hard Fork Good or Bad?

Hard forks can be helpful for miners and holders since all users on the original chain get an equal quantity of coins on the new chain. For instance, Bitcoin owners got an equivalent amount of Bitcoin Cash (BCH) on the new chain when Bitcoin forked in 2017. Market responses to hard forks will vary, though. Originally attracting a lot of interest, Bitcoin Cash showed great volatility throughout the next year.

Hard forks also represent democracy since they let the people choose major changes. They can, however, create governance problems especially when conflicting groups cause a fresh chain break. Hard forks for miners and validators involve choosing something different.

The table below illustrates the pros and cons of hard forks:

What Is a Soft Fork?

A soft fork is a backwards compatible modification to the blockchain technology unlike a hard fork. One such is the SegWit (Segregated Witness) used in Bitcoin, which raised block capacity without changing the general blockchain architecture. While new rules maximize transaction throughput, old nodes can keep verifying transactions. Please read ‘Soft Fork in Crypto Networks: Meaning and Cases’ for more on soft forks.

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