Cryptocurrencies such as Bitcoin (BTC) or Ethereum (ETH) are powered by an open-source network known as the blockchain. It is called blockchain because they’re literally made up of data in a block, that can be traced all the way back to the first block. It is an open-source network that depends on the community to maintain and develop its underlying code.
A hard fork happens when a community makes changes in the predetermined rules of the blockchain and because of this, the chain splits — producing a second blockchain that shares all of its histories with the original, but is headed off in a new direction. It requires all the nodes to upgrade to the latest version of the protocol software.
Understanding hard fork
It is the latest and newest version of the blockchain that does not accept the rules of the old version of the blockchain. This new version of the blockchain is created from the permanent divergence from the previous version of the blockchain, leading to its separation.
Adding a new rule to the code essentially creates a fork in the blockchain, some nodes no longer meet consensus, which leads to the two different versions of the network that run separately. In simple words, it is created on the blockchain where one path keeps following its current set of rules, while the second path follows the latest version of rules.
How does a fork work?
A hard fork can happen on any crypto technology platform it’s not just limited to Bitcoin. All the miners have to agree to the terms set for creating new rules and about what comprises a valid block in the chain. In this way, you can “fork it” it is just as same as a fork or separate direction on the road to indicate that there’s been a change in or a diversion to the protocol. The developers can then update all of the software to reflect the new rules.
It is through this forking process that many virtual cryptocurrencies with names similar to Bitcoin have come to be: Bitcoin cash, Bitcoin gold, and others. For new traders or investors, it becomes hard to find the difference between these cryptocurrencies and to map the various forks onto a timeline.
Why does a fork occur?
It is just like all software upgrades that are updated for a variety of reasons:
- To add new features and functionality
- To address security issues
- Resolve disagreement in the community about the direction of cryptocurrency.
Notable hard fork examples
There are many examples of a hard fork in the crypto world and not every one of them is related to the Bitcoin blockchain. Following are some examples of famous hard forks.
- The DAO Hack
- Hashrate Wars: ABC vs. SV
- SegWit2x and Bitcoin Cash
Recent hard fork by Polygon
Recently, Polygon Labs completed a hard fork to reduce gas fees spike and disruptive chain reorganizations known as “reorgs”. The software update was completed on 17 January with the help of only 15 validators.
After the discussion on December 2022, the fork was supposed to be voted on by 100 validators but in the voting process, only 15 validator teams participated, and 13 of them voted in the favor of the proposal, which was extremely low as the hard fork needs a supermajority to conduct any changes.