Bitcoin can be a confusing technology, and little is more confusing to new users than trying to wrap their heads around Bitcoins forks. This is. in part, because there are different types of forks with very different implications.
The first type of fork that people refer to is a “software fork.” A software fork is really a copy of the code of a software implementation, which is typically tweaked to serve functions that the original code does not
But in the world of Bitcoin. there is also a very different type of fork: a blockchain fork. A blockchain fork occurs when different nodes accept different blocks of transaction data, henceforth constructing a different transaction history. This may sound bad for Bitcoins ability to secure and record all transactions immutably, but it happens fairly often. Importantly, these blockchain forks usually get resolved within an hour or less. If one chain becomes “longer” (meaning it has the most proof of work) than the other, the nodes should automatically switch to that chain and by design disregard the shorter chain.
However, if different nodes apply incompatible protocol rules, the chain – split may never resolve. One set of nodes could consider one version of the blockchain invalid, while another set of nodes does not Such a split is typically called a “hard fork.”
A hard fork can be accidental
— caused by a bug. for instance
— or deployed on purpose. If its intentional, it is usually intended to be a protocol upgrade. More specifically, a hard fork upgrade entails protocol rules to be removed or expanded. This means that non – upgraded nodes consider the new rules invalid: they breach the original protocol rules. (As if the terminology isnt confusing enough, the goal of a hard fork upgrade is typically to avoid an actual blockchain fork. Instead, everyone is expected to upgrade and adopt the new protocol rules.)
And finally, contrasting a hard fork, theres also such a thing as a “soft fork upgrade.” Whereas a hard fork removes or expands protocol rules, a soft fork adds or tightens protocol rules. This has one big benefit compared to a hard fork: a blockchain fork can be avoided even if not everyone upgrades. This is because, from the perspective of non-upgraded nodes, no rules are broken. Upgraded nodes are still operating within the bounds of non – upgraded nodes.
With the possible exception of some irregular protocol changes in the early days. Bitcoin has only undergone soft fork upgrades. They range from the implementation of the well-known block size limit by creator
Satoshi Nakamoto. to advanced features like time-locked addresses, to the most recent Segregated Witness upgrade that resolved a protocol bug.
Importantly, this means that all planned protocol upgrades so far have had an “opt in” nature. Anyone who preferred not to adopt a particular upgrade could choose not to whilst still remaining compatible with the rest of the network. By extension, this means that all software implementations of Bitcoin that have ever existed are still compatible with the current protocol — though some of the oldest versions would require a minor software patch for reliability. This compatibility is a crucial achievement for a project that is designed to come to consensus over the state of the blockchain without anyone in charge, and therefore also no one to dictate upgrades.
However, not everyone agrees that Bitcoins protocol rules are desirable. A significant segment of the (former) Bitcoin community so strongly believed that the aforementioned block size limit should be removed with a hard fork that it decided to move forward with such a hard fork even without community consensus. This hard forte therefore, caused a blockchain fork, in effect spawning a new currency: Bitcoin Cash. The relative success of Bitcoin Cash, in turn, ignited a spur of Bitcoin hard forks, all resulting in new currencies.
Whether these “forkcoins.” as they are sometimes called, really add much to the cryptocurrency ecosystem is questionable, however. Launching a new cryptocurrency has always been possible, and. at least from a technical perspective, no forkcoin has introduced a feature that wasnt already offered by either Bitcoin or an existing alternative coin. While many Bitcoiners would agree that anyone is fundamentally free to use any currency of choice — including forkcoins — it remains to be seen whether these coins will maintain much market value in the long run.