What happens to bitcoin forks?
If you are about to enter the world of cryptocurrencies and have started to dive deeper, you may have come across the word ‘fork’. It has become the hot topic of discussion.. Understanding this concept can be a bit difficult but we are here to help you out!
What is a Bitcoin Fork?
A bitcoin fork is a change made to the bitcoin protocol that changes the validity of the previous rules. Forks can be considered as protocol upgrades. There are two types of forks: a hard fork and a soft fork. Let’s see how they differ from each other
Bitcoin Fork (Source)
#1 Hard Fork
A hard fork makes some change in the software but it is not backward compatible. Therefore, it is also considered as a permanent split from the previous version or legacy rule set. With hard forks, the previous version will consider the new transactions as invalid.
#2 Soft Fork
Soft Fork is a change in bitcoin protocol rule which is backward compatible. This ensures that the updates are interoperable with the legacy protocol. In case of soft forks, the older versions will still consider the new transactions as valid.
Why investors and miners need forks?
There are two main reasons why a fork is needed. Either for the splitting of the communities or addition of new features.
#1 Splitting of communities
This is one of the most common reasons why forks are needed by the miners. In such cases, hard forks are implemented. For example, there is a split in the community and they decide that they will no longer use the older version. So, they create a new blockchain with changed rules. This gives rise to hard fork as this new version is not compatible with the older ones.
#2 Addition of new features
No model or version is perfect. Same is the case with the cryptocurrencies blockchain model. There will be addition of new features for enhancing the capability of the model and here the soft fork comes into the picture. New features like enhanced speed of transactions can be added using the soft fork! In this case, the features will be added to the versionso that these changes become backward compatible!
Famous Bitcoin Forks
Undoubtedly, Bitcoin is the most famous cryptocurrency and so it has ruled this industry for ages and continues to do so! Here are some famous Bitcoin forks that have happened till date.
#1 Bitcoin XT
Launched in December 2014 by Mike Hearn, Bitcoin XT was one of the first hard forks of bitcoin. This hard fork was aimed at increasing the block size to 8 MB in order increase speed to 24 transactions per second. Firstly, it was received by people in huge numbers but with time, it went through a sharp decline.
At the time of launch, it had almost 1,000 nodes but became almost dead by early 2016. Currently, there are less than 30 nodes running Bitcoin XT and therefore it is considered as a minor crypto.
#2 Bitcoin Classic
Even after Bitcoin XT failed, the community wanted to increase the block size in order to enhance the speed of transactions. So, they came up with a new fork called as Bitcoin Classic in February 2016. Also a hard fork, Bitcoin Classic aimed to increase the block size by around 2 MB. Though it had support from a large number of companies, it did not gain enough traction. After around 8 months, it changed to market driven block size.
Currently, Bitcoin Classic is run by 100 nodes and has adopted a long term development strategy of coming five years.
#3 Bitcoin Unlimited
With around 650 nodes implementing Bitcoin Unlimited currently, it is still quite popular. The reason is its unique strategy. After the release of Bitcoin Unlimited, the platform did not give any information on which type of fork should be implemented! So, the miners get the choice of determining the block size.
Unfortunately, Bitcoin Unlimited has suffered some serious reliability issues. Once, around 70% of the nodes crashed due to memory leaks. Currently, their coins cannot be purchased as it is unique but firms like Bitfinex has created Bitcoin Unlimited futures which can be easily traded in.
#4 Segregated Witness
Also known as SegWit, it was proposed by Core developer Peter Wuille in a Bitcoin scaling event. This event took place in Hong Kong in December 2015. It was later proposed by Eric Lombrozo, Johnson Lau and Wuille as BIP 141.
Basically, SegWit aims at reducing the size of individual Bitcoin transaction. In this fork, the signatures constituting more than 60% of the Bitcoin blockchain, are stored as extended block. SegWit was activated on 24 August 2017 as a BIP 9 soft fork. Currently, not many use SegWit.
#5 Bitcoin Cash
When it was obvious that SegWit will be implemented on main chain, the users responded by supporting a hard fork instead. This hard fork is Bitcoin Cash. Launched on 1 August 2017, Bitcoin Cash did not wait for any support. Instead, it just announced the date of its launch!
As Bitcoin Cash supports Bitcoin XT, Bitcoin Classic and Bitcoin Unlimited, it received support from major exchanges like Kraken. One interesting feature of Bitcoin Cash is that people can easily switch between Bitcoin and Bitcoin Cash. This is known as opportunistic mining.
Currently, it is run by around 800 nodes. This number keeps on changing due to opportunistic mining but it has remained more or less the same over time. It has 8 MB block size for speedy transactions.
#6 Bitcoin Gold
Bitcoin Gold is based on the fork model of original Bitcoin Cash fork. Instead of scalability, it aims at reducing the importance of large scale miners on the blockchain. Released in November 2017, it is a hard fork with New Equihash mining algorithm implemented in it.
A large number of forks, whether soft and hard, have been implemented in the past few years. But, the increasing need of speedy transactions, changes in size of the block and lots of other features, call for more forks to be launched. So, we bring you some of the upcoming forks that will be launched in 2018!
#1 Lightning Bitcoin
As the name suggests, Lightning Bitcoin aims at making the payments lightning fast. In order to implement this, they will be expanding the size to 2 MB and have a three-second block time. It will join the blockchain by building the smart contracts.
The fork will enable processing 1000 to 10000 transactions per second. It will be launched in early 2018 and has support from exchanges like CEX.io, gate.io and BTCC.
#2 Bitcoin Uranium
Roughly set to be launched in December, Bitcoin Uranium will have a supply of 21,000,000 with no premine. It is predicted that it will support SegWit and bring down the time to around one minute only. All the other information is yet to be released.!
#3 Bitcoin Cash Plus
Scheduled for block 501407, it will be working on fulfilling the promise of Electronic Peer-to-Peer Cash. It will make use of the BTC’s Emergency Difficulty Adjustment to decrease difficulty in mining.. Though it has an official website but no information of the coin supply is available..
After knowing about the basics of forks, the recent and most popular forks of Bitcoins, their importance and the names of the upcoming ones, you can enter the world of cryptocurrency without any confusion!