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Hard Fork and all You Need to Know about It

03/28/2019
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Soft fork, hard fork - recently these words often appear in the news. For the uninitiated in the subtleties of the work of cryptocurrency networks, they are at least puzzling. That is why today we will analyze the meaning of these concepts, explain them in simple words for what they are carried out, let us give real examples of the loudest hard forks that disturbed the cryptocurrency community.

What is Hard Fork?

Each cryptocurrency network operates according to certain rules. Periodically, they can make small changes, for example, change the last blocks. At the same time, the system is rolled back to a clearly defined point, overwriting the last payments. This process is called soft fork. There are no major changes to the rules of the network itself.

When it comes to hardfork, the situation is different. Here they are already encroaching on the very essence of the work of the cryptocurrency platform, changing the source code of the system. It incorporates new rules that are incompatible with the old software. As a result, the network is branching out (literally a hardfork, and users have to choose which path they are ready to follow.

Thus, after carrying out hard forks, there are two ways - either one of the branches dies off, or they continue to coexist as two independent systems in parallel.

Reasons for a Hard Fork

What is the purpose of hard forks - a lot of reasons? Most often, significant deficiencies begin to manifest themselves in the system, which inhibits network operation. Even a banal increase in block size already requires hardfork. Take for example Bitcoin. In the early years of the network, there were no problems with making payments. 7 transactions per second were totally okay for the community. Discontent began to manifest itself with an increase in the number of users and the growing popularity of cryptocurrency. The issue of network scalability has become particularly acute.

Recently, transactions could hang not only for a few hours but even for a couple of days. Commissions also increased significantly - in August of this year they could even go up to $ 9, which cut the attractiveness of using the network for many. Users have become or pay attention to other cryptocurrencies or returned to the traditional methods of payment. And only hard the fork can solve problems.

Who Can Do a Hard Fork?

Developers, miners, active community members - anyone can be the initiator and conduct a hard fork network. The main thing is to gather like-minded people around you and interest them with your ideas. When differences of opinion are critical, this can lead to a total split in the community and there are many examples of this. The creators of hard forks often become well-known personalities in the crypto-market, and anonymous development teams can put forward ideas and bring them to a logical conclusion. An example of the latter is Bitcoin Diamond.

Advantages and Disadvantages of Hardforks

Hardforks have both positive and negative effects on the development of cryptocurrency systems. We focus on the main points.

Benefits:

  • Competently conducted hard forks solve current network problems that hamper its work;
  • hard forks often increase the capital of the token holders of the original networks - they additionally receive coins from new branches.

Disadvantages:

  • In fact, no one ever knows how a network ramification can affect its future operation, which network remains the main one, how it affects the current cost of tokens;
  • Hard fork often causes a split in the community of crypto enthusiasts;
  • Hard forks can trigger high volatility.

The History of Hardforks

The most resonant hard forks occurred on the Bitcoin and Ethereum networks. Some of the branches are firmly entrenched in the market. However, there are also such that, as a result of these or other shortcomings, they have not gained particular popularity. So, who, when and why tried to divide the network and rule over it.

Bitcoin

For the first time, Bitcoin split in August 2015 - then Bitcoin XT appeared. The main goal of its initiators was to remove the limiting factors in the operation of the system and increase the block size. The project was severely criticized and it did not meet with any special support in the community, although it is believed that its creators are the developers of Bitcoin Core. The second attempt was made six months later - at the beginning of 2016. The new plug is called Bitcoin Unlimited. The intention is the same - to increase the size of the block. However, this time the developers went the other way and offered the nodes to decide for themselves what it would be. It was assumed that the system will eventually stop at the average value.

However, after some thought, the community came to the conclusion that large pools could begin to impose their vision of block size and then decentralization would end. So Bitcoin Unlimited did not win much support. Nevertheless, the supporters of the forks did not give up and a month later they put forward a new idea, which was called Bitcoin Classic. This time the proposal was clear and specific - to increase the block size exactly 2 times to 2 MB, and up to 4 in two years. The project met the crypto community with great interest, there was almost no criticism towards it.

On August 1, 2017, the next and, as it turned out, the loudest hard fork happened. After a lengthy and heated debate in the cryptocurrency community in Bitcoin, the updated SegWit protocol was activated, which carried the transaction signature outside the scope of the block into a separate structure. As a result, in contrast to this Softfork, a major branch of the network appeared - Bitcoin Cash. Bitcoin Cash, in addition to increasing the block size to 8 MB, also has high-quality implemented protection against transaction failures. In particular, now input values ​​in them are signed.

Conclusion

Each hard fork is different. Some proposals are accepted by the cryptocurrency community by voting in dollars and other currencies for the innovations introduced by them. Other forks in the road face tough rejection and disappear, losing old supporters. Be that as it may, most hard forks allow cryptocurrencies to get rid of the original restrictions, making them more convenient for users. If the developers left everything as it was, cryptocurrencies would not cope with the load and lose their active supporters - they would be looking for more comfortable means of mutual settlements. In some situations, they are simply inevitable and help not only to correct mistakes but also to take into account the interests of all parties, as happened in the situation with Ether.

Nevertheless, at present, the Bitcoin community seems to have been fascinated by hard forks and the end of 2017 will be remembered for a continuous series of hard forks. So, for the near future, branchings called Lightning Bitcoin, Super Bitcoin, Bitcoin Cash Plus, Bitcoin Platinum and even Bitcoin God are already planned. The latter threatens to be held by an entrepreneur from China, Chandler Guo. Experts advise to transfer the coins to your personal wallets and not to keep money on the exchanges. This will allow users to secure, and sometimes increase their assets

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