The world of cryptocurrency has seen many developments since the creation of Bitcoin back in 2008. One of the most significant events that can take place in the world of cryptocurrency is the hard fork. A hard fork is a fundamental change to the protocol of a blockchain network.
There are two types of forks in cryptocurrency, a soft fork and a hard fork. In a soft fork, only the rules of the protocol are changed, and the network remains compatible with the previous version. However, in a hard fork, the protocol is changed so much that it is no longer compatible with its previous version.
What is a hard fork?
A hard fork is an update to a blockchain protocol that changes the rules by which it operates. It is a permanent divergence from the previous version of the blockchain, resulting in a split into two different networks. A hard fork occurs when a subset of the network’s participants adopt a new version of the software, while the rest continue to use the older version.
The new version of the blockchain is then created, and transactions from the previous version are no longer recognized by the new version. This creates two separate chains, each with their own history and distinctive features. Any holders of the original cryptocurrency will only be able to transact on the original chain, while those holding the new version can transact on that new chain.
In simpler terms, a hard fork is like two people who decide to move in different directions instead of staying together.
How does it work?
Hard forks usually occur when there is a disagreement within the community about how to move forward with a particular blockchain network. It could be related to technical improvements or political disagreements.
Once the community decides that a hard fork is necessary, a new version of the blockchain is created, and the changes are implemented. As the new version of the blockchain diverges from the original, it creates a split in the network. Nodes that have adopted the new version of the blockchain continue to validate transactions and mine blocks, while the ones that have not, continue to run the old version.
Nodes on different chains start building their own unique blockchain. The ones who have adopted the new version of the blockchain will not accept transactions or blocks from the nodes still running the older version. Similarly, the old-chain nodes will not accept blocks from the nodes of the new chain.
If the hard fork is successful, two different cryptocurrencies will be created – one for the old-chain version and the other for the new-chain version.
1. What happens during a hard fork?
During a hard fork, a new version of the blockchain is created, and any holders of the original cryptocurrency will only be able to transact on the original chain, while those holding the new version can transact on that new chain.
2. Can I mine both versions of a cryptocurrency after a hard fork?
No, after a hard fork, the old-chain nodes will not accept blocks from the nodes of the new chain, and vice versa. You can only mine the version of the cryptocurrency that your nodes support.
3. Do I get the same amount of the new cryptocurrency after a hard fork?
No, it depends on the network’s rules and how the hard fork has been implemented. In most cases, if you hold 1 unit of the original cryptocurrency before the hard fork, you will get 1 unit of the new cryptocurrency after the hard fork.
4. Can a hard fork happen with any cryptocurrency?
Yes, a hard fork can occur in any blockchain network where there is a disagreement among the community regarding a particular change to the protocol.
5. Can a hard fork cause a cryptocurrency to lose its value?
Yes, a hard fork can cause a cryptocurrency to lose its value if it is not well received by the community. However, if the hard fork results in a successful upgrade and improvement in the blockchain network, it can result in an increase in the value of the cryptocurrency.
In conclusion, a hard fork is a fundamental change to a blockchain protocol that results in the creation of two different versions of the network. It happens when there is a disagreement among the community regarding changes to be made to the network. Hard forks can cause a lot of confusion for holders of the cryptocurrency, but if implemented successfully, they can lead to improvements in the blockchain network.