The terminology “forking” often generates confusion among industry newcomers and even seasoned traders. But what does it actually mean? And why does it have nothing to do with a tasty dinner?
In traditional computer software development, forking refers to the copying of an existing codebase to create a new version with different features or changes. In cryptocurrency terms, forking also involves creating a new version of an existing coin but with one crucial difference – it creates a separate blockchain.
What is a Fork?
A fork occurs when there is a divergence in the blockchain network, resulting in two or more versions of a coin. This can happen for various reasons, such as changes in an existing cryptocurrency’s code or a disagreement among developers and miners about how the coin should operate.
There are two types of forks: soft forks and hard forks. Soft forks are updates to the protocol that do not require all nodes on the network to upgrade, whereas hard forks require all nodes to update their software to a new version.
Why Fork?
Forks can serve different purposes in the world of cryptocurrency. One main reason is for improving or upgrading a coin’s functionality and features. Just like any other technology, cryptocurrencies need to evolve and adapt to stay relevant and competitive. Forking allows developers to make changes and improvements to a coin’s codebase.
Another reason for forking is ideological or philosophical differences. When there are disagreements within the community, it can lead to a split in the blockchain network, resulting in two separate versions of the coin.
Lastly, forks can also be used as a way to create new coins by “forking off” from an existing one. This is commonly known as a hard fork, where a new version of the coin is created with different features and functionalities.
Types of Forks
As mentioned earlier, there are two types of forks: soft forks and hard forks. Soft forks are updates that do not require all nodes on the network to upgrade, while hard forks require all nodes to update their software to a new version.
Soft Forks
Soft forks are backward-compatible updates to the protocol. This means that nodes using the older version of the software can still operate on the network without any issues. However, when transactions from nodes that have not upgraded are broadcasted, they may be rejected by nodes running the updated software.
One benefit of soft forks is that it allows for a more gradual and smooth transition for upgrading the network. It also ensures that there is no disruption in the blockchain’s continuity.
Examples of soft forks include Bitcoin’s Segregated Witness (SegWit) update and Ethereum’s Byzantium upgrade.
Hard Forks
Hard forks are more drastic updates that require all nodes on the network to upgrade to a new version of the software. This is because hard forks introduce changes that are not compatible with the previous version of the software.
A hard fork can lead to a split in the blockchain network, creating two separate versions of the coin. This happened with Bitcoin in 2017 when there was a disagreement within the community on how to scale and improve its transaction processing capabilities. This resulted in a hard fork, creating a new cryptocurrency called Bitcoin Cash.
Some argue that hard forks go against the decentralized nature of cryptocurrencies as they give power to developers or influential individuals to make changes without consensus from the community.
Consensus Mechanisms
In order for a blockchain to function efficiently, there needs to be an agreement on the state of the network. This is where consensus mechanisms come in.
Consensus mechanisms are protocols that allow different nodes on the network to reach a common understanding and agree on the validity of transactions. They ensure that all nodes have the same version of the blockchain, preventing any malicious activity such as double-spending.
The most commonly used consensus mechanism is Proof-of-Work (PoW), which is used by Bitcoin and Ethereum. Other popular ones include Proof-of-Stake (PoS), Delegated Proof-of-Stake (DPoS), and Practical Byzantine Fault Tolerance (PBFT). Each of these mechanisms has its own advantages and disadvantages, and choosing the right one for a blockchain network depends on various factors such as security, scalability, and energy efficiency.
Conclusion
Blockchain technology is constantly evolving with new updates and upgrades being introduced to improve its functionality and address any issues. Whether it’s through soft forks or hard forks, these changes are crucial in maintaining the integrity of the network and ensuring that all nodes are in consensus.
