What is a Fork in Crypto?
Have you ever wondered what is a fork in crypto? Well, cryptocurrencies are powered by decentralised open software. Anyone can contribute and make transactions on the open software (read this – play to earn games).
This leads to the creation of the blockchain, which literally stores all data in blocks. These blocks create a chain that can be imagined as a train. All blockchain transactions can be traced back to the very first transaction.
A crypto fork is created when a forking blockchain splits to create a new branch. When the blockchain splits, it produces two opposing and competing branches, which is the most common fork crypto meaning.
Crypto forks can be intentional or unintentional and are classified as hard or soft forks.
Forking a blockchain is the process of creating a new version of an existing blockchain platform. Fork meaning in cryptocurrency that all users and miners on the network will be working with a different set of rules, which could include changes to consensus algorithms, block sizes, transaction fees, and more. It can also involve the introduction of entirely new features or functionality.
Bitcoin fork examples include Bitcoin Cash and Bitcoin Gold. One of the reasons why Bitcoin was initially forked was to increase its block size from 1MB to 8MB.
Communities create intentional and unintentional forks. Forks are created when changes are made to the blockchain’s protocol or rules. Creating forks changes the algorithm and increases block sizes.The existing code is copied, pasted, and then modified to launch a new fork cryptocurrency.
Hard crypto forks require a consensus of the new rules or protocols and require nodes to be upgraded. If there’s no consensus in the community, a rollback is required. Soft crypto forks don’t require a consensus of new rules and don’t require nodes to be upgraded. So this is difference between hard fork and soft fork in blockchain.
The blockchain is an open source and relies on developers’ communities to maintain and develop it further. So what is forking in cryptocurrency?
Fork definition crypto involves making changes to the blockchain’s protocol. This increases the block size reducing block time, and implements an entirely new algorithm to the blockchain. Intentional forks are further distinguished between hard fork soft fork.
Continue reading our review of forking a blockchain if you’re new to the phenomenon of crypto forks or if you require additional information on how it all works.
We’ve done an expert review of crypto fork explained article and highlighted only the most important factors to take into consideration (read this – Solana staking guide).
What is Forking in Blockchain?
So what is forking in blockchain? Think of a fork as a rail track that splits into two, creating two separate branches. This is precisely what the technical phenomena of crypto fork meaning present.
The two branches share the same transaction history. As soon as the branches are formed, each branch starts creating its own independent new history. Crypto forks can be created intentionally or unintentionally.
What is a Fork in Crypto: Intentional and Unintentional
Thousands of miners continually compete to create new blocks in crypto blockchains. It sometimes happens when two miners accidentally compete to create the same block. The blockchain will split and create a fork in the blockchain unintentionally.
The original block will continue to expand on the longer blockchain and will abandon the newly created block. Intentional forks are created when communities or developers implement intentional changes to the rules of how the blockchain operates.
Why Crypto Fork is Important
So, you now know what is a fork in crypto, but why are they important? There are various reasons communities or developers would want to implement a hard fork. Security risks could be found in older versions of the blockchain or software.
Developers may also need to add new functionalities or, in worst cases, reverse unauthorised transactions. Most investors agree that these reasons warrant the creation of new forks.
Sometimes forks are created due to disagreements between developers about where the cryptocurrency should be moving.
In terms of what is fork in cryptocurrency,why was the Ethereum blockchain forked? When Ethereum was hacked, a hard fork meaning crypto, had to be created to reverse the hack done on the Decentralised Autonomous Organisation (DAO).
The Ethereum community lost millions of euros worth of Ethereum and the hard fork helped the DAO token holders to get back their ETH funds.
Soft Forks
We have gone over what is fork in crypto, but how are soft forks formed? Soft crypto forks don’t require nodes in the blockchain to be upgraded. This is because a soft fork in blockchain is forward compatible.
These types of blocks are created under new protocols and must also be compatible with the old rules of the original blockchain. Soft crypto forks can continue to run on the old blockchain software and can still take part in the upgraded network as validators of the blockchain’s transactions.
Hard Fork
How are hard forks created? Hard forks are changes to the blockchain that introduce a complete set of new protocols to the blockchain. This involves the upgrade of nodes within the blockchain.
Suppose you have a block within the crypto blockchain that can hold 1MB. You’d need to implement a new set of protocols that would increase the block’s size limit if you needed a larger block that can keep up to 8MB. This involves creating a hard fork.
In terms of what is forking in a blockchain and the hard fork, how does it work? When a hard crypto fork is formed, everyone on the blockchain, including users and miners, must be in consensus to create the new fork.
They can decide to keep running the original software or update the node and switch to the newly formed chain. If they have coins on the original blockchain, they can claim the new blockchain’s protocol’s crypto on the newly formed hard fork chain. Basically, investors will get free coins from the split.
What is forking in crypto and how does it affect the blockchain? Any nodes that have failed to upgrade to the new consensus protocols can no longer participate in the new mechanism once the change has been made on the blockchain.
These nodes are forced onto a separate blockchain at the exact time the hard fork is formed. Nodes that have not been upgraded can no longer process the new protocols and therefore splits the blockchain into a hard fork that is forward compatible.
Conclusion: How Crypto Fork Will Change Industry
We trust that we’ve shed some light on the question: What is a crypto fork? Forks enhance the security of a blockchain network and address shortcomings by enhancing the forks blockchain.
If you’re an investor and you know what does fork mean in cryptocurrency and you know how to use it to your advantage, you can increase your position in a cryptocurrency and perhaps get a positive result.
However, those that do invest in crypto before the creation of a fork quickly cash in on their free coins, thereby dropping the value of the newly formed blockchain significantly. If you have a high-risk tolerance, you could win big just before the crypto fork is created.
