What is a fork in Bitcoin, and why are they so significant? Forks can occur in any cryptocurrency as either hard or soft forks. Bitcoin is one of the prominent coins with various forks.
Ever since the inception of Bitcoin, which pioneered cryptocurrencies, many other coins have sprung up. Some have very similar traits to Bitcoin, while others borrow very little. Interestingly, even Bitcoin has seen numerous recent historical attempts to alter some of its core principles for advancement and security purposes.
This desire for change leads to the process of forking where there is a minor or radical change in a blockchain’s protocol to either update the existing code or split into an entirely new cryptocurrency.
Any cryptocurrency can experience forking or forks if it runs on blockchain technology. Bitcoin is one prominent example because of its popularity, prompting a look at its forks specifically.
Forks in more detail
As already suggested, a fork is a fundamental change in a cryptocurrency’s code to either alter the said coin or create an entirely new one. Forks essentially introduce a new set of rules to a cryptocurrency, as suggested by the mining community.
This suggestion is usually for reasons related to adding new features and catastrophic bugs. In most cases, forks serve to solve a developmental or structural problem within the blockchain. Typically, in the mining communities, there may be two distinct camps with opposing views on a proposed new set of rules. When the community cannot reach a consensus, a permanent split occurs where a new cryptocurrency emerges from the original.
Soft and hard forks
If all miners reach a consensus, this event is known as a soft fork. We can think of a soft fork similar to an app update on a phone where any old version features will not work on the new version. So, in a soft fork, everyone has to update to the new rules of the code.
This type of update is minor or ‘soft’ because it doesn’t drastically change the cryptocurrency in question. An example of a notable soft fork in Bitcoin, which culminated in the hard fork of Bitcoin Cash, is the Segregated Witness protocol (or SegWit for short).
Miners proposed the protocol primarily to improve the transaction speed by increasing the 1MB block size of the BTC block. On the other hand, a hard fork seeks to radically alter the core tenets of a cryptocurrency to the point of splitting into a new one.
Adding on from SegWit, it eventually became apparent this system wasn’t unanimously favored, resulting in Bitcoin’s first hard fork, Bitcoin Cash. Hard forks are more significant and recognizable to the average Joe, especially with Bitcoin.
The most recognized Bitcoin-branded hard forks
The criteria we are using here refers to the cryptocurrencies part of the top 100 coins by market capitalization that uses the Bitcoin name. Many Bitcoin-branded hard forks exist, such as Bitcoin Diamond, Super Bitcoin, Bitcoin Atom, Bitcore, Bitcoin Gold, Bitcoin Private, Wrapped Bitcoin, Bitcoin Zeo, and Bitcoin Post-Quantum, to name a few.
However, many of these have very thin liquidity and attract little mainstream coverage.
The following three Bitcoin-branded coins are in the top 100 most traded cryptocurrencies according to CoinMarketCap (at the time of writing):
- Bitcoin Cash (#5)
- Bitcoin SV (#11)
- Bitcoin Gold (#75)
BCH (Bitcoin Cash) is arguably the most successful Bitcoin hard fork, as evidenced by having a high position in the top 100. The fork was born out of the disagreements with the previously mentioned SegWit that attempted to solve Bitcoin’s scalability problem.
Those who were faithful to Bitcoin wanted to keep the block size to 1MB, even though this means the blockchain can handle a limited number of transactions per block. Bitcoin Cash’s main distinction is the 8MB block size, meaning it can contain significantly more transactions, which makes it faster.
Bitcoin SV is a hard fork from Bitcoin Cash. The SV stands for Satoshi Vision, alluding to the vision of Bitcoin’s anonymous founder, Satoshi Nakamoto. The main difference between Bitcoin Cash and SV are the block sizes.
Bitcoin SV proponents wanted to further increase the block size from 8MB to 128MB in line with making Bitcoin a faster and cheaper peer-to-peer payment service.
Bitcoin Gold is a hard fork from the original Bitcoin that aimed to make mining more accessible. Instead of its predecessor, which heavily favors miners who use ASICs (application-specific integrated circuit), the algorithm of BTG (Bitcoin Gold) allowed for CPUs (central processing units) and GPUs (graphics processing units) to mine the currency.
These options are more accessible and tremendously less expensive than ASICs.
All of the variations of Bitcoin here possess many identical technical dimensions like the mining algorithm and maximum total supply but mainly differ in their unique use cases.
Most recognized non-Bitcoin branded hard forks
Owing to its massive appeal and influence, many other prominent cryptocurrencies were hard forks from Bitcoin. Although they do not carry the name, they share many similarities with their ancestor.
Other recognized non-Bitcoin branded hard forks include the likes of Dash, Zcash, and Litecoin. As with the Bitcoin-branded forks, many of these tokens have comparable technical specifications.
Most of these coins were hard forks back in the early days and have also staked their market share claim, appearing very high in the list of most traded cryptocurrencies. For example, Litecoin is the eighth most traded cryptocurrency with a market cap of roughly $4 billion.
Forks are just one interesting facet of cryptocurrencies, which explains why hundreds of them are around now. Specifically, with Bitcoin, investors shouldn’t be confused with the many Bitcoin-branded coins that exist once they understand forks.
This article shows that Bitcoin has inspired countless currencies that share much of what makes it a great invention.