Article, Fintech

What The Fork?

What The Fork?

Why are there different versions of Bitcoin? Hardforks? What are hardforks?  These and many more questions are what keep me up at nights.

Sometimes learning something new can be a struggle. Especially if that something is new technology like cryptocurrency. If you’ve already been on an online exchange, or have taken a look around the internet, you’ve probably notice there’s a big list of cryptocurrencies.

This article aims to help you understand why there is a seemingly never-ending list of different cryptocurrencies, how and why they come to be.

List of cryptocurrencies on coinmarketcap.com, as of 1st November 2017

Okay, so there’s different cryptocurrencies and tokens, no worries. For the purpose of this article, we shall focus on Bitcoin. However, it’s needed to understand that any cryptocurrency can experience and undergo a fork.

Alright, now if you’ve gone and try to buy some Bitcoin, you’ll notice that there are a few other cryptocurrencies that also shares the Bitcoin name. Those being – Bitcoin Classic. Bitcoin Cash. Bitcoin Gold.

And as of writing this article, in case you did not know there’s talks of something coming that could be Bitcoin2x, in just a couple of weeks.
I can understand how it can be overwhelming, especially ìf you’ve only just taken the first step into the crypto world.

Well, have no fear! As this article will hopefully shed some light and help ease you into the sometimes-overwhelming world of cryptocurrency.
We’ll leave the different cryptocurrencies and tokens for another article, for now, let’s focus on what many people intend to do when they first enter the crypto world. That’s to buy Bitcoin. So just why are there so many different versions of Bitcoin? The reason is hardforks.

As stated previously Hardforks aren’t only for Bitcoin. Hardforks can happen to any cryptocurrency that is on a blockchain. It is also vital to understand that blockchain technology is not the same as Bitcoin. Ethereum had a hardfork of their own back on October 25th, 2016, effectively splitting it into Ethereum Classic and Ethereum. And as of writing this article, another planned Ethereum hardfork is in the works, forking and making Ethereum Byzantium.

But for the purpose of this article and simplicity, we’ll stick to just the Bitcoin forks, what they are and why they happen.

So, what is it and why do these forks happen?

Okay, so here’s a rough explanation.
Bitcoin is a cryptocurrency and cryptocurrency are basically a digital asset. And according to Wikipedia; A digital asset is something that exists in a binary format. So, it’s basically just data.

Like all data and software, it all eventually needs to be upgraded as the tech ages and new and better ideas come along. And so, hardforks in cryptocurrency is essentially just to innovate and to upgrade, where the rules and protocol of the current/old blockchain changes to a new set of rules and protocols.

But let’s go into a little more detail.
The upgrade process starts, and then you have the more updated and recent version of the software/client and then the older previous version is no longer used.

At least, that’s how it works for normal software. Such as one of the many applications on your phone, or a game client that you play on your computer.

My TeamViewer client is in need of an update!

Generally, when it comes to software, the updates are not all mandatory (Like in the above screencap of my TeamViewer, asking me to choose a new version but the cancel button is still available and when clicked on, will still allow me to use the program despite being an older version). So, even when a new version rolls around, offering and asking you to upgrade. There are still many people that continue to use their older versions unless the client forces a mandatory update.

In the cryptocurrency world, this is comparable to a softfork.
Bitcoin had a softfork back in July-Aug of 2017 during which it implemented segwit (Segregated Witness protocol). The regular users of Bitcoin were not yet required to update any of their clients or programs in order to keep using Bitcoin on that network.

So, what is the other kind of update? The other type is when the client or program forces an update on you and in order to keep using it, you must complete the update to the new version. Games do this, and every time they roll in a new patch or version, everyone has to update or they are unable to continue playing the game. This is comparable to a hardfork.

Though, it works a little differently when it comes to Bitcoin and others in the cryptocurrency world.

Below, you can see my beautifully illustrated masterpiece of the Bitcoin blockchain, showcasing how a hardfork would look like.
Alternatively, you can check out Investopedia’s illustration but it’s nowhere near as colourful or as hip as mine.  http://www.investopedia.com/terms/h/hard-fork.asp

As you can see in the illustration, when a softfork happens, the backend changes and without going into too much detail, some bits and bobs are tweaked in the code but overall not all too many changes on the front end of the blockchain, and end users can continue to run/use that same blockchain and most likely not notice any changes.

However, when there’s a hardfork like the Bitcoin Cash fork, and Bitcoin Gold fork. It splits into a whole new chain. And so, any client or software you were running on the original Bitcoin blockchain, is not compatible with the new Bitcoin Cash blockchain and an update/upgrade is then required.

Other types of forks?

Since Bitcoin’s code and protocol is open source (Bitcoin’s core code can be viewed by the public, the links to view them are; https://github.com/bitcoin/bitcoin and https://github.com/bitcoin/bips), it allows anyone to come along and fork the chain at their will, potentially creating a new coin based on the Bitcoin codebase in the process.. The best example is Litecoin, created by Charlie Lee and other examples of other coins created from the Bitcoin codebase include Dogecoin and Namecoin. But just a quick note, not all hardforks are in the name of innovation and sometimes these hardforks can fail (A little more on this a couple of paragraphs below).

And then there is of course the planned hard forks. Such as Ethereum’s Byzantium. Planned hardforks are hardforks that have been stated in the projects roadmap from an early stage. In this particular scenario, the older blockchain will almost certainly die out as planned hardforks are a part of the vision for the future of the project, making them the next step forward.

If you want to learn more in detail, check the out the following links in the citations section below. s

What happens to the older blockchain?

Generally, the newest path is supposed to be the ‘better’ path, better tech wise that is. That means bigger block sizes and other details that are supposed to make the blockchain more efficient and faster.
So, what’s supposed to happen, is after a short time the people who are still using the old blockchain, will see it slowing down as more and more people move onto the new blockchain. And with this, eventually the older blockchain will be obsolete and go onwards unused. However, not every hardfork is a success. Hardforks are sometimes used to create a new coin and it doesn’t take long before this new coin simply fails, do the lack of miners, nodes and overall use on the its blockchain.

It’s worth mentioning, this may not always be the case. The same scenario happened with Bitcoin Cash and Bitcoin Gold. Where after the hardfork, the majority of network continued to use and stay on the old blockchain. We call these; Contentious Hardforks.
They happen due to disagreements within the community, as people will have different perspectives and believe this or that to be better for the Bitcoin network and others will disagree.

 

Citations and awesome links:

https://masterthecrypto.com/guide-to-forks-hard-fork-soft-fork/

http://www.investopedia.com/terms/h/hard-fork.asp

https://www.coindesk.com/bitcoin-hard-fork-exploring-science-contentious-code-change/

https://github.com/bitcoin/bitcoin

 

Image courtesy of DeviantArt, wojtekd

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Justs is a strange and very rare creature of Latvian origin. He is a jack of all trades, yet master of none. He hopes to change that around by mastering all things Crypto. In his own highly opinionated and rant fuelled way. Have no fear, Justs is here.