What Is a Hard Fork?
Ablockchain hard forkis a change in programming that is incompatible with the old programming. This essentially creates a new blockchain and cryptocurrency. Hard forks generally require all nodes or users who wish to stay on the new chain to upgrade to the latest version of the software.
Hard forks may be initiated by developers as part of routine progress or maintenance on a blockchain. They may also be created by a faction of the crypto community that wants to take a different direction with the blockchain.
Key Takeaways
- A hard fork is an event in which a change to a blockchain results in two branches: one that follows previous protocols and one that follows the new version.
- In a hard fork, holders of tokens in the original blockchain will also be granted tokens in the new fork, but participants must choose which blockchain to continue verifying.
- Hard forks are not specific to any single blockchain—it is an event that many have gone through.
- Hard forks occur for several reasons, such as developer disagreements, required updates to a blockchain, or someone attempting to make another blockchain and cryptocurrency they control.
How Hard Forks Work
A hard fork is when a new blockchain version emerges that is incompatible with the original version. It is not always an adverse event; in fact, many blockchains have undergone hard forks to implement necessary changes.
Blockchains are basically programs that create and store files of information on a network of computers and devices. There are usually layers of software completing different tasks, some methods for the network to reach an agreement on the blockchain's state, and many network participants. Each layer's underlying programming can be changed as needed, but it has to be accepted by the network's participants to be adopted.
Developers cannot force changes on a public blockchain that relies on participation. Public blockchains rely on their participants, so changes must be implemented by them, not forced upon them. Otherwise, they can refuse to accept the changes and keep their preferred version.
Because blockchains are essentially programs and scripts, they can be affected by errors, bugs, network communication problems, hardware failures, or other issues. Blockchains also rely on a large number of network participants to host versions for security.
When developers publish a change to any of a blockchain's functions, one of two things happen: a hard fork or a soft fork. If the change is drastic enough to prevent a participant running the old version from participating in the blockchain's processes, the change is considered to have created a hard fork in the blockchain. Conversely, a change that allows old and new nodes to run is considered a soft fork.
In a hard fork event, participants are faced with a choice—they can update their software to the new version or not upgrade their software and use the old (and now unmaintained) blockchain.
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Reasons for a Hard Fork
There are several reasons or even events that cause developers to implement a hard fork. For instance, when the hack on the Decentralized Autonomous Organization (DAO) occurred, the Ethereum blockchain was forked by a nearly unanimous vote.
The fork rolled back transactionsthat siphoned off tens of millions of dollars worth of digital currency by an anonymous hacker. The hard fork also helped DAO token holders get their ether (ETH) funds returned. However, some miners kept mining the old chain, which was picked up by OTC desks and given a price discovery order book. Poloniex listed this currency also, and some of the Ethereum community decided to keep this version and created Ethereum Classic.
What Is the Meaning of Hard Fork?
A hard fork is a change in a blockchain's programming that creates a new blockchain and cryptocurrency. Many projects have hard forked but kept their original names and tokens, with other groups deciding to stay with the original code and change the name.
Is a Hard Fork Good or Bad?
It depends on the circ*mstances and participants' views. Some might believe a hard fork is necessary and good, while others might not.
Why Do Hard Forks Happen?
There are several reasons a hard fork might happen. Code might need adjusting to fix errors or address a weakness, or a group might want to create their own blockchain and cryptocurrency.
The Bottom Line
Hard forks are a change in programming that results in a blockchain split. Sometimes, hard forks are controversial in the community involved in a blockchain; at other times, they are necessary for a blockchain to progress.
In situations with controversy, participants and users can either upload the updated blockchain and begin processing it or reject it and use the old chain. This is how several blockchains and cryptocurrencies, such as Bitcoin Cash and Ethereum Classic, started.
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