The world of cryptocurrencies has altered our conventional understanding of many terms. For instance, whales do not solely refer to a species of aquatic mammals but could be extended to describe big shots who possess the clout to steer the crypto market to their liking. Similarly, forks denote more than just utensils used at meals.
A cryptocurrency fork indicates a situation when a single cryptocurrency is divided into two. On top of that, one needs to pay heed to the slight differences between hard forks and soft forks.
A hard fork arises when a cryptocurrency’s existing code is changed, culminating in a new blockchain that is entirely isolated from the old blockchain. This means that nodes on the new blockchain do not recognise nor communicate with those on the old blockchain. Miners will have to conform to the new rules to generate valid blocks.
On the other hand, a soft fork entails interoperability between the two versions, where old transactions are still accepted by new nodes and non-updated nodes are able validate new transactions.
Clearing the fog in fork
So, why do forks happen? Forks are almost never incidental, rather they are usually far-sighted decisions incorporated in the road map of a project. Forks can either be spearheaded by the core development team or kickstarted by a particular group of developers who had identified flaws within the existing project and attempted to revamp the system.
For example, one of the more widely known cases is Bitcoin Cash. It was set in motion in August 2017 to increase the Bitcoin’s block size from 1 MB to 8 MB so as to enhance its scalability. Yet, this controversial decision met with adverse reactions from some members of the community who felt that large miners would be given an unfair advantage over smaller miners.
Thus, the effects of forks are very much varied. The most common outcome is that both versions of blockchain are popularised, but one remains in a dominant position over the other. Ethereum exemplifies this trend in the aftermath of a hack, with a small segment of the community choosing to internalise the effects of the hack in the old blockchain now called Ethereum Classic.
Given that innovations continually penetrate the cryptocurrency market and every enterprise is struggling to outpace the other, forks are generally conceived to be part and parcel of the playing field. Developers are constantly reworking existing protocols to address perennial concerns regarding privacy and scalability.
By Joanne Quak, Brand Manager of Dressabelle
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