Every thing you need to know about bitcoin and cryptocurrencies

  • July 20, 2021

Since the information recorded in the blockchain cannot be changed and each blockchain with the same registered information will continue its activity forever, then no one will be able to prevent the activity of the Blockchain or change it. Registered data include rules set by Blockchain developers which is known as protocols. We said that this information cannot be changed, but if over time people from the development team disagreed with the protocols or believed that these protocols should be changed, then what should happen?

This is where the fork debate comes into play.

What is fork?

Creating updates to the main blockchain or creating a new blockchain branching out from the main blockchain is called fork.

Fork occurs when a group of developers of a digital currency are dissatisfied with the current trend or believe that the program needs to be updated and modified. A digital currency fork means the branching of the cryptocurrency or branching of a blockchain. This split can be compatible with the previous method (Backward-Compatible), which can be considered as an update or may not even be compatible with the previous method (Backward-Incompatible), which means that the Blockchain is completely a new one, which, of course, branches off from the main blockchain.

Reasons for creating forks

There are many reasons why forks can develop depending on the type of thinking of the development team. There may be market dissatisfaction or technical differences in the team that can lead to forks. Here are the main reasons for creating a fork:

 

Technical differences

Technical differences are one of the main reasons for the formation of forks, which usually leads to the branching of a new Blockchain and thus the production of a new digital currency. Bitcoin Cash, for example, is the most popular Bitcoin fork, created by technical disputes and dissatisfaction with major Bitcoin miners. A group of Bitcoin developers, as well as some well-known Bitcoin miners, were unhappy with the speed and fees of transactions, so a new currency called Bitcoin Cash was created by making extensive changes to the network and defining new rules.

 

Add new features and capabilities

Of course, every software and program need updates over time to improve its performance and security. Digital currencies and decentralized programs are no exception. In order to protect the network from potential risks, improve performance and, of course, security, updates are made that are considered a form of fork.

 

Return of lost capital

 

Sometimes digital currency networks are attacked by malware, and sometimes these attacks lead to hacking of part of the network and the theft of users’ assets. In these cases, the development team may have to provide forks to improve their security and regain lost trust. For example, in 2016, an Ethereum project called DAO was hacked and millions of dollars were stolen from users’ capital.

 

Planned fork

At the outset, digital networks and currencies anticipate future updates and create a foreclosure on time. These updates are usually created to develop new features, and sometimes to improve network security. Since this type of fork is done at the basic network code level, all participants must update their software and enter the main chain.

Hard fork and Soft Fork

Soft fork is compatible with older versions and software updates are not mandatory, so users can update their software as they want, but there may be some limitations and errors over time which leads to forcing the users to update.

Hardfork, however, is a basic and incompatible change with older versions in which all users have to update to participate in transactions, otherwise the user is disconnected from the network and can not confirm the transaction. Hardfork is, in fact, the result of intense disagreements and fundamental changes in a separate branch of the main Blockchain, resulting in the production of a new digital currency. Bitcoin Cache and Ethereum Classic are also controversial hardfork types that were controversial due to differences between network members and major code changes.

There is another type of hardfork known as spin-off coins. In this type of hardfork, each person or developer can use the open source capability of Bitcoin and after accessing its codes, make changes and generate new currency with new features. For example, Litecoin was derived from Bitcoin in the same way. Changes were also made to Lightcoin, such as reducing the time it takes to create a block from 10 minutes to 2.5 minutes and increasing the amount of coins from 21 million to 48 million coins.

 

The effect of forks on price

Forks definitely affect the price of a digital currency, but not all of them! Since the blockchain network program code is open source, anyone can access the source code and change it. can the result be called a fork? You may be able to put the name of the fork on it, but this fork has no effect on the price of the digital currency and does not enter the market. It’s all about big forums that are supported by celebrities in the digital currency world, like Bitcoin Cache! But how does that happen? Suppose a person has 20,000 bitcoins. With this asset, this person is considered a great Bitcoin investor who must carefully monitor the news of digital currencies, especially Bitcoin. The informed investor is notified that a basic fork is to be created called Bitcoin Cash. Since his digital wallet supports bitcoin and its forks, he gets the same bitcoin cache with 20,000 bitcoins. The investor may now buy more bitcoins to increase their assets in the right position, resulting in more bitcoin caches. A basic fork will be very crucial for a digital currency. It can destroy the desired digital currency or stabilize its position in the market forever. Usually, before and on the eve of creating a fork, the price of the digital currency increases, but by creating a fork, its value is also divided in the forged network. We will see the result of a price reduction.

Are you ready to face a fork?

Many forums are created over time for a digital currency that we certainly don’t need to be prepared for. A Successful Fork is a forum that attracts the attention of most users and investors. These are usually legal forums whose news will be published.

 

How does a fork occur?

 

To create a fork, first a block number is specified to start it. The farther this block is from Genesis, the harder it will be to predict the fork, but the closer we get to the start time of the fork, the more predictable it can get. The size of the block for the fork must be specified in order to adjust the network according to the power of the miners and create a new blockchain. The point is that if you make a transaction on the old blockchain after determining the fork’s block number, it will no longer be valid, so if you buy a digital currency after creating the specified block number to create the fork, you will not receive any coins. If you keep your coins in a secure wallet, the exchanges you use will soon support the new coin and give it to its users.

 

Don’t trust too soon!

Not all forks should be trusted because most of them are invalid. Reputable and reliable forums must publish their source code before they occur. You also need to be careful with the new wallet that comes on the market and claims to support new forks. A new wallet and coin that is not open source and does not have many users will never be reliable. Be careful not to trade during a fork and wait for the fork to fully and logically gain your trust. Once the new blockchain becomes independent, it may take days to months for your wallet to support new coins.

 

How to get new coins for a fork

In the first step of receiving new coins, you must have the original digital currency in your wallet before determining the height of the block (the size of the block marked for the start of the fork). As the developers of a new blockchain copy from the main office of the main blockchain and apply it to the new blockchain, you will receive the same amount of coins from the original digital currency as the new digital currency coins. Note that before receiving new forged coins, be sure to transfer your wallet balance to a new address because you may lose your capital if you request a forged coin from an address where there are no forked coins.

 

Conclusion

 

When working in a virtual community with open source code, you need to pay close attention to the forks. Forks, which are a branch of the network and the main digital currency, have different reasons for being created, the most common of which are technical disagreements that have led to hardfork and improved network quality that lead to soft forks.

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