Bitcoin Forks Explained: A Crypto Guide on Hard Fork

Bitcoin Forks Explained: A Crypto Guide on Hard Fork

The rise of Bitcoin fork gave birth to cryptocurrencies like Bitcoin Cash and Bitcoin SV. Understanding the concept of the original Bitcoin network is important for crypto enthusiasts, investors, and blockchain developers. 

This article will cover Bitcoin forks in detail, focusing on areas like soft and hard forks within the Bitcoin community. We will also cover the early days of Bitcoin, differences between a hard fork and a soft fork, and the impact of these new features to a blockchain investor.  

What Is a Bitcoin Fork?

A Bitcoin fork is simply a change to the Bitcoin blockchain protocol that creates a new version of the blockchain. This change depends on the type of fork and can lead to a permanent or temporary split in the blockchain. A fork in the nature of Bitcoin can occur during changes in consensus rules, software upgrades, and disagreements within the crypto community.  

Hard forks create new cryptocurrencies while soft forks result in small and compatible updates. Understanding Bitcoin forks is vital for Bitcoin developers because they can affect the vision of Bitcoin transactions and technology behind Bitcoin.   

History of Bitcoin Forks

Bitcoin forks can be hard forks (not backward-compatible) and soft forks (backward-compatible), which occur because of the several opinions on the future direction of Bitcoin. Since Satoshi created Bitcoin in 2009, Bitcoin has undergone several major or minor forks.   

1. Bitcoin XT (2014)

• Purpose: Increased the block size limit from 1MB to 8MB

• Key Developer: Mike Hearn

• Outcome: Lost momentum after original blockchain adoption, fading away largely.  

• Significance: First notable Bitcoin fork created to scale Bitcoin.   

2. Bitcoin Classic (2016)

• Purpose: The creation of Bitcoin classic was to increase block size limit to 2MB.  

• Outcome: Short-lived because of the lack of minor and consensus support.    

• Significance: Highlighted growing diversion in the community.   

3. Bitcoin Unlimited (2016)

• Goal: Let miners pick block sizes  

• Result: Failed to gain recognition because of centralization and security concerns.  

• Significance: Further illustrated block size debate

4. Bitcoin Cash (BCH) – August 1, 2017

• Why: Different opinions over the scalability of Bitcoin  

• Change: Increased block size to 8MB

• Supporters: Roger Ver, mining pools

• Result: Successful hard fork; remains one of the top altcoins

• Significance: First major and sustained split from Bitcoin

5. Bitcoin Gold (BTG) – October 24, 2017

• Purpose: Switched to Equihash (GPU-friendly) to promote decentralized mining.   

• Security Issue: Suffered 51% attacks after launch  

• Outcome: Still active but have limited adoption

• Significance: Challenged the dominance of ASIC in BTC mining   

6. Bitcoin Diamond (BCD) – November 2017

• Goal: Improve privacy and price by increasing supply to 210 million coins.   

• Change: Adjusted block size, encryption features

• Outcome: Controversial because it was poorly managed and lack transparency.  

• Significance: One of many forks with mixed reception

7. Bitcoin SV (BSV) – November 15, 2018

• Full Name: Bitcoin Satoshi Vision

• Origin: Bitcoin cash's fork   

• Proponent: Craig Wright who claimed to be Satoshi Nakamoto)

• Changes: Increased block size to 128MB or more

• Controversy: Highly debated and was delisted by some exchanges

• Significance: Showed how ideological splits can go beyond technical problems.   

Types of Forks

Blockchain forks take place when a blockchain splits into two paths. These splits are because of deliberate rule changes, debates in the community, and software upgrades. The types of Bitcoin forks include:   

1. Bitcoin Hard Forks

A hard fork is change to the Bitcoin blockchain that is not backward compatible. This implies that nodes maintaining the old software choose not to accept the blocks made by nodes running the new software. This disagreement can lead to blockchain splits and the creation of a new cryptocurrency. Notable hard forks of Bitcoin are Bitcoin Gold and the creation of Bitcoin Cash.   

2. Soft Forks

A soft fork is a backward-compatible change to the Bitcoin protocol. This fork requires non-upgraded nodes to keep participating in the network, as long as they stick to the new rules. Example of soft forks include Taproot and Segregated Witness (SegWit) upgrades.   

Major Bitcoin Forks in Crypto

Over the years, several Bitcoin forks have been created with new objectives and features. Here are the major forks in crypto:  

1. Bitcoin Cash (BCH)

This Bitcoin version was developed in August 2017 to solve the scalability issues of Bitcoin by increasing the block size from one to eight. This change was made to accommodate more transactions for each block by lowering transactions per second and fees. Bitcoin Cash was created to encounter its own forks and add new features.  

2. Bitcoin SV (BSV)

Bitcoin SV stands for "Bitcoin Satoshi Version" and it began in November 2018 due to a split in the Bitcoin Cash community. The proponents of BSV campaigned for a larger block size (128MB) to accommodate enterprise-level applications and stick closely to what they read as the original vision of Satoshi Nakamoto.   

3. Bitcoin Gold (BTG)

Bitcoin Gold was developed in October 2017 to increase the decentralization of Bitcoin. This was executed by changing the proof-of-work mechanism to one that is ASIC-resistant, thereby allowing more miners take part in Bitcoin mining by using standard GPUs to mine BTG.   

Why Do Bitcoin Forks Occur?

1. Scalability Concerns: Disagreements on how to scale the Bitcoin network to process more transactions.   

2. Security Enhancements: Implementing network upgrades to increase the security of the blockchain.   

3. Ideological Differences: Different philosophies on what Bitcoin should be. For instance, opinions like seeing Bitcoin as a digital gold, a platform for smart contract, and a medium of exchange

4. Technical Upgrades: Adding new functionalities or features to the network   

Impact of Forks on Cryptocurrency Investors

For investors who want to invest in digital currencies like Bitcoin, forks can be seen as a reward or risk. Mastering Bitcoin fork is vital to help investors understand its transaction history. Here are the impacts of forks on investors: 

1. Asset Duplication: In the case of hard fork, Bitcoin holders can have the same amount of new cryptocurrency.   

2. Market Volatility: Another fork impact is that it can lead to major price fluctuations in the new and original cryptocurrencies.   

3. Security Risks: Newly forked coins may be open to attacks if they do not have enough network security.

For more read on Bitcoin, check out this article on Bitcoin Name Domain to learn how to customize your wallet addresses.

The Future of Bitcoin Forks

As Bitcoin continues to grow, the nature of future forks can be based on community values, evolving technology, and global regulations. Here is what the future holds:  

1. Fewer Major Hard Forks

Why: The Bitcoin community has evolved to be more conservative and risk averse.

Trend: Consensus is now harder to get for large protocol changes.   

Result: Major contentious forks such as Bitcoin Cash or Bitcoin SV are unlikely unless a severe disagreement arises.

2. Growth of Application-Level Forks

Instead of forking Bitcoin itself, blockchain developers are working on creating Layer 2 solutions like Lightning Network and building sidechains such as Liquid Network and RSK. This help to lower the need of forking the base protocol while allowing innovation.  

3. Soft Forks for Privacy & Efficiency in Blockchain

Possible future enhancements done through soft forks include:   

Schnorr Signatures – Better efficiency and multi-signature support

MAST (Merkelized Abstract Syntax Trees) – More flexible smart contracts

Further Taproot Upgrades – Higher privacy and scripting capabilities

4. Regulatory Pressure May Trigger Forks

Governments could choose to enforce "compliant" copies of Bitcoin. For example, they can achieve this by reversing transactions and blacklisting addresses. This attempt might to lead to forks between regulated Bitcoin-like chains and permissionless Bitcoin. 

5. Ideological Forks May Still Occur

Although there is stability in the technical foundation, different ideologies can lead to regulated versions vs censorship-resistant energy-intensive Proof-of-Work vs. eco-friendly alternatives.

Final Thoughts on The Technology Behind Bitcoin

A fork is a change in Bitcoin protocol because of the decentralized and dynamic nature of cryptocurrency. In the case of Bitcoin, they show the ongoing efforts by the community to scale, redefine, and innovate the cryptocurrency. Although forks can be seen as opportunities for blockchain developers and investors, these versions of Bitcoin come with risks that must be carefully evaluated. By grasping the mechanics and implications of Bitcoin forks, you can actively take part in changing the future of blockchain technology.   

This YouTube video on Forks in Blockchain is an education piece that discusses the mechanics of blockchain forks through visual aids for better understanding

FAQs About Bitcoin Forks

1. What is the difference between soft forks and hard forks?

A hard fork is a non-backward-compatible change that results in a new blockchain and cryptocurrency. A soft fork is a backward-compatible update that does not create a new coin.

2. Do I get free coins when a hard fork happens?

Typically, if you hold Bitcoin at the time of a hard fork, you may receive an equivalent amount of the new cryptocurrency. However, this depends on the policies of your wallet or exchange.

3. Are all Bitcoin forks successful?

No, many forks fail to gain traction and may become inactive or obsolete. Success depends on factors like community support, technological innovation, and market adoption.

4. How can I stay informed about upcoming BTC forks?

Follow reputable cryptocurrency news sources, forums, and official project announcements to stay updated on potential forks.