Forking a cryptocurrency is basically the process of implementing changes to existing rules of a decentralized system in which a crypto asset runs.
In order to have contextualized interpretation of this simple fact, it is useful to reiterate the idea that a cryptocurrency is a public transaction record. In other words, it is a database with rules that dictate how new data can be written.
Electronic money – no matter if it is fiat or decentralized currency – is not composed of discrete units of matter. Modern money is just data stored in a database. Bitcoin is made up of an open and public ledger. A few almost infallible rules govern the management of the system autonomously. The rules are the core of the system!
The word “fork” is used to refer to a change in the consensus rules of a blockchain. A change in the rules can be small and non-critical. For example, one could be when developers want to eliminate an error or add some functionality that does not alter the previous rules of the system. If a change does not affect the general agreement coded in the system, it is said to be a “soft fork”.
If a change in the rules is of a larger scale as to cause the software to diverge and transform into a new system – a brand new version if you will – then it is said that a “hard fork” is taking place. It is understood that when such a process happens, users will no longer be able to connect to that blockchain with the older software. They must migrate over to the new version in order to connect to the “brand new” blockchain.
In practice, a hard fork takes place when the software that miners use to create blocks, splits into two different versions. Miners are the first to vote YES or NO on the new chain. Miners, given the simultaneous existence of the old version and the new one, are then forced to choose between the two distinct networks that have completely different rules.
If all miners choose the new software, then the old chain dies; a non-contentious fork takes place and the currency stays the same. If the fork is contentious, though, a split occurs. Some miners run the old chain and the rest support the new one. This causes the birth of a new cryptocurrency. A new blockchain is born as a copy-paste of the old one, but with noticeable changes.
Bitcoin’s blockchain has faced a number of contentious forks over the last few years. Some developers seem to be convinced that Bitcoin is not as good as it could be, and that new rules are necessary. Some want bigger blocks, others cheaper fees, and so on. They choose to fork Bitcoin, as a consequence. Perhaps some are just greedy and want to make money by launching their own Bitcoin. Some contentions hard forks even claim to be “the real Bitcoin” or a new and better BTC. Others do not antagonize the old chain and even support it.
SOME FORKS CLAIM TO BE THE REAL BITCOIN OR A BETTER BTC
Bitcoin Cash (BCH). Bitcoin Cash is a classic example of a contentious hard fork. The separation of BCH from BTC was carried out on August 1, 2017. Among the rules that were changed is the implementation of block size 8 times that of Bitcoin at the cost of a certain degree of security: 8MB in BCH to generate cheaper and faster transactions.
Bitcoin Gold (BTG). The separation into BTG took place on October 25, 2017. BTG changed the rules regarding mining, so that Bitcoins could be mined with regular PCs. BTG developers wanted to kill the centralization of mining. In BTC, one needs to purchase very powerful machines – the infamous ASICs – in order to work for the network as a miner.
SOME FORKS LAUNCH A NEW KIND OF CHAIN WITH A DIFFERENT UTILITY
Litecoin (LTC). The LTC currency is an example of a fork that was not intended to replace Bitcoin. The founders of Litecoin wanted to create a complementary currency, especially useful for micropayments in everyday life. LTC was launched on October 7, 2011. It did not even divide the miners. LTC was implemented as a new currency with a totally new chain. People liked LTC’s rules: fast transactions, increased maximum supply of 84 million – 4 times that of BTC – and others.
Dash (DASH). Dash was designed to allow instant and private transactions, and decentralized governance. Its decentralized governance and financing systems actually made Dash the first Decentralized Autonomous Organization (DAO). Dash was initially released as XCoin (XCO) on January 18, 2014. On February 28, the name was changed to “Darkcoin.” On March 25, 2015, Darkcoin was renamed “Dash.” Its Masternode system has also been very popular, a type of nodes almost impossible to create in Bitcoin.
BITCOIN WILL KEEP FORKING
There are already a number of famous Bitcoin hard forks: Bitcoin Cash, Bitcoin Gold, Bitcoin Diamond, Bitcoin Satoshi Vision (forked from BCH actually), Super Bitcoin, BitcoinX, Bitcoin God, Bitcoin Pizza, Bitcoin 2, Bitcoin Private and many more. Most of these claim to be better than Bitcoin, to be the real Bitcoin or they promise to improve Bitcoin’s model.
Hard forks that copy the name “Bitcoin” seem to try to take advantage of the brand and the popularity of the original Bitcoin. These forks are very notorious. They tend to confuse new investors. One has to ask the developers of these new copy-pasted versions of Bitcoin, why they insist on reproducing the code and using the name. No hard fork, however, has been able to achieve as much popularity and market dominance as BTC.