What is Bitcoin fork? The Ultimate Guide to Bitcoin Hard Forks
The father of all cryptocurrencies, Bitcoin has become
the pioneer in the sphere of blockchain-based money. It’s not surprising: the underlying
technology appeared to be revolutionary, and only a few projects managed to
come up with completely new types of blockchains (Ethereum, EOS, and Tron). Numerous cryptocurrencies appeared to be
Bitcoin forks. What is a Bitcoin hard fork? This guide is here to explain that
To start with: What is Bitcoin fork?
The fork is a
cryptocurrency with some changes in the current Bitcoin protocol (BTC)
and a change in its rules. Imagine you play one game and want to change its
rules. It means all other players will have to agree to change the rules. If you
reach the agreement, the changes are implemented and the game continues as
usual. However, if the consensus was not achieved, two versions of the game are
created: version No. 1 with the old rules and version No. 2 with the new rules.
This would be a fork in the game. The same logic applies to Bitcoin code.
After the fork, the original Bitcoin stays, and the new
Bitcoin appears. For example, Bitcoin Cash (BCH) changed the block size from 1
to 8 MB. Supporters switched to a new Bitcoin Cash coin, and those who
preferred the original rules continued to use the original Bitcoin. Bitcoin
Gold changed the rules of mining in favor of users, and also got many
Bitcoin hard fork explained
Hard Fork is a change in the cryptocurrency protocol
that does not support backward compatibility with older versions of the
currency. For example, anyone who runs a node on a Bitcoin network will
definitely need to update their software to recognize new blocks.
Hard Fork is a
situation where the nodes that launch the new software are separated from the
previous version of the cryptocurrency.
If half of the nodes work with the new version and
mining blocks, and the other half starts the old version and expands a
different set of blocks, then you actually have two different chains.
What is a soft fork?
Soft forks of
cryptocurrencies allow you to combine new rules with old ones. While
the goal of a hard fork is to weaken the action of some rules that are
implemented in an unreduced version of the protocol, the task of a soft fork is
to tighten some of them.
SegWit is a good
example of Bitcoin soft fork. The Bitcoin community has long
been discussing how to boost the speed of Bitcoin transactions. Since a new
transaction block is mined every 10 minutes on average (and this point has not
been discussed), the idea was to increase the number of transactions that can
be included in each block. To do this, the community proposed a solution called
Segregated Witness (abbreviated SegWit). The main idea was to free up space in
each block, which can be used to include more transactions. This was achieved
by removing the public key and signature associated with each transaction from
the block and sending them through another messaging channel. Since the public
key and signature occupy about 60% of the total transaction size, due to their
separate sending, the number of transactions in each block could be doubled.
Why do hard fork BTC currencies appear?
The cryptocurrency blockchain is usually open-source,
which means that the code is free and accessible to everyone; both for viewing
and for use.
As currencies evolve and change over time, some
changes need to be made to their protocols. Such changes can range from a small
addition of a new function to mass changes, such as increasing the maximum
Sometimes, within the community of miners, blockchain
changes can be viewed in different ways. Some accept changes, while others do
not. Such divisions in the network infrastructure can also lead to the creation
of new blockchains and new cryptocurrencies.
7 Bitcoin forks
The Bitcoin hard fork list is actually longer, but those were rather small improvements than separate viable cryptocurrencies. Below, we observe seven main Bitcoin hard fork cryptocurrency projects.
The fork appeared on August 19, 2015. The authors were
the developers of the original Bitcoin Core – they created Bitcoin XT to solve
the problem of network scaling. Bitcoin XT developers went by increasing the
block size, which in the original Bitcoin chain was 1 MB.
At the time of the creation of the first block of
Bitcoin XT, it was supported by 12% of miners, however, as conceived by the
creators, a complete transition required 85% of the network nodes to join the
Bitcoin XT network. Later, the share was reduced to 75%.
Right from the start, the Bitcoin XT project has been
harshly criticized by many leaders of the Bitcoin community. Moreover, an
account, allegedly owned by the creator of Bitcoin Satoshi Nakamoto, spoke out
against the fork. However, back in 2014, information was circulating in the
community that the profile could be hacked, and therefore there is a theory
that it was Satoshi who opposed Bitcoin XT.
The Bitcoin Unlimited project appeared almost half a
year later than Bitcoin XT – in January 2016. It solved the same problem –
increasing the size of the block – but in a fundamentally different way.
Bitcoin Unlimited let network nodes to decide what size blocks they should
issue. The creators relied on democracy – everyone who has a complete node got
the opportunity to decide on the size of the block.
Creators considered that the system itself would stop
at the average value chosen by the majority: too small blocks would be “forked”
from the network by the system itself, it would not accept too large blocks
since most nodes would not see them.
The power of the free market, which rules the world of
the traditional economy and financial systems, was created by the creators of
Bitcoin Unlimited to serve the digital economy. The impact of the project was
added by the joining of developers Tom Sonde and Tom Harding, who left Bitcoin
XT, which had begun to decay, and another, which appeared a little later, but
also did not last long, – Bitcoin Classic.
Unlimited, like its predecessor, Bitcoin XT, was not successful – the community
was thrilled by the prospect that the proposed scheme could be used by large
centralized pools, suppressing the opinion of the majority of users with
superior computing power. This would lead to a concentration of influence in
the network in the hands of only a few groups and devalue the whole idea of Bitcoin decentralization.
Besides, a large number of blocks of different sizes
could lead to multiple involuntary forks and the formation of a number of false
chains – which would ultimately lead to the fall of bitcoin itself.
Bitcoin Classic appeared only a month later than
Bitcoin Unlimited, in February 2016, but began to crumble even faster. The
creator of the fork was Gavin Andersen, the author of Bitcoin XT, who continues
to pursue his goal – to increase the throughput of the blockchain by increasing
the size of the block. This time it was planned to increase exactly twice, up
to 2 Mb, and two years later – up to 4 Mb. Jonathan Tumim, another of the
creators of Bitcoin Core, also joined Andersen.
XT, Bitcoin Classic has been favorably received by the community. It
was supported by such mining pools as Antpool (Bitmain), BW.COM, HAOBTC.com,
Genesis Mining, Multipool.us, as well as Coinbase, OKCoin, and Foldapp. Roger
Ver, the owner of Bitcoin.com, also expressed his sympathy for the project – he
is confident that increasing the block size will allow for the creation of a
larger number of full nodes, which means to further increase the decentralization
of the network.
never found direct and high-profile opponents, but it never became fully
functional. The main reason why discussions have been dragging on
for the second year now is the need to conduct a hard fork, which will
temporarily affect the overall security of the network and may result in a
split. However, after the appearance of Bitcoin Cash, which produces blocks up
to 8 MB, the developers of Bitcoin Classic said that they considered the goal to
Bitcoin Cash is one of the most famous forks, which
really ended with a chain split and the formation of a new cryptocurrency of
the same name. This happened on July 23, 2017, and so far, Bitcoin Cash is
showing good results in the market. Many experts are inclined to believe that
while the authority of the original Bitcoin and its associations keep it
afloat, but even Bitcoin Cash itself has managed to gain some influence and
stays firmly in the top ten most popular cryptocurrencies.
Bitcoin Cash has a number of significant differences
from the original Bitcoin. There are three main code additions:
The block size limit increased from 1 MB to 8 MB at a time;
Additional protection against transaction failures is set – retries and erasures. Bitcoin Cash guarantees the safety of the user if two parallel chains are saved – the code allows them to coexist without duplicating or erasing the operations performed;
The type of transaction has changed. This is part of a previous security code change – Bitcoin Cash has launched a new type of transaction in which input values are signed. This ensures the security of hardware wallets and solves the issue of quadratic hashing.
The creators of Bitcoin Cash also created two more
hard forks: Bitcoin SV and Bitcon ABC.
Bitcoin Gold is another cryptocurrency that separated
from Bitcoin on October 24, 2017, a day earlier than the developers planned
deadline. The creators’ goal is to make their own cryptocurrency more
significant than the original Bitcoin, turn it into real “digital gold”.
To achieve this goal, the authors changed the hashing algorithm, switching to using Proof of Work
by Equihash. The peculiarity of this PoW is that Equihash is suitable for
GPU mining – mining of cryptocurrency, passing through graphic cards. The same
type of mining is already used in some other cryptocurrencies, in particular,
ZCash. Equihash is also resistant to ASIC processors.
In fact, the creators of Bitcoin Gold are trying to
expand the circle of potential miners – the distribution and availability of
GPUs are higher than the ASICs, which means there will be more users who can
mine cryptocurrency and become network nodes. This will increase the level of
decentralization and reduce pressure on the community from large commercial
mining pools. The main slogan – “Make
Bitcoin decentralized again”, “Let’s make Bitcoin decentralized again” is
also aimed at this. According to the developers, large pools have actually
monopolized the network, and the community must fight this. The result of this
struggle was Bitcoin Gold.
There were ideas and opponents who insisted that the
market for GPU processors is controlled by only two large manufacturers, which
means that there is a risk again – but the hard fork was produced anyway, and
Bitcoin Gold is now traded on exchanges – albeit with a rather unstable rate.
The main idea behind Bitcoin SV was the preservation
of the vision of Bitcoin, which was founded by Satoshi Nakamoto himself. The abbreviation SV stands for Satoshi Vision.
The developers have preserved the best from Bitcoin
Cash, namely low fees on the network, scalability and security, and various
chips have been created for miners and investors.
In the fall of 2018, the Bitcoin Cash community split
into two camps, each of which presented its vision for the development of
cryptocurrency. The developers could not reach consensus, and as a result,
investors had to choose.
Bitcoin Cash ABC, led by Roger Ver, chose to implement
decentralized applications and transactions between blockchains. Bitcoin SV, led by Craig Wright, solves the
scalability problem (which affects transaction adoption speed). Creators
plan to expand the block to 128 MB. The BCH network was divided at block No.
556767. Therefore, Bitcoin SV repeats BCH technology in many respects, in
particular, the developers chose Proof-of-work consensus algorithm and are not
going to change it yet. On block 557301, blocks were reorganized, which is typical
of PoW cryptocurrencies.
B2X, the brainchild of the SegWit2x hard fork, was
supposed to become another cryptocurrency. The fork was going to be launched on
November 16, 2017, and provoked hot discussions in the community, but was
eventually canceled – the creators announced this in an open letter on November
8. However, officially it was not completely canceled, but postponed for some
time. A number of supporters also said they continued to support SegWit2x even
after the cancellation of the hard fork.
The main reason for the abolition of the hard fork was
split of opinions – the next division was breaking the community, and SegWit2X
authors were trying to avoid it by all means. In addition, some Segregated
Witness supporters who later refused to support the agreement stated that the
terms of the fork were not transparent, there was no consensus between the
various groups, and the code was incomplete.
The problem of increasing the block size in the main
Bitcoin chain remains, and over time it becomes more acute. So, most likely, in
the near future, new forks will appear, trying to win the sympathy of the
community and change Bitcoin. In addition, the farther, the more acute the
problem of anonymity arises, which in the Bitcoin network is becoming more and
more illusory, and this issue also remains to be resolved – which means there
will be changes in this direction.