Impact of Forks in Evolving Cryptocurrency Landscape
Forks are utilized for updating the chains in a blockchain. The fork is a set of new rules that are set to blockchain protocol. Any divergence in blockchain either temporary or permanent is a fork. Forking happens when a blockchain splits into two branches as a result of a change in consensus algorithm or any other software. Based on the type of change, the fork is categorized into a hard fork and soft fork. A soft fork occurs when an amendment to the software keeps it backward compatible, which means the new forked chain follows the new rules and will also follow the old rules. The native chain will continue to support the old rules.
Hard forks have gained a bit of bad reputation since it has split the Ethereum’s blockchain into two. Software developers are still striving hard to understand the process, study its nuances, and test for its safe execution. It is regarded as a dangerous and disruptive mechanism that is more intuitive for upgrading blockchain. Developers have stated that not all the blockchains struggle with the transition and even cryptocurrency developers agree that this mechanism might have great importance in the future. The bitcoin cash has successfully divided from bitcoin with relatively fewer problems. As the forks are increasing, developers still have a question about the conditions under which the forks are safe to use and ways to mitigate their side effects. Hard fork requires all the nodes to be updated and has to be compatible with the new version.
However, it is not that easy to execute a hard fork. The main issue is that, when a blockchain splits into two, the users are confused about which cryptocurrency is to be followed; this is known as a replay attack. With replay attack, the users can send cryptocurrencies on both blockchains when they are actually only meant to send funds on one. Bitcoin Cash, Bitcoin’s first hard fork had made a big a change that provided safety against this issue. Bitcoin Gold (BTG), an open-source cryptocurrency, is a hard fork of bitcoin that restores the mining functionality with graphic processing units with customized chipsets. This hard fork is precisely opposite to the Bitcoin Cash that adds replay protection too.
Till date, many developers have different strategies to deal with these attacks. Segwit2x, a proposed hard fork, can increase the block size to 2 megabytes. In fact, this was canceled due to lack of consensus. Ultimately, if the trends in hard fork continue, the owners of currently existing coins can be benefited significantly and can gain the rights to future coins. For extracting the best possible outcomes from the hard forks, the disagreements should be justified, and doubts be clarified at the organizational level itself.