Understanding Hard Forks in Cryptocurrency

Cryptocurrency is decentralized digital money created with the help of encryption softwares.  It provides anonymous and secure transactions. However, the untamed fluctuations in the price of cryptocurrency are related to the occurrence of a fork.

What are Forks?

Before understanding the fork, you must know what a blockchain is. A blockchain is a technology concealed behind the digital currency that refers a shared ledger formulated by blocks of data, and due to continuous growth and formation, these blocks of data result in a single blockchain. Moreover, the spilt of a single blockchain into two becomes the reason of a fork. Following are the reasons for a fork:

•  A Split in Consensus: A split in consensus becomes the reason of a temporary fork when miners find a blockchain and it results in two block chains. However, the largest blockchain wins at the last and short blockchain automatically discarded from the system.
• A Change in the Underlying Rules of the Protocol: Developers make the changes in the underlying rules of the protocol and these become the reason of permanent fork. The provision of new features to users to improve the performance of network or transformation of core rule are the reasons for these kinds of codebase modifications.

A change in underlying rules of the protocol is classified into two types of forks, soft forks and hard forks. However, in this article, we are going to describe the hard forks.

What are Hard Forks?

The software amelioration that is not adaptable for previous versions is known as hard fork. Due to the occurrence of hard forks, it is compulsory for users to upgrade new version of the software to validate their transactions; otherwise, they would not be able to validate their transactions. Similarly, hard forks result in the form of permanent distinction of blockchain and nodes running in the old versions are not accepted in the new versions of protocol software. Therefore, it is recommended for cryptocurrency users to be knowledgeable with cryptocurrency updates and upgrade protocol software after an applicable period.

Hard Fork Types

There are two types of hard forks i.e. contentious and planned.

• Contentious Hard Forks: These hard forks occur due to division or difference of opinion within the Bitcoin community and results in the creation of a new chain with significantly modified code. Bitcoin Cash is one of the best examples of the contentious hard fork where a section of the community wanted to increase the block size from 1MB to 8MB to reduce the user’s fee and to allow more transactions in the network.
• Planned Hard Forks: Planned hard forks are protocol updates that the core developers have planned since the beginning. Planned hard forks are for the betterment of blockchain’s functionality. The outcome of these forks is addition of more features and capabilities in the blockchain. One thing that should be kept in mind is that planned forks do not result in the creation of any new coins.  For example, in order to improve the privacy and security, Monero added a new feature in the network with the name ‘Ring Confidential Transactions (RCT)’ in 2017 is an example of the planned hard fork.

All in all, to understand hard forks in cryptocurrency is not rocket science. Crypto latest news and authority articles can help you understand the concept of hard forks in cryptocurrency.