hard fork (blockchain)

One of the key concepts in blockchain technology is a hard fork. This notion refers to a situation in which changes are made to the blockchain protocol, leading to the network splitting into two separate branches. A hard fork is considered a radical change that is not backward-compatible with the previous version of the protocol.

How Does a Hard Fork Work?

A hard fork occurs when a new version of blockchain software is introduced to the network and users do not agree with the new protocol rules. In such a scenario, a split occurs, where some participants decide to continue transactions on the old branch of the blockchain, while the rest move to the new branch created by the hard fork.

Example of a Hard Fork

An infamous example of a hard fork took place in 2017 when the Bitcoin network split into two branches: Bitcoin and Bitcoin Cash. The dispute revolved around the block size in the blockchain, with one group proposing an increase in the block limit and the other wanting to maintain it as is. The conflict resulted in a hard fork, leading to the creation of the new cryptocurrency – Bitcoin Cash.

Advantages and Disadvantages of a Hard Fork

A hard fork can be perceived both positively and negatively. On the one hand, it enables technological development and the introduction of innovations to the blockchain network, while on the other hand, it causes community divisions and can result in a loss of trust. Therefore, the decision to carry out a hard fork should be carefully considered and agreed upon by the majority of network participants.

It is worth noting that a hard fork differs from a soft fork, which is a less radical change in the protocol and does not lead to the network splitting into two branches. A soft fork is usually easier for users to accept because it does not require migration to a new blockchain branch.

As a result, a hard fork is a process that can significantly impact the operation of blockchain networks and cryptocurrencies; hence, understanding this concept and its implications for market participants is crucial.