What Are Bitcoin Forks? — HKToken Wallet Cources
Bitcoin forks are splits that happen in the transaction chain based on different user opinions about transaction history. These splits create new versions of Bitcoin currency, and they are a natural result of the structure of the blockchain system, which operates without a central authority.
These forks allow for different buying opportunities for the cryptocurrency. There are many different forks that serve different purposes, and some have maintained value better than others. Learn more about Bitcoin forks and what they mean for investors.
What Are Bitcoin Forks?
The concept of forks and the technology involved is extremely complex, but the easiest way to think about a Bitcoin fork is that it introduces a new set of rules for Bitcoin to follow. Because a new rule is introduced, the users mining that particular Bitcoin blockchain can choose to follow one set of rules or another, similar to a fork in the road.
Fundamentally, these forks arise out of different perspectives on transaction history. This can happen due to delays in the system. As Bitcoin became more and more popular, the blockchain technology it was built on slowed down. This resulted in the entire system becoming unreliable and the transaction fees getting more expensive.
Because of this slowdown, Bitcoin needed to create a solution that would scale as more users bought and sold the product. That’s where the forks came in.
Forks allow for a different development structure and experimentation within the Bitcoin platform, without compromising the original product. The original Bitcoin was developed on 1-megabyte blocks, which was limiting as the cryptocurrency scaled and became more popular. These forks can be developed on larger blocks, and they result in a brand new currency.
How Bitcoin Forks Work
There are two types of Bitcoin forks — soft forks and hard forks.
A soft fork is a change to the Bitcoin protocol, rather than changing the end product. The big difference between a soft fork and a hard fork is that a soft fork is backward-compatible.
This means that the new protocol will be recognized by old nodes within the system. It also means that there is not a new product being launched.
Hard forks are new versions of Bitcoin that are completely split from the original version. There are no transactions or communications between the two types of Bitcoin after a hard fork. They are separate from each other and the change is permanent.
You can think of forks like organizational splits, with one part of a company moving in one direction and another part of the company moving in another direction. That’s exactly what happened with Bitcoin, Bitcoin Cash, and Bitcoin Gold.
These are all separate cryptocurrencies within the Bitcoin family and all operate independently with different rules. They are all still cryptocurrencies but are not the same as the original Bitcoin.