What are hard forks?

December 7, 2023
2 min read

A hard fork is a drastic event that sometimes occurs when the blockchain of a cryptocurrency goes through a very large change or update. Several well-known and unknown cryptocurrencies have already undergone hard forks.

However, not all hard forks are planned. In this article, we will tell you more about what a hard fork entails and mention some well-known examples.

A drastic change

A hard fork represents a drastic change in a blockchain network. The changes are so drastic that all participants in the network must update the associated software. A hard fork is often used to modify essential features of the blockchain protocol. In some cases, this involves an upgrade, but it can even create a whole new cryptocurrency.

During a hard fork, nodes running the new software will no longer accept the old version of the blockchain. This results in both the old and new versions of the blockchain. It is recommended that no transactions be performed during the hard fork.

If the hard fork is performed with consensus in the network, meaning that most nodes upgrade quickly, there is usually no problem. If the fork is performed without consensus, the network may be split. This can be especially problematic if both sides claim that their version of the protocol is correct. In the event of a dispute, usually, the longest blockchain is considered the valid one.

Bitcoin Cash: a hard fork of Bitcoin

An example of such a split where there was no consensus is the separation between Bitcoin (BTC) and Bitcoin Cash (BCH). In 2017, it became clear that a fraction of the Bitcoin community was dissatisfied with the course of Bitcoin's development. This fraction then conducted a hard fork of the Bitcoin blockchain resulting in Bitcoin Cash (BCH).

Other reasons for a hard fork

A hard fork is not only necessary for drastic changes in the future of a blockchain; it can also be used to correct the past. One of the most notable examples is Ethereum's so-called DAO hack. This hack caused significant losses for many investors and forced the Ethereum developers to make a crucial choice. They could choose to let the hacker go unpunished or to roll back all transactions. The DAO hack marked a turning point for Ethereum. Although the blockchain was restored via a hard fork, this decision also resulted in the creation of a new cryptocurrency.

Part of the community was not satisfied with this decision and created Ethereum Classic (ETC) by keeping the old blockchain, including the consequences of the DAO hack. Such a rollback is very rare, as cryptocurrencies generally hold onto the principle that all transactions are irreversible.

The information provided in our articles is intended solely for general informational purposes and does not constitute (financial) advice.

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