Blockchain forking splits a blockchain into two. This can happen accidentally or through intentional rule changes. Some forks are temporary, while others might occur simultaneously when two blocks are created.
Forks can also introduce new technical rules. Smart contracts are typically divided into two categories:
Planned Blockchain Forks: Soft Forks and Hard Forks
When all parties agree, the alteration of the rules of the blockchain system is a soft fork. This is more or less like a new patch added to a computer’s operating system or a browser update. Unlike hard forks, soft forks are compatible with existing rules. So, the network will still be flawless based on the new regulations. Understanding what is a blockchain fork is essential here, as it helps differentiate between the types of forks.
A hard fork occurs when there’s disagreement on rule changes. This leads to two separate chains in the blockchain. Each chain has its own rules. One chain follows the old model, while the other adopts the new standard.
Unintentional Forks: Orphan, Stale, and Uncle blocks
All blockchain structures rely on consensus mechanisms. These mechanisms use pseudo-random sampling to add new transaction blocks. Sometimes, this process creates multiple valid blocks at once, leading to temporary forks.
Orphan or Stale Blocks: These blocks occur when two miners successfully develop valid blocks simultaneously. This leads to the formation of two different chains until the network’s nodes decide to dismiss one of them.
Uncle Blocks: In Ethereum’s pre-Merge PoW model, two blocks could be mined simultaneously, and the block with more computing power (PoW) could be integrated into the chain. When shaking off the proof-of-work consensus algorithm in the Merge and moving to proof-of-stake, Ethereum pre-selected those who can propose blocks, thus ruling out background conditions that created an uncle block.
These fork occurrences are inherent in blockchain networks, whether due to a planned activity or an unfortunate eventuality. Consequently, one has to be familiar with drivers and effects to work and cooperate effectively within blockchain contexts.
Understanding Soft Forks and Their Role in Blockchain Evolution
Defining Soft Forks
A soft fork is an alteration in the set confirmation algorithm of a particular blockchain that, if implemented properly, can be adopted by earlier versions of the blockchain software. Such changes are made to solve problems, such as correcting security flaws, improving current functions, or introducing new functions. This leads to the common question what is a blockchain fork?
Soft forks are as simple as grading an internet browser or operating system on a computer. Nodes do not need to update their client software; however, those that do not update become unable to work as Miners or Validators, meaning they cannot propose new blocks or earn block rewards.
To prevent a chain split, backward compatibility maintains that a soft fork does not cause the separation of the blockchain system’s rules. This can be compared to having an old version of the operating system on your smartphone, meaning that while the phone works, it doesn’t receive updates of the latest version.
Soft Forks and Improvement Proposals
The nodes functioning within a blockchain environment execute client software, which sets out the working rules of the blockchain, collectively referred to as its protocol. These systems are all designed as open-source systems, meaning anyone can point out where improvements can be made and new features can be added.
Even with Bitcoin, whose detailed specifics are not fully understood by all its users, the process for handling protocol changes is intended to be democratic. One of the features of this system is that the blockchain community can collectively agree to upgrade to grow, develop functionality, and improve security.
All proposed changes must be written in Bitcoin Improvement Proposals, abbreviated as BIPs. Each BIP follows a number. The first BIP, published in mid-2011, discussed a proper procedure for presenting BIPs.
A list of all BIPs can be found on GitHub, and Soft Forks has also been mentioned there. Below are examples of significant soft forks:
Segregated Witness (BIP 141): Increase the current block size to accommodate more transactions in each block, increasing scalability.
Taproot (BIP 340-342): Enhanced privacy and user experience while the feature of executing smart contracts was developed.
As such, for the blockchain to advance, the users must be convinced to accept or reject the proposed BIPs. This ensures that the two are synched and that the system is progressive.
How Long Does a Blockchain Hard Fork Take To Process?
This time can range from a few minutes to several hours depending on the fork’s nature, the network’s size, and the degree to which the participants are prepared. Below are the key factors and typical timelines:
1. Preparation Phase (Weeks to Months)
Proposal and Consensus: Decisions about the fork’s desirability and goals can take weeks or months. Consensus is important, with a particular focus on contentious forks, because maintaining consensus is important in a healthy community.
Development: It should be noted that the developers require time to write, test, and then bring down the fork. This phase can take several weeks or several months, depending on the degree of modifications required.
Communication: Finally, the changes must be announced to affect the miners, validators, exchanges, and other ecosystem participants.
2. Implementation Phase
Block Activation: Block activations are normally planned to begin at a specific block number or time in the future. This means the participants across the network are aware of when the fork will take place.
Node Updates: Users in the network have to upgrade their software to the one in the fork. Depending on the level of adoption expected, this may take many hours or several days at worst.
Validation: The fork occurs when the system reaches the stated block of the network. The blockchain branches into two if some nodes don’t follow these new rules.
3. Post-Fork Stability (Days to Weeks)
Network Stabilization: Despite the fundamental changes usually incorporated into the new chain after the fork, the new chain may take some time to become stable.
Adoption and Integration: New chain integration with exchanges, wallets, and other services occurs. If two distinct blockchains are created, more effort is required to list these new tokens or assets.
Average Timeline
Simple Hard Fork: It can often be done within 1 – 3 months when changes are clear and the community is engaged if only changes are needed.
Contentious or Complex Fork: This may take around 6 months when changes involve disputes or require many changes in the activities related to the code base.
Although the technical fork occurs at the specified block, preparing for, implementing, and stabilizing the network takes significantly longer.
Exploring Hard Forks: A Divergence in Blockchain Evolution
Understanding Hard Forks
A hard fork arises when there is a conscious alteration to a blockchain that is not hospitable to previous versions. This type of change means that validating nodes must decide between sticking to the current chain or adopting a new one, hence two chains running under two different rules.
The split inspires node competition within the chains, and the chain that attracts the most nodes is considered more dominant. This chain is often a bit more likely to reach the ultimate user in the population than others.
It is somewhat akin to splits in political parties when important decision-making channels lead to the forming of new systems or independent parties.
Notable Hard Fork Examples
Over one hundred hard forks have recently been conducted on the Bitcoin blockchain. However, the main ones stemmed from the “block wars” between 2015 and 2017.
The block wars were based on different strategies to solve the problems associated with Bitcoin scaling. Since no consensus was reached on the best solution to slow transactions and low throughput, a new chain Bitcoin Cash (BCH) was created on August 1, 2017.
To this date, Bitcoin Cash has failed to attract most miners who continued mining on the Bitcoin (BTC) chain predominantly. Later, as we have already discussed, BTC activated Segregated Witness (SegWit) improvement that shifts some of the transaction signatures off the data carried within blocks.
Bitcoin Cash underwent a hard fork in November 2018, and then the Bitcoin SV, or Satoshi Vision, was formed. This chain had block sizes 2,000 times larger than BTC.
Implications of Hard Forks
Establishment of a new Virtual Currency
A hard fork creates a brand new coin, with staking based on the ownership of the original chain when the split occurred.
For instance, Bitcoin owners could receive an equivalent amount of Bitcoins in cash by signing a transaction to prove ownership of their private key. However, those who owned BTC and kept it on custodial platforms, such as centralized exchanges, did not receive forked coins initially. It was entirely at the exchange’s discretion to do so.
Such discretion culminates in the value of custodial services, which is an underutilized economy. The process resembles the stock split and serves shareholders’ delivery of extra stocks without altering the company’s value. However, what is more important is that their creation process based on hard forks, in theory, can reduce the value of the STAT original chain. Still, BCH and BSV make up less than 1% of Bitcoin’s market cap, and this share continues to go down.
Impact on Tokenomics
Modifying rules through hard forks can also distort the tokenomics of a particular cryptocurrency due to changes made to the supply limitations introduced in the course of its design. For instance, the decentralized asset’s maxed supply, as well as reduced rate of inflation, makes it viewed as a store of value like gold. Likewise, after Ethereum’s merger, its rates make it an inflation-neutral asset.
They point out that hard forks produce clones that negate those inherent safeguards. However, as research shows, Bitcoin’s limited supply is a key factor that makes users believe in its ability and continued popularity despite forks affecting the asset’s dominance in the market only in the short term.
In summary, while hard forks allow blockchain systems to evolve through disagreement, they also introduce challenges related to tokenomics, value dilution, and ecosystem fragmentation. Despite these challenges, dominant chains like Bitcoin remain relevant and attract significant adoption.
Ethical Considerations in Blockchain Governance
Blockchains for Bitcoin and Ethereum are open, allowing anyone to join. This includes storing transfer histories or approving new blocks for rewards. While this openness is a key feature, it also raises ethical issues. What is a blockchain fork? It is often central to resolving such challenges, as it can provide a mechanism for system corrections
For instance, the lack of clear rules on an error can lead to problems. The community then faces tough questions about the severity of the exploits. A blockchain fork might be a solution that allows for corrections in the system.
One of the most famous ethical dilemmas of this kind was the DAO Hack: it happened a year after the launch of the Ethereum project. , which was used to steal 14% of all the Ether in circulation at the time and stirred up the hornet’s nest in Ethereum.
Opinions split sharply into two groups. One group claimed, “code is law.” Regardless of the outcome, they believed no one should meddle with blockchain code. The other group argued for ethical intervention to recover stolen funds.
In the end, the Ethereum Foundation chose to intervene. It created two blockchains: Ethereum and Ethereum Classic. Ethereum adjusted its code to recover lost funds. Meanwhile, Ethereum Classic preserved its original code, including the hacked transactions, upholding the principle of an unchangeable blockchain.
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