What is a Hard Fork?
A hard fork is a major upgrade to a blockchain protocol that is not backward compatible, meaning that the new version is not compatible with the old version, and blockchain participants must upgrade their software to continue interacting with the most recent version of the blockchain.
As a result of a hard fork, the network splits into two separate blockchains: one follows the new set of rules, while the other continues under the old protocol. After some hard forks, the unchanged version gained the status of a separate cryptocurrency, but in most cases it is eventually abandoned.
The purpose of a hard fork in crypto is typically to enhance security, improve functionality, or introduce new features. However, they can be contentious as they require all nodes to upgrade to the new protocol.
For an individual cryptocurrency, a hard fork can have significant implications for the value and functionality of the coin. It may create an entirely new cryptocurrency, which can lead to a decrease in the value of the original coin, or strengthen the existing blockchain, boosting its security and efficiency.
Etymology of the Term Hard Fork and Its Meaning
The term "fork" in blockchain originates from software development, referring to a divergence in codebase. The term originated from the need to upgrade software in a way that is incompatible with the previous version, thus creating a necessity to decide on the direction of future development.
What's the Difference Between a Hard Fork and a Soft Fork?
Unlike a hard fork, which requires all participants to upgrade to remain compatible, a soft fork is a backward-compatible update. This means nodes that have not upgraded can still interact with the new version, making soft forks less disruptive and generally easier to implement.
A soft fork is typically used to make minor changes to the protocol, such as updating the block size limit or adding new transaction types. Soft forks are generally less complex and less contentious than hard forks, and they do not require all nodes on the network to upgrade to the new version of the protocol.
Can Both Versions Stay Active After a Hard Fork?
Yes, in crypto a hard fork often results in two independent blockchains, each maintaining its own transaction history. In the case of Bitcoin and Bitcoin Cash, all holders of Bitcoin at the time of the fork received an equivalent amount of Bitcoin Cash, as both chains continued from the same block height. This mechanism ensures that users have the freedom to choose which version of the blockchain they wish to support.
How Long does a Blockchain Hard Fork Take to Process?
The time it takes to complete a blockchain hard fork can vary greatly depending on the specific blockchain and the nature of the change. Sometimes, there is little to no downtime at all, and in other cases, it can be 4 hours, 16 hours, or more than a day.
Can a Hard Fork Increase the Price of a Coin?
A hard fork can have significant implications for the value and functionality of a cryptocurrency. In some cases, a hard fork can result in the creation of a new cryptocurrency, which can lead to a decrease in the value of the original coin. In other cases, a hard fork can improve the functionality and security of the blockchain, which can lead to an increase in the value of the coin.
Notable Hard Forks in Blockchain History
The Bitcoin Cash hard fork in August 2017 resulted in a market cap of approximately $20 billion shortly after the split, demonstrating significant user interest and adoption.
The Cardano Chang hard fork happened on September 1, 2024 and allowed ADA holders to participate directly in decision-making processes through on-chain voting mechanisms, making it an important step in the development of the blockchain.
The hard fork of Litecoin in 2018 led to the creation of Litecoin Cash, which resulted in a market cap of around $100 million shortly after its launch, showcasing the financial implications of such forks.
What are the Most Notable Ethereum Hard Forks?
Ethereum's DAO Hack hard fork of 2016, which was used to recover ETH that had been stolen in a hacking incident.
Ethereum's Constantinople hard fork, implemented in February 2019, aimed to reduce gas costs and improve overall efficiency, contributing to a transaction volume increase of 30% post-upgrade.
Ethereum's London hard fork, implemented on August 5, 2021, introduced several key changes, including the EIP-1559 proposal, which modified the transaction pricing mechanism and introduced a burning mechanism for a portion of the gas fees paid by users.
Ethereum's Dencun hard fork that happened on March 13, 2024 was another example of a hard fork of the Ethereum blockchain that was used to improve the scalability and reduce transaction fees for Layer-2 protocols.
Is the Ethereum 2.0 Upgrade a Hard Fork?
No, Ethereum 2.0 was a gradual upgrade rather than a traditional hard fork. While it transitioned Ethereum from Proof-of-Work to Proof-of-Stake, it did not result in two separate chains, unlike previous Ethereum forks.
Although Ethereum Classic was created after the Ethereum 2.0 upgrade as a version of Ethereum that used the old proof-of-work consensus mechanism, The Ethereum 2.0 upgrade is not a hard fork. Instead of a split resulting in two versions of the blockchain, the upgrade was implemented through a series of upgrades, including the Beacon Chain, the Merge, and the Shanghai upgrade, eventually transitioning the Ethereum network to a proof-of-stake consensus algorithm.
Bottom Line: What is a Hard Fork
A hard fork in cryptocurrency represents a fundamental blockchain split, creating two independent networks that cannot interact. These forks are used to introduce major improvements, resolve security vulnerabilities, or create alternative versions of existing cryptocurrencies. While they can drive innovation, they may also cause network fragmentation and impact the price of the coin.
