What Are Forks in Cryptocurrency?
Distributed ledger technologies have introduced a plethora of terms that are understood mainly by technically savvy specialists. One such term is "forks."
For example, Bitcoin was the first decentralized virtual currency created using distributed ledger technology, also known as blockchain.
Blockchain comprises blocks of information arranged in chronological order based on their verification time. To add a block to the chain, a set of rules and protocols must be adhered to and agreed upon.
A fork signifies the splitting of a blockchain into two parts.
Blockchain forks are used when it's necessary to alter the basic rules and protocols currently in use within the blockchain, such as increasing block size or enhancing blockchain features.
Once these changes are implemented, they become irreversible and permanent.
Changes to blockchain protocols can occur either in the form of a soft fork or a hard fork.
When a blockchain undergoes an update, there are instances where the new version is compatible with the old one. Users still employing the old version can access new blocks but won't be able to utilize the new features. Miners attempting to validate a block with the old version will encounter an error. To avoid this, all users must upgrade their software to the enhanced version.
This is nearly the opposite of a soft fork. When a blockchain updates, an entirely new chain with its own rules and protocols is created, which is incompatible with the old version. Both chains will exist independently of each other, with no impact on the other.
Forks in the cryptocurrency world are inevitable given the rapid proliferation of coins and the continuous advancement of blockchain technology. The key is to discuss every significant decision with the project community to maintain the principle of a decentralized financial system.