What is a Hard Fork in Blockchain & How Does it Work?

Blockchain hard forks are a term you are familiar with if you are into cryptocurrencies. Is there any significance to them? What are hard forks, and why do they occur? What is the difference between hard and soft forks? And why are they crucial to the blockchain? 

Additionally, Bitcoin Cash and Ethereum Classic were recent hard forks. 

What is a “hard fork” in blockchain technology?

A hard fork divides a blockchain, with a change in the network’s code resulting in two different copies of the blockchain. 

A hard split creates two distinct blockchain versions. An updated blockchain will prevent your nodes from recognizing transactions made on an un-updated blockchain. Every node must agree on a hard fork to take place. 

Why do hard forks happen in blockchain?

A community usually triggers a blockchain hard fork to enhance a coin’s usefulness. Users may need a new software version due to problems, new features, or bitcoin user debates regarding the currency’s future. 

The long-awaited Beacon Chain Ethereum 2.0 hard fork is intended to provide several advancements to Ethereum 2.0, including the ability for nodes to work on mobile devices. 

It is also possible to use hard forks as part of an advertising effort for a new cryptocurrency. There was an airdrop in October 2017 for everybody who had Bitcoin at that time, and they received an equal amount of Bitcoin Gold. This was to commemorate the hard split of Bitcoin into Bitcoin Gold. 

Any blockchain may experience a hard fork, not only the Bitcoin or Ethereum networks, as the Cardano Mary hard fork did in March 2021. 

Other reasons for hard forks

There are distinct reasons that hard forks can happen, aside from the reasons mentioned above. 

One of the reasons for a hard fork is to compensate users if a security compromise on a blockchain network. In such an occurrence, transactions made from a specified date by attackers are no longer valid. This happens because, usually, developers quickly fix newly exploited vulnerabilities after the hack.  

Such vulnerability in the DAO project code was why Ethereum Classic hard-forked — we will discuss it in detail later. 

In a popular protocol such as Bitcoin, various coders worldwide work on its improvements constantly by proposing specific upgrades. In the case of Bitcoin, there is a whole list of BIPs (Bitcoin Improvement Proposals). As for Ethereum, there is a list of EIPs (Ethereum Improvement Proposals). 

An excellent example of what is going on during these forks was given in 2019 by Ethereum’s founder Vitalik Buterin said. 

“In the coming year to two, we will upgrade the Ethereum ecosystem to a new, more secure version…. on top of it, so things are coming soon, more developments to rollup, more developments to scaling technology, improvements to security, including wallets, including clients, including a lot of things, improvements to usability, improvements to privacy.” 

Hard Forks vs. Soft Forks

The next portion of the talk will focus on how hard, and how soft forks vary, but first, let us define soft forks. 

It is possible to update to the latest blockchain version without breaking compatibility with previous versions through a soft fork. These miners can still participate in validating and verifying transactions even if they have not yet switched to the latest software. 

Soft forks are more straightforward to execute than hard forks since most miners must update. 

Even if you have not upgraded, the soft fork will harm you, nonetheless. 

Assume that you are a non-upgraded miner who produces a 1-megabyte block. You may still verify incoming transactions. However, the new upgrade only allows adding blocks with a maximum size of 8 megabytes. Therefore, will exclude your blocks from the ecosystem. 

To put it another way, soft forks force miners to update their software or risk having some features deactivated or restricted. 

Examples of Hard Forks

There are three conceivable outcomes to a community’s decision to hard fork. 

• After the hard fork, one blockchain remains dominant, resulting in limited community acceptance and value for the other blockchains. 

For example, only a few mining pools now support Bitcoin Classic (BXC) and Bitcoin Unlimited. 

• In terms of community acceptance and worth, both blockchains have the same value and coexist in the same space. 

Although there are not any particularly noteworthy instances, Roger Ver’s Bitcoin Cash network, which in 2017 introduced an 8 MB block size increase, serves as an approximation (and a 32 MB block size in 2018). Now that BCH, the digital asset built on this platform, is among the top 20 most valuable cryptocurrencies, it is safe to claim that the platform has succeeded. 

If you look at the other hard forks listed here, you will see they are all under $1! 

• However, one of the two blockchains is more widely used than the other. In terms of acceptance and value, one of the two chains takes the lead.  

This is where the Ethereum Classic comes in, so let us take a closer look at it. 

In addition, creating DAO in April 2016 was on the Ethereum blockchain to form an investor-directed Venture fund. 

In July 2016, hackers exploited a DAO coding flaw and stole $50 million in ETH. At block 1,920,000, Ethereum split to recover lost assets. Due to the hard fork, it created two separate blockchains and currencies. 

Here, Ethereum is the overwhelming power. Currently, Ethereum Classic is among the top fifty cryptocurrencies by market capitalization. 

We’ve all heard that Bitcoin is the most popular cryptocurrency and previously stated it.

The fascination with ‘digital gold’ has only increased in recent years. Consequently, curiosity about its past, especially its use of hard forks, has grown. 

An overview of Bitcoin hard forks throughout time is provided here. 

• Bitcoin Classic – A planned hard fork attempted to expand the maximum size of transaction blocks from Bitcoin Core (Bitcoin). Despite some early promises, the Bitcoin community has not taken to Bitcoin Classic. 

• Bitcoin Unlimited – Enables larger block sizes for the user. However, it has also failed to take off because of worries that miners with more resources would dominate profit-taking. 

• Bitcoin SV – A “civil war” between two Bitcoin cash factions led to the creation of this currency. Supported by entrepreneur Roger Ver and Bitmain CEO Jihan Wu, Bitcoin ABC (BCH) was advocated to keep the block size at 32 megabytes (Mb). After the Bitcoin complex splits, it has been the most successful coin to emerge from the process. As a second option, Craig Wright and Calvin Ayre created the “Bitcoin Satoshi Vision” version of Bitcoin SV, which would increase the block size limit to 128 MB. 

• Bitcoin Gold – 2017 Oct. This fork was built hoping graphics cards (instead of pricey ASICs) would make mining more accessible to ordinary people. 

Over the previous ten years, how many Bitcoin enhancement ideas have been made? 

How much is the answer? There were 350, but not all of them made it to hard forks. 

Although blockchain is still in its infancy, we may expect to witness many more hard forks in the years to come. 

The Bottom Line

Hard forks need all nodes in the network to switch to the newer version of the blockchain, which is why they are known as hard forks (that support readjusted functionality). 

Alternatively, a “soft” or “non-hard” fork is a software update compatible with prior blockchain versions. Un updated miners may still validate transactions. 

For network development, hard and soft forks are critical. Although no central authority exists, the community may make necessary alterations and improvements because of them. 

Hard forks allow blockchains and cryptocurrencies to adopt new features and enhancements as they emerge quickly. There would have been no way for the ecosystem to function without a centralized server to keep track of everything. We are fortunate that we do not have to deal with centralized servers, but hard forks are inescapable.

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