What is a Hard Fork?
Knowledge of what hard fork is necessary for users who have contact with the cryptocurrency world. Consider how the forks pass, what are their pros, cons and how to benefit. A hard fork cryptocurrency is the introduction of significant changes in the program code of the blockchain chain, as a result of which a new branch of the network is created that functions by its own rules and do not interact with the “parent” system. In this review, we will consider in detail the key points regarding hard forks, and we will understand why it is being held.
As mentioned above, hard fork cryptocurrency is a modification of the source code of the blockchain, as a result of which new rules for the functioning of the system are created, incompatible with the old algorithms. Since the old and new rules cannot work within the same chain, the network is ramified (hence the name of the process, because the hard fork translates as “hard fork”). The “mother” system continues to operate according to the established algorithms, while the new blockchain has its own ecosystem.
In most cases, the result of the hard fork is the creation of a new cryptocurrency, which runs within the same payment system. Sometimes this operation does not imply the creation of a new asset. Changes are made in order, for example, to correct the principle of extraction of a coin. In this case, division occurs. The best example of hard forks is Bitcoin Cash. For a long time, the BTC blockchain worked, satisfying user needs, and everyone was happy with everything. In 2017, there was a proposal to change the settings and increase the block size to 8 MB. The step was to solve cryptocurrency scalability problems: reduce transaction costs and increase the number of transactions per second.
What changes are made during hard fork?
We have already found out that often due to hard forks a new cryptocurrency appears. This asset is formed due to the fact that the organizers make fundamental changes to the original blockchain, which are incompatible with the old algorithms. As a rule, the following aspects are touched upon when holding a hard fork:
- Sets the maximum issue of the new currency.
- The time of block generation is prescribed.
- Sets the amount of the reward for the disclosure of the block and the frequency of its adjustment.
- An algorithm that regulates the complexity of mining is created.
- The block size is set (the possibilities of the subsequent change of this parameter are additionally specified).
In fairness, we note that the organizers of the hard fork extremely rarely subjected to drastic changes absolutely everything. As a rule, they cover only a couple of aspects. For example, one of the most successful forks of Bitcoin Cash is in many ways similar to the original Bitcoin. It has the same emission (21 million coins), approximately the same block generation time.
Taking into account all the above, we can say that despite some drawbacks, hard fork cryptocurrency is a rather positive development. Of course, attackers often use this, and ordinary people burn through on projects that are not successful. However, dramatic changes in blockchain networks stimulate their development, expand the possibilities of application, make payment systems as user-friendly as possible, and give new chances for investment. The main thing is to observe a competent approach when working with one or another hard fork in order to minimize all risks.