The meaning of fork in cryptocurrency industry — why it happens and why it's important. Detailed information on each type of fork: accidental and intentional, hard and soft, UASF
Our previous articles have already shown the comparison between crypto and fiat, Bitcoin and Litecoin, now it's time to see the differences between various types of forks. Here our readers can find everything they need to know to prepare for the next Bitcoin fork, including how forks work and who initiate them.
Bitcoin, like many other cryptocurrencies, stores all of its transactions on a blockchain. Data on a blockchain, as the name suggests, is organized in blocks linked in a chain. Sometimes a blockchain can divide into two paths, meaning it has two blocks connected to a single previous block. This event is called a fork.
Accidental and intentional forks
Forks can be accidental or intentional. Accidental forks occur when two miners find their blocks at nearly the same time. Now both their blocks are connected to the same single block. The next successfully mined block determines the main chain by linking to one of them. The blockchain always chooses the longer chain, and the blocks in the shorter chain are abandoned, or, as we call it, orphaned.
Accidental forks rarely cause any trouble because they do not usually get longer than one or two blocks. The longest accidental fork in bitcoin’s history happened in March 2013. It was 24 blocks long and was caused by a critical bug in the system.
Intentional forks are initiated by the developers to change the rules, to improve software, or to mitigate the damage caused by an attack. There are two types of intentional forks: hard forks and soft forks.
A hard fork is a permanent significant change in a blockchain. To function properly, all nodes need to upgrade to the new version, otherwise, they will not see new blocks, created by new rules, as valid, and their blocks will not be recognized by upgraded nodes. Non-upgraded nodes, however, can keep using the old version, if they do not agree with new rules. For example, in July 2016 Ethereum platform hard-forked into Ethereum and Ethereum Classic.
At the same time, hard forks can happen when a group of developers and miners decide they want to have their own chain and work by their own new rules. This often happens as a solution to scalability issues, Bitcoin Cash being the most common example. Seeing that Bitcoin’s 1MB block size limit was not enough, a group of developers initiated a hard fork, setting the block size limit to 8MB. This effectively split the blockchain into two and created a new cryptocurrency, Bitcoin Cash (BCH).
Forks copy all data from the original blockchain. This means that after a fork all nodes will retain their original coins and get the same amount of forked coins. If your exchange or wallet does not support a new fork, you can claim your forked coins using the fork’s official wallet or website. This is possible because all your wallet details are stored on the blockchain and not the website.
As opposed to a hard fork, a soft work is a change of rules or a software upgrade that is backward-compatible. Blocks, created by new rules, are recognized by non-upgraded nodes. Nevertheless, to mine valid blocks, they will still need to upgrade to the new version, otherwise, the blockchain splits in two. This implies that a soft fork is successful only when the majority of nodes support the new version, thus providing their computing power or hash rate.
An example of a soft fork is Bitcoin’s BIP 66 soft fork, which changed some of the rules regarding signature validation.
User-activated soft fork
A user-activated soft fork (UASF) is a concept of initiating a soft fork, which does not need the majority of nodes to support it at once. Nodes will be able to join the UASF at any time, whenever they deem its rules acceptable. UASFs are still a widely disputed idea and have never been applied in practice.