What is a hard fork in Crypto?

When a blockchain forks, a new blockchain is created from an existing blockchain. Think of it as an exit ramp when driving on a freeway – the freeway remains, but a new road takes a different path.

Hard fork and Bitcoin

Hard forks occur when a group of developers or members of a cryptocurrency community are dissatisfied with some functionality of the blockchain. The reasons vary, but some of the possible causes of a hard fork could be changing block sizes, increasing security measures, adding new features, or even canceling fraudulent transactions.

For a hard fork to take place, there must be disagreement between the community and the miners over the current protocol. As miners help facilitate transactions on the blockchain, they have the power to implement a new protocol. If a large enough group of miners wanted to increase Bitcoin’s block size from 8MB to 32MB, they could cast a vote. This is how Bitcoin’s first hard fork, Bitcoin Cash, was created.

Miners who wanted to create a larger block size (which would increase transaction speed and reduce fees) proposed a vote to increase Bitcoin’s block size. The vote was not approved by the majority of current Bitcoin miners, so developers in favor of increasing block sizes proceeded with a hard fork. Thus was born Bitcoin Cash.

Most hard forks look like the blockchain they come from. Aside from a few changes, Bitcoin Cash is extremely similar to Bitcoin.

Once created, Bitcoin Cash miners and participants could exchange their bitcoins for an equal value of Bitcoin Cash if they choose to adopt the new cryptocurrency.

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Other examples of hard forks

Since the inception of Bitcoin Cash, more and more hard forks have emerged. Bitcoin Cash has also transformed into Bitcoin SV.

Other notable hard forks include Ethereum and Ethereum Classic. Due to a hack, developers and community members have come forward with a hard fork proposal to reimburse those who have lost money due to hacking and to wipe hacking out of blockchain history. The new fork is now known as Ethereum. Some have decided to stick with the old unmodified version, which is now called Ethereum Classic.

Even more recently, another hard fork occurred in one of the world’s most valuable cryptocurrencies by market cap, Terra. Its native cryptocurrency Luna and algorithm-backed stablecoin UST have taken a hit following a widespread decline in cryptocurrency markets. The algorithm that supports UST has lost $ 1 and Luna has also lost value. Both have lost almost all of their value.

In an effort to salvage the original ideas and goals of the Terra blockchain, founder Do Kwon proposed a hard fork to give the blockchain a fresh start. Now known as the Terra Classic, the new hard fork has introduced a handful of changes with the promise of averting another catastrophe like the one in early May 2022.

It can help to think of hard fork cryptocurrencies as cousins ​​within the same family. For example, Bitcoin, Bitcoin Cash, and Bitcoin SV all have more similarities than differences. The same goes for Ethereum and Ethereum Classic or Terra and Terra Classic. They all have a similarity to their old blockchain, but due to particular ideas, a hard fork has been introduced to create a new cryptocurrency.

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