Forks | Cryptocurrency | blockchain
A Fork in the Crypto world has nothing to do with food or agriculture.
Concerning blockchains, a fork is a moment where the blockchain splits into two (or more) different ways.
We know already that one block follows another, but sometimes the blockchain splits, which can have various reasons. No matter what was the cause of it, the history of the blockchain always remains the same. Reasons for the split can be either small or large, for example, an update or a significant change that divides the community. An example of such a small change can be a “soft-fork” (this means that blockchain is getting updated).
Usually, the old version still works; therefore, the user does not have to follow the soft-fork.
(A major exception was the Bitcoin’s soft-fork at the end of July 2017, here the Segwit update did not allow the old version to be used; hence many people did not want to follow and decided to initiate a “hard-fork”.)
A hard-fork is the opposite of the soft-fork - here the blockchain splits after a certain block, and a new coin is created. The paths of the two coins are irrevocably separated.
(Continuing with the Bitcoin example: The issue was there were two sides of users and miners. The first side aimed to keep the block size small, to only use the blockchain for big transactions. The smaller ones would bevdone with the lighting network (will be explained later). This group of people is currently using Bitcoin. The other group wanted to increase the block size because for them all transactions should be saved on the blockchain. This group is currently using “Bitcoin Cash / Bcash”.) You might ask yourself what consequences this has on the holder of this coin.
When such fork is initiated, and the blockchain splits, the basis for both currencies (the old and the new one) has the same blockchain history.
Therefore, if someone was holding for example Bitcoin at the end of July 2017, his stake was recognised before the fork. Consequently, he has the same amount of those coins on both blockchains.
(If you had 10 BTC before the fork, after the fork you had 10 BTC and 10 BCH (Bitcoin Cash).)
But - and this is a vital part most people forget about - in order to claim the coins, you have to be in possession of your private key! Only with the private key, it is possible to control the coins on both chains. Only in sporadic cases, exchanges offer the service of claiming the coins for you and distributing the new currency.
A fork is a highly sensitive topic for Cryptocurrency and therefore most of the times hard to judge. We will come back to this topic at a later stage of this book when we are talking about best investment strategies for such events.
The next pages will deal with the general algorithms a blockchain can use. (It does sound more complicated than it is.)
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