Everything You Need To Know About Blockchain Splitting (Fork)

Blockchain splitting, or fork, is a technical occurrence where a blockchain is split into two branches. This article covers everything regarding blockchain splitting

The decentralized, open-source software that anybody can contribute to is known as Blockchain, and it is this software that many cryptocurrencies use to fuel their operations. Because it is made up of blocks of data that can be traced back to the very first transaction ever processed on the network, this is the reason why it has this name. Blockchains are open source, and because they are open source, they depend on the communities who use them to maintain and develop the code that runs below.

Blockchain Splitting (Fork)

Before we understand a Blockchain split or fork, you should know that any blockchain-based cryptocurrency network is vulnerable to divisions, not only Bitcoin. This is because blockchains and cryptocurrencies function similarly regardless of the specific crypto platform.

Now, what is Blockchain Splitting or Fork? When there are modifications to the code or protocol of a blockchain network, the network may split into two distinct chains, an event known as a hard fork. This splits the original Blockchain into two chains that follow different rules and have independent transaction histories.

The Blockchain splits when a subset of users implements rules incompatible with the rest of the network. This may occur when there are differences of opinion about the future of the network, worries over its safety, or a need for additional functionality.

Whenever a blockchain experiences a hard fork, the community is typically split between those who favour the new chain and those who prefer the old one. Users who still possess the original coin may feel betrayed and need clarification if the new version has its cryptocurrency.

New, potentially more effective networks can be created when a blockchain divides, but it can also be disruptive and cause confusion for users in the meantime. Users should be informed of impending hard forks and take necessary precautions to protect their assets.

Types of Blockchain Splits (Forks)

There are two main types of blockchain forks, they are;

1. Hard Forks
2. Soft Forks

Hard forks

Hard forks happen when a new set of rules is introduced incompatible with the previous blockchain system. As a result, a new blockchain is generated that exists independently of the original. All network nodes must upgrade to the latest version of the protocol’s corresponding software to switch to the new chain. Some users may stick with the original chain after a hard fork, while others may switch to the new one.

Soft forks

Introducing new rules compatible with previous versions of the blockchain protocol is an example of a soft fork. This ensures that the network will continue functioning normally even if some nodes choose not to upgrade to the new software. The network may temporarily fragment during a soft fork, but eventually, all nodes will adopt the new protocol.

Hard forks are more problematic than soft forks since they result in a new blockchain that is not backwards compatible with the original network. As opposed to hard forks, which cause a network split when new features are introduced, soft forks introduce modifications that are small enough that all nodes may quickly embrace them.

Impacts of Blockchain Split (Fork)

A blockchain fork may have significant and far-reaching effects on the systems and groups it concerns. Some potential impacts of blockchain forks are as follows:

1. Innovation and experimentation
2. Community fragmentation
3. Network congestion
4. Price volatility
5. Governance

Innovation and experimentation

Forks can make it possible for developers to try out new features, protocols, and technologies without worrying about affecting the original chain’s functioning. This can result in new networks, some of which may have superior capabilities.

Community Fragmentation

A fork has the potential to split a blockchain community into various factions, each of which will have its vision and objectives for the network. This can result in confusion and a breakdown of consensus, both of which can hurt the network’s overall value as well as its level of safety.

Network Congestion 

If a fork results in the development of a new cryptocurrency, this could lead to a sudden increase in the number of transactions that take place on both the original chain and the new chain. This could result in slower transaction speeds and congestion on the network.

Price volatility 

Price volatility can also be caused by forks, which can affect both the price of the old cryptocurrency and the price of the new coin created by the split. Investors may change their investments, which may cause price volatility in both chains, depending on the perceived value of the new features and protocols offered in the forked chain.

Governance 

Forks can also bring concerns related to governance to the forefront since different factions may argue about how the network ought to be administered and governed. This can bring the issue to the fore. This can rise to disagreements about the size of blocks, the fees associated with transactions, and the mining rewards.

Some Examples of Blockchain Splits (Forks)

Here are some examples of blockchain forks or splits;

1. Bitcoin Cash (BCH)
2. Ethereum Classic (ETC)
3. Litecoin Cash (LCC)
4. Monero Classic (XMC)
5. Bitcoin Gold (BTG)

1. Bitcoin Cash (BCH): In August of 2017, the community divided over how to scale the network. Some users desired to increase the maximum block size to facilitate more transactions, whereas others believed that doing so would compromise the network’s security. 
2. Ethereum Classic (ETC): In July 2016, the Ethereum network was compromised, leading to the loss of Ether worth millions of dollars. To undo the harm, the Ethereum community implemented a hard fork to roll back the transactions and recover the lost funds. A group of users, however, disagreed with this decision and continued to support the original chain, which became known as Ethereum Classic.
3. Litecoin Cash (LCC): In February 2018, the Litecoin network split to establish Litecoin Cash, which claimed to offer faster and less expensive transactions than the original Litecoin. Additionally, the fork introduced a new mining algorithm and increased the maximum block capacity.
4. Monero Classic (XMC): In April 2018, the Monero network underwent a hard fork to implement modifications that a subset of users did not support. These users proceeded to mine the original chain, which resulted in the creation of Monero Classic.
5. Bitcoin Gold (BTG): In October 2017, the Bitcoin network was split to establish Bitcoin Gold, which aimed to make individual mining more accessible. The hard fork introduced a new algorithm designed to resist ASIC mining, which had centralized Bitcoin mining.

Reasons why Blockchain splits, or forks occur

Here are some of the reasons why blockchain forks occur;

1. Technical upgrades
2. Disagreements over governance
3. Network security concerns
4. Community fragmentation
5. Creation of a new cryptocurrency

Technical upgrades

Forks can be used to execute technical upgrades to the blockchain protocol, such as changes to the block size, consensus mechanism, or transaction processing speed. One example of technological advancement is the addition of new blocks to the Blockchain. The network’s scalability, security, and functioning may improve due to these modifications.

Disagreements over governance 

This can lead to the formation of forks in a network—these differences of opinion concern how the network should be regulated and administered. For instance, some users may conclude that they disagree with the decisions made by the core development team or the process of reaching an agreement, and they may choose to fork the Blockchain to execute their vision.

Network security concerns

Concerns about the integrity of the network It’s possible that a fork will be triggered if it is discovered that the blockchain protocol contains security flaws. This will allow for the implementation of fixes that will address these issues. This may be of utmost significance for public blockchains, which are more susceptible to assaults from actors with the wrong intent.

Community fragmentation

Over time, various factions may arise within a blockchain community, each with distinct views and objectives for the network. If these differences cannot be resolved, a fork may be created to establish a new chain that more accurately reflects the priorities and objectives of a specific group.

Creation of new cryptocurrency

Forks can also be utilized to establish a new cryptocurrency based on an existing blockchain. This is possible through the creation of a new coin. For instance, the Bitcoin Cash blockchain was split from the original Bitcoin blockchain in 2017. This was done in 2017 to produce a cryptocurrency with a lower transaction fee and faster transaction rates.

Summary

In conclusion, blockchain forks may cause disruption and controversy, but they also have the potential to be potent stimulators of exploration and experimentation. Users should be aware of imminent splits and seriously consider the effects on the network and their holdings.