What is a Hard Fork?
- Understanding Hard Fork
- Working of Hard Fork
- Why is Hard Fork Done?
A hard fork, as it’s associated with Blockchain technology, is a change made to the current network protocol that makes previously invalid blocks and transactions valid, or vice-versa. In a hard fork, all the users are required to upgrade to the latest version of the software.
Forks are initiated by developers or crypto community members who are dissatisfied with the current functioning of the blockchain.
Understanding Hard Fork
A hard fork is when nodes on the newest version of blockchain don’t accept older versions of the blockchain, thus creating a complete divergence from the previous versions of the blockchain.
When a new rule is added to the code on the blockchain, a fork is created. One path will follow the new upgraded version and the other path will follow the older version. Even the users working on the old version, at some point, will realize that the blockchain is outdated and will quickly upgrade to the newer version.
Working of Hard Fork
Hard Fork can occur on any crypto-technology platform, as both blockchain and cryptocurrency have the same working irrespective of the crypto platform. All the new rules on a blockchain are set by the miners, and all the miners must agree to the new rules before they can be implemented.
So when a new rule is to be implied on a blockchain, a fork is created, indicating that there has been a change in the rule. All of the software is then updated by the developers to reflect the new rules.
It is the result of this forking process that various cryptocurrencies with names similar to Bitcoin were developed: Bitcoin gold, Bitcoin cash, etc.
Why is Hard Fork Done?
Hard Fork can be implemented by developers for several reasons such as adding new functionality, addressing security risks, and sometimes even reversing transactions. The biggest example of a reverse transaction is the hard fork created by Ethereum to reverse the hack on the Decentralized Autonomous Organization (DAO).
The hard fork exactly didn’t reverse the transactions over the network, but instead, it relocated all the funds tied to DAO to a newly created smart contract, thus allowing the original owners to withdraw their funds.
DAO token holders were able to withdraw Ethereum at a rate of approximately 1ETH to 100 DAO. The Ether that was left behind as a result of the hard fork was used by DAO curators to provide “failsafe protection” for DAO.
Disclaimer: The article is just to provide information and shouldn’t be considered as any financial advice. It is advisable to conduct thorough research before investing in any cryptocurrency.
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