As opposed to traditional assets, Bitcoin is less liquid, more volatile, and more expensive as it concerns transaction fees, which means that its state is anything but strong. If you look at the Bitcoin price chart, you’ll see that investor optimism continues to rise, with spot ETFs as popular vehicles for those seeking exposure to the market. Many parts of the Bitcoin blockchain – and the crypto asset market – show potential for worthwhile innovations that could give rise to more efficient financial solutions. Perhaps forks are part of the solution. Since its inception, Bitcoin has gone through multiple forks that have led to code improvements.
As of May 2024, there are more than 100 forks on the Bitcoin network with varying degrees of adoption and success, though many of them have become inactive. Forks have provoked fierce debate within the cryptocurrency community, with some viewing them as drivers of innovation and progress, while others consider them disruptive forces that make growth harder to sustain. While we’re discussing Bitcoin, forks can happen on any blockchain, including Ethereum, due to a lack of consensus for software updates.
What Is A Fork? How Does It Work?
In the blockchain world, a fork is a modification, a discrepancy, or a breach of the consensus protocol. When a protocol is updated, the individual nodes upgrade to accept the new changes, yet if some of these nodes reject the proposed modifications, a fork occurs, and the update becomes mandatory. The consensus protocol is altered while the chain structure remains intact. The community will follow the longest chain, i.e., the one considered valid by the majority, while the other one will be abandoned and discontinued. These events are planned and pre-announced to introduce an improved and more secure version.
Hard forks take place when the blockchain suffers important code modifications, typically for security reasons or to add new functionality, and the irreversible changes make the new version of the blockchain incompatible with the previous version. More often than not, the network splits into two separate blockchains: one follows the old protocol, while the other adheres to the new one. If modifications are made in such a way that the blocks deploying the old software continue to recognize the ones using the new version, it’s called a soft fork. Soft forks are used to implement minor changes.
Blockchain Forks, For The Most Part, Occur In A Non-Random Manner
Whilst the Bitcoin community is anything but united, it has been successful in implementing Satoshi Nakamoto’s vision, who desired one global chain that can be used to streamline processes at scale and capable of becoming the world’s new money. Forks are planned and discussed with the community so that everyone involved knows what kinds of changes will be implemented. There are several causes of division within the Bitcoin community, such as disagreement over the block size, and in this situation, Bitcoin holders can vote to execute a fork, meaning everyone can follow their ideas and develop the blockchain independently.
Three Stand Out As The Most Notable: BTC, BCH, And BSV
Forks can be accidental, but they rarely happen, and typically happen when two miners mine a block at exactly the same time. An intentional fork is enforced to repair or solve a bug or hack, so it’s the community’s proactive desire to add new functionality or considerably modify or enhance an existing feature of the blockchain. The most impactful forks are:
Bitcoin
In 2009, an individual or a group of people known as “Satoshi Nakamoto” mined the first block of the chain, commonly referred to as the Genesis block. Shortly thereafter, the native token was launched, and Nakamoto carried out the first transaction, its price escalating from pennies to tens of thousands of dollars. Bitcoin is classified as one of the most expensive cryptocurrencies in existence by April 2024. It presents various use cases, from a swift payment method to borrowing and lending without traditional intermediaries, and crypto exchange platforms have emerged to simplify buying and selling.
Bitcoin Cash
Bitcoin Cash (BCH) was created in 2017 by virtue of a hard fork in the Bitcoin blockchain. Miners implemented a software upgrade called BIP (Bitcoin Improvement Proposal) 91, activating the Segregated Witness upgrade at block 477,120, which made a second layer solution, such as the Lightning Network, possible. The mining pool ViaBTC came up with the name Bitcoin Cash, which is basically a spin-off, a product of the hard fork, a second version, or an altcoin. Take your pick. Contrary to popular opinion, BCH increased in popularity with investors, which is bad news for the community that wanted cryptocurrency to remain a payment method.
Bitcoin Satoshi Vision
Bitcoin Satoshi Vision (BSV) emerged in 2018 after a split from Bitcoin Cash, increasing the block size limit to 128MB. It aims to become a more technologically advanced continuation of the original Bitcoin protocol, that is, to increase network transaction speeds and guarantee increased scalability. Even to this day, BSV remains a controversial fork within the broader crypto community, generating concerns about centralization, which can lead to security breaches, manipulation of transactions, and a deviation from Bitcoin’s vision.
Who Stands To Benefit From The Forks?
As mentioned earlier, forking has taken place over 100 times throughout Bitcoin’s history, introducing new sets of rules for it to follow. At times, a fork can have a profound effect on the blockchain and its native token, whereas at other times, it might not. It all depends on the circumstances. There are countless groups invested in these forks, namely:
- Bitcoin miners: Forks can lead to price fluctuations, market uncertainty, and even a divide in the community, all of which can benefit Bitcoin miners. The more forks, the more options.
- Speculative investors: With speculation, the risk of loss is offset by the possibility of a substantial recompense. Bitcoin forks benefit other digital assets since the blockchain is the oldest codebase.
- Crypto users: Traders can better optimize their portfolios and improve their approach to buying and selling Bitcoin. Indirectly, forks can lead to a liquidity increase, therefore creating more opportunities for transfer between blockchains.
Lynn Martelli is an editor at Readability. She received her MFA in Creative Writing from Antioch University and has worked as an editor for over 10 years. Lynn has edited a wide variety of books, including fiction, non-fiction, memoirs, and more. In her free time, Lynn enjoys reading, writing, and spending time with her family and friends.
