Hard forks are much in trend nowadays. You might be wondering what are these new terms in this crypto industry. But trust me they are one of the best developments in the crypto world. Before we directly jump into defining hard forks and other strange words, I want you to know the basic terms.
So, let’s get started…
The first question which arises is what is blockchain protocol?
Basically, a blockchain protocol is the code convention that defines the connection, mining and transaction rules.
Now let’s move further defining the term cryptocurrency fork, which is where it all started…
A cryptocurrency fork is an event that splits the existing software protocol into two co-existing versions. Precisely, a cryptocurrency fork is a divergence in the perspective of the state of the blockchain.
Now is the right time to explore more about hard forks…
A hard fork is a permanent divergence to the protocol that converts the blocks/transactions that were previously invalid into valid. The basic requirement is that all the users or nodes should upgrade to the latest version of the protocol software. Eventually, this will create a fork in the blockchain: one path follows the new, upgraded blockchain and the other follows the old path.
Hard Forks are further categorised into two sub categories, namely the planned hard fork and contentious hard fork.
Planned: This hard fork is an upgrade to the protocol which was already existing. A high-degree of consensus from project developers and community have reached prior to the occurrence of hard fork. Monero’s hard fork can be one of the examples of such a fork. This hard fork saw the addition of Ring Confidential Transactions (RingCT) which is a new privacy feature.
Contentious: These hard forks are applicable in situations where there are severe disagreements between stakeholders of the project. The stakeholders may include project developers, network users and miners. The contentious hard forks take place only because a portion of the community believes that major changes in cryptocurrency code will initiate superior blockchain. Bitcoin Cash Hard Fork can be an example of the Contentious Hard Fork.
How Is A Hard Fork Implemented?
Basically, the Hard Fork implementation aims to recover the security risks found in the old versions of the software. This is mainly done to add new functionality or to reverse transactions. For example in the case of hard fork to reverse the hack on the Decentralized Autonomous Organization (DAO) in Ethereum Blockchain.
Hard fork splits the path of a blockchain by invalidating transactions done by nodes also the ones which are not updated to new version of protocol software. After the DAO hack, the Ethereum community voted in favor of hard fork. This was in order to roll back transactions that siphoned off tens of millions of dollars worth of digital currency by an anonymous hacker. Eventually, the DAO token holders were able to get back their ether funds.
DAO token holders can withdraw ETH at the rate of 1 ETH to 100 DAO. Finally, the extra balance and any ether remained will be withdrawn and distributed by DAO curators or the individuals to provide “failsafe protection” for the organization.
Hard fork majorly represents a permanent change in digital currency’s protocol and it is necessarily requires a majority support. After accomplishing the upgrade, this new protocol will stop accepting the blocks mined using old rules. Eventually, the miners who wish to support the old protocol will require to form a separate chain.