What is a Crypto Fork, and Its Advantages

Rancakmedia.com – Do you know what Crypto Fork is? In this article, we will provide an explanation of Crypto Forks.

Before entering into the discussion, updating or updating the software that is used is a familiar thing and we definitely do it several times regularly. But do you know there are times when updates also need to be done on digital currencies.

If the software we use is usually updated by the manufacturer, it is different in the world of digital assets, such as Bitcoin.

Aplikasi Bitcoin bersifat open-source, artinya pengembangan perangkat lunak dilakukan oleh berbagai individu secara bebas di seluruh dunia, dan bukan oleh tim pengembang di dalam satu perusahaan.

To update a decentralized program like Bitcoin, developers will create a copy of the Bitcoin program and edit the underlying code.

This program is a new version of the program that anyone can download from the internet. However, previous versions of the program are still accessible for download from the internet.

Program users (such as miners or complete nodes) can choose to run the new program or the old one. This forked version of the program is known as a fork.

What are Crypto Forks

Forks are of two types, namely hard forks and soft forks. Hard forks are software changes that are not compatible with older versions. This usually happens when there is a change that goes against the old protocol.

For example, if the Bitcoin mining community (bitcoin miners who verify Bitcoin blockchain transactions) splits into two groups, each of which uses Bitcoin software that is incompatible with the other, the blockchain network will split into two distinct groups. This event is known as a hard fork.

Soft forks are software changes that are backward compatible and still communicate with older versions.

This change does not conflict with the old protocol, allowing them to run concurrently.

In other words, when a soft fork occurs, miners who haven't updated their machines can continue to run the same program, and there's no forking into two different blockchains.

Soft fork and hard fork may occur based on planning or occur due to differences of opinion in the community.

Decision-making

In a network like Bitcoin, the protocol can be changed by three different groups: developers, miners, and full nodes. The creation and maintenance of the Bitcoin code is the responsibility of the developer.

The Bitcoin network is protected by the computing power used by miners in verifying transactions and building new blocks.

Meanwhile, complete nodes are Bitcoin users who store all Bitcoin transaction data from day one.

They help validate/send/receive transactions, and also offer infrastructure such as block explorers (websites for viewing transactions on the bitcoin network).

The code can be changed by programmers, but they can't force miners and full nodes to use their latest versions.

Miners and full nodes can choose whether they want to use the new version or the old version. Changes to a decentralized crypto program must be properly prepared and executed using this decision-making methodology.

Before any modifications can be made, the three parties involved developers, miners, and full nodes must come to an agreement, and each group has a say in making changes.

What are the Benefits of Forking for Investors

Because forking duplicates the old protocol, if a hard fork occurs, previous transactions that occurred in the old protocol also fall into the new protocol.

A number of old protocol coins will be transferred to your account along with a corresponding number of new protocol coins. However, the value of the new currency depends on whether the new protocol is durable and has value over a long period of time.

Some people assume that by forking they will make a profit because they get double the coins.

For example, Bitcoin (BTC) went into trouble on August 1, 2017 creating a new version of Bitcoin known as Bitcoin Cash (BCH). In other words, if you owned two Bitcoins before August 1, 2017, you will also own two BCH on the new Bitcoin Cash network!

However, the fork does not necessarily have the same value as the previous coin. During the fork in 2017, 1 BTC at that time was worth $3,600 and 1 BCH was worth $300.

Currently in May 2021 the price of 1 BTC is equivalent to $55,000 (15x) and 1 BCH is equivalent to $1,300 (4.3x). Even though the increase does not have the same ratio, the forking moment is still awaited by investors to make a profit because investors get free coins.

Conclusion

Forks are of two types, namely hard forks and soft forks. Hard forks are software changes that are not compatible with older versions. This usually happens when there is a change that goes against the old protocol.

In the above article we didn't only discuss what a fork is, but we also discussed decision making and also the advantages of forking.

Thus the article about What is a Fork Crypto, and the advantages. Hopefully the above article can be helpful and useful for all of you.