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What is a Hard Fork?
A hard fork is a significant and permanent divergence in the blockchain protocol of a cryptocurrency. It occurs when there is a fundamental change made to the underlying rules of a blockchain network, resulting in a split or branching off into two separate paths.
In the context of blockchain technology, a fork refers to a situation where a blockchain’s existing codebase is modified or updated. A hard fork specifically involves a change that is not backward-compatible, meaning that nodes or participants running the previous version of the blockchain will not recognize or accept blocks created by the updated version.
When a hard fork takes place, the blockchain splits into two separate chains with a shared history up until the point of the fork. One chain follows the new set of rules, while the other continues to operate under the old rules.
Techopedia Explains the Hard Fork Meaning
Defining and describing hard forks is tricky, partially due to various emerging opinions on what constitutes a hard fork, and partly due to debate on whether a particular change was a hard fork or not.
One good definition of a hard fork is that in a hard fork, node consensus diverges permanently. By contrast, backward-compatible changes to the blockchain protocol that allow new rules to be introduced without requiring all users to upgrade their software are soft forks.
The term “hard fork” signifies that the upgrade or change in the blockchain protocol is not backward-compatible. This means that nodes or participants running the previous version of the blockchain will not recognize or accept blocks created by the updated version, and vice versa.
Hard forks can be initiated for various reasons, including implementing new features, addressing security vulnerabilities, resolving disagreements within the community, or addressing scalability issues.
It is worth noting that hard forks require consensus among the network’s participants to adopt the new rules and can sometimes result in a split in the community, with some supporting the original chain and others embracing the new chain.
How Hard Fork Works
A hard fork works by implementing significant changes to the protocol of a blockchain, which are incompatible with the existing blockchain rules. This process materializes in several key steps.
In the first step, a proposal is made to modify the existing blockchain protocol. This proposal can come from developers, community members, or stakeholders.
Consensus among the network participants is crucial to proceed with the hard fork. The proposal needs to gain significant support and agreement from miners, developers, node operators, and other key stakeholders.
Once consensus is reached, the technical specifications for the proposed changes are defined. Developers work on implementing modifications to the blockchain’s codebase, which includes introducing new features, altering the consensus algorithm, or adjusting parameters within the network.
The updated code is thoroughly tested and reviewed by developers and experts to ensure its functionality, security, and compatibility. This stage aims to identify and fix any potential bugs, vulnerabilities, or issues before the hard fork is executed.
Subsequently, the hard fork is scheduled to occur at a specific block height or a predetermined point in the blockchain. At this block height, the updated version of the blockchain protocol will be activated.
When the block height is reached, the network splits into two divergent paths. The existing blockchain continues to follow the old rules, while the new blockchain starts operating with the updated rules.
Notably, nodes and miners on the network need to decide which chain they will support. Nodes can choose to upgrade their software to follow the new rules or continue with the old version. Likewise, miners decide which chain they will mine blocks for, based on factors such as profitability, community support, and network security.
Why Do Hard Forks Happen?
Hard forks happen in blockchain networks for several reasons. Here are the more notable ones:
Hard Fork vs. Soft Fork
In the context of blockchain technology, both hard forks and soft forks are methods of updating the blockchain’s protocol, but they differ fundamentally in their compatibility with existing rules and their impact on the network.
Here’s a comparative look at hard forks versus soft forks:
Hard Fork
Not backward compatible. Nodes must upgrade to the new version to continue participating.
Soft Fork
Backward compatible. Non-upgraded nodes can still participate in the network.
Hard Fork
Can result in a permanent split, creating two separate blockchains if not all participants agree to upgrade.
Soft Fork
Typically does not result in a permanent split. Non-upgraded nodes can still accept blocks from upgraded nodes.
Hard Fork
Requires all nodes and users to upgrade to the new protocol version.
Soft Fork
Only a majority of miners need to upgrade, while non-upgraded nodes will still recognize new blocks as valid.
Hard Fork
Can divide the community if there is disagreement about the upgrade.
Soft Fork
Less likely to cause division within the community since it’s more inclusive of nodes that haven’t upgraded.
Hard Fork
Implementing significant changes that are not compatible with the existing protocol, correcting serious security issues, or making sweeping updates.
Soft Fork
Making incremental changes, improvements, or optimizations that do not drastically change the protocol.
Hard Fork
Can result in the creation of a new cryptocurrency if the blockchain splits.
Soft Fork
Does not create a new cryptocurrency; maintains a single blockchain.
Hard Fork
Requires a clear and often hard-to-achieve consensus among all network participants.
Soft Fork
| Requires consensus only from a majority of the network’s hash power, not from all nodes. |
The Ethereum Fork
In July 2016, the Ethereum network underwent a significant hard fork in response to a DAO hack, where an attacker exploited a vulnerability in the code of a decentralized autonomous organization (DAO) to steal about 3.6 million Ether, valued at around $50 million at the time.
The DAO was intended as a decentralized venture capital fund, enabling investors to vote on project funding. The hack prompted a heated debate within the Ethereum community regarding the appropriate response, with major concerns revolving around the principles of immutability and the security of smart contracts.
The Ethereum community faced a tough decision: to either let the hack stand as a painful lesson in smart contract security or to intervene and reverse the fraudulent transactions to recover the stolen funds. Opting for the latter, a hard fork was executed, creating a new version of the blockchain where the theft was effectively erased.
This action aimed to return the funds to their original owners, leading to the split of the Ethereum blockchain into two distinct entities: Ethereum (ETH), which adopted the new forked chain, and Ethereum Classic (ETC), which continued on the original unforked chain.
Hard Fork Examples
Aside from the popular Ethereum hard fork, there have also been other such updates in the crypto industry.
Here are some notable examples of hard forks:
In August 2017, Bitcoin Cash was created to address concerns about Bitcoin’s scalability. The primary dispute was over the size of blocks in the blockchain. Bitcoin Cash supporters advocated for increasing the block size limit to allow more transactions per block, aiming to improve transaction speeds and reduce fees.
In November 2018, this fork occurred due to disagreements within the Bitcoin Cash community about the blockchain’s technical direction. Specifically, the dispute was over the block size limit and the introduction of certain protocol features aimed at enhancing smart contract capabilities.
SegWit2x was a proposed hard fork intended to increase Bitcoin’s block size to 2MB, following the implementation of Segregated Witness (SegWit), which was a soft fork aimed at addressing scalability by altering how data was stored in blocks. However, the proposed hard fork was ultimately canceled due to insufficient consensus within the community.
Hard Fork Pros and Cons
Hard forks come with their own sets of advantages and disadvantages. Understanding these can help stakeholders make informed decisions about supporting or opposing such forks.
Pros
- Improvement and evolution
- Community consensus
- Responding to crises
- Creating new opportunities
Cons
- Community division
- Market volatility
- Security risks
- Confusion and operational challenges
- Dilution of resources
The Bottom Line
Hard forks show the strength of the blockchain community, offering the ability to adapt and evolve in response to technological, ethical, or philosophical challenges.
However, the decision to undertake a hard fork is not without its difficulties. It involves weighing the benefits of improvements and the necessity of fixes against the potential for community division, market volatility, and security vulnerabilities.
