Understand what is Bitcoin fork in one minute

Rage Comment : Regardless of the cryptocurrency, forks always cause strong reactions. Ethereum's hard fork was opposed, resulting in the coexistence of two Ethereum blockchains and two corresponding currencies. As the first blockchain-based digital currency, Bitcoin, which has a high market value, is also in a fierce debate about forks. Therefore, understanding what a fork is, what types of forks there are, and the consequences of forks is something that everyone who pays attention to digital currencies and invests in should understand.

Translation: Annie_Xu

If you’ve been paying close attention to Bitcoin lately, you may have noticed that the topic of “forks” is very popular.

Unlike blockchain, a fork is a technical event that occurs when different participants determine common rules.

Basically, a fork is when a blockchain splits into two paths, either regarding the network’s transaction history or new rules that make transactions possible.

Therefore, people who use blockchain must choose one or the other.

While there are many types of forks, the science behind them is relatively new. We currently know that some forks resolve themselves, but others, caused by extreme community disagreement, can permanently split the network, creating two blockchain histories and two separate currencies.

Therefore, the understanding of fork types, activation reasons and potential risks is not clear.

For the sake of illustration, we briefly summarize how the different forks work.

Basics

Before we start the classification, it is necessary to know that Bitcoin forks have already started in an orderly manner.

Forks are a byproduct of distributed consensus and occur whenever two miners discover a block at almost the same time. This uncertainty disappears when a subsequent block is added to one of the chains, making the chain the longest and the other block "orphaned" or "abandoned" by the network.

Developers can also voluntarily fork the network when they want to change the software rules that determine whether a transaction is valid.

When a block contains invalid transactions, the block will be ignored by the network, and the miner who found the block will lose the block reward. Therefore, miners usually only want to mine valid blocks and join the longest chain.

Below are some common forks and their characteristics.

Hard Fork

A hard fork is a software upgrade that introduces new rules to the network that are incompatible with old software. You can think of it as an extension of the rules (making the block size 2MB instead of 1MB would require a hard fork).

After the fork, nodes that continue to run the old version of the software will find that new transactions are invalid. Therefore, in order to switch to the new chain and continue to mine valid blocks, all network nodes must be upgraded to the new rules.

When there is a political deadlock and some people in the community insist on the old rules, problems will arise. The hash rate and network computing power of the old chain will become outdated. What is important is that the data and rules of the old chain are still seen as valuable, and miners certainly want to continue mining, and developers also want to continue to support it.

The DAO hard fork is the best example of how the community rules diverge. Now we have two blockchains with different software, ETC and ETH, each with different philosophies and currencies.

Soft Fork

A soft fork is a way to strengthen some rules. So the new rules may deny 1MB blocks and support 500K blocks. Soft forks are backward compatible.

Nodes that have not been upgraded will continue to treat new transactions as valid. However, blocks that continue to be mined by non-upgraded nodes will be rejected by upgraded nodes. Therefore, a soft fork requires a large portion of the network’s computing power.

If a soft fork gains support from a minority of hashing power, it could become the shortest chain and be encouraged by the network. Or it could be separated and run independently, like a hard fork.

Soft forks are a common method for upgrading Bitcoin because the risk of the network splitting is considered low. Successful soft forks in the past include BIP 66 software upgrades (involving signature verification) and P2SH (modifying the Bitcoin address format).

User Activated Soft Fork

A user-activated soft fork (UASF) is a controversial idea that explores how blockchains can add upgrades that are not directly supported by the network’s hash power providers.

The idea of ​​UASF is to no longer wait for sufficient support from mining pools, but rather for exchanges, wallet service providers, and companies running full nodes to decide whether to activate the soft fork (full nodes in Bitcoin are still responsible for verifying blocks, including non-mining nodes).

A majority of exchanges must publicly support the change before it is written into new code. This new software will then be installed on nodes that wish to participate in the soft fork.

This method would require longer preparation time than a hash power driven soft fork. In fact it is thought to take at least a year to get the code written and give people enough time to prepare.

And if a majority of miners do not activate the new rules, they will use their massive hashing power to split the network.

Currently, the idea is just theory and has not been implemented.