What is a Hard Fork in Crypto?

A fork of the Bitcoin logo.

When a blockchain forks, a new blockchain is created from an existing one. Think of it like an off-ramp when driving down a freeway: the interstate remains, but a new highway follows a different course.

Hard Forks and Bitcoin

Hard forks occur when a group of developers or members of a crypto community are dissatisfied with certain features of the blockchain. Reasons vary, but some possible causes for a hard fork could be changing block sizes, increasing security measures, adding new features, or even reversing fraudulent transactions.

For a hard fork to occur, there must be a disagreement between the community and the miners about the current protocol. Because miners help facilitate transactions on the blockchain, they have the power to implement a new protocol. If a large enough pool of miners wanted to increase Bitcoin’s block size from 8MB to 32MB, then they could start a vote. This is how the first Bitcoin hard fork, Bitcoin Cash, was created.

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Miners who wanted to create a larger block size (which would increase transaction speeds and lower fees) proposed voting to increase Bitcoin’s block size. The vote was not favored by the majority of current Bitcoin miners, so developers in favor of increasing the block size implemented a hard fork. Thus Bitcoin Cash was born.

Most hard forks resemble the blockchain from which they originated. Aside from a few tweaks, Bitcoin Cash is extremely similar to Bitcoin.

Once created, Bitcoin Cash miners and participants would be able to exchange their Bitcoin for an equal value of Bitcoin Cash if they choose to adopt the new cryptocurrency.

Other examples of hard forks

Since Bitcoin Cash was created, more and more hard forks have appeared. Even Bitcoin Cash was forked into Bitcoin SV.

Other notable hard forks include Ethereum and Ethereum Classic. Due to an attack, developers and community members introduced a hard fork proposal to reimburse those who lost money to the hacker and erase the hack from the blockchain history. The new fork is now known as Ethereum. Some decided to stick with the old, unaltered version that is now Ethereum Classic.

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Even more recently, another hard fork occurred in one of the world’s most valuable cryptocurrencies by market cap, Terra. Its native cryptocurrency Luna and its algorithmically backed stablecoin UST were hit as a result of a widespread sell-off in crypto markets. The algorithm behind UST decoupled from $1, and Luna subsequently lost value as well. Both lost almost all their value.

In an attempt to salvage the original ideas and goals of the Terra blockchain, founder Do Kwon proposed a hard fork to give the blockchain a fresh start. Now known as Terra Classic, the new hard fork has introduced a handful of changes with the promise of avoiding another catastrophe like the one in early May 2022.

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It might help to think of hard fork cryptocurrencies as cousins ​​within the same family. For example, Bitcoin, Bitcoin Cash, and Bitcoin SV share more similarities than differences. The same goes for Ethereum and Ethereum Classic or Terra and Terra Classic. All of these bear a resemblance to their old blockchain but, due to particular ideas, a hard fork was introduced to forge a new cryptocurrency.

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