A fork is a split in the blockchain that happens when the blockchain diverges into two separate branches. There are two different kinds of forks – hard forks and soft forks. A hard fork introduces new rules to the blockchain and is not compatible with the old blockchain. A soft fork, by contrast, can be thought of as an update to the existing blockchain.
At the time of writing, the Bitcoin blockchain has been hard forked over 100 times since its original release. However, 28 of these forks did not last and were shut down due to various reasons.
This article explores three hard forks (Bitcoin Cash, Bitcoin Gold, and Bitcoin Diamond) that have branched from Bitcoin and the idea behind them. For more details on the mechanics of forks and how they work, see an article on forks.
BITCOIN FORKS ESSENTIALS
- Bitcoin has been hard-forked over 100 times since its release.
- Forks attempt to solve a problem or improve the way a blockchain functions.
- Bitcoin Cash first increased the block size from 1 MB to 8 MB, then to 32 MB.
- Bitcoin Gold changed the proof of work algorithm.
- Bitcoin Diamond increased the total supply of coins.
Bitcoin Cash (BCH) was implemented as a hard fork in August 2017 in response to SegWit and protocol updates made to the Bitcoin platform. SegWit (short for Segregated Witness) is a protocol upgrade that changes the way data is stored. Some developers did not agree with the SegWit protocol update and decided to take another path.
The main goal of Bitcoin Cash is to increase the number of transactions that can be processed by the network. To achieve this goal, they did not adopt the SegWit protocol but rather increased the block size from 1 MB to 8 MB, and later to 32 MB. This proved to be a viable solution, although it has raised concerns that Bitcoin Cash may not be as secure as Bitcoin.
Bitcoin, as the most popular cryptocurrency, has almost 10 times as many full nodes as BCH, providing a more distributed network with greater security and stability. The tradeoff, however, is transaction confirmation time. When the Bitcoin network has a lot of activity, the transactions have higher fees and take longer to be confirmed.
Bitcoin Cash itself has undergone a user-activated hard fork and split into Bitcoin Cash ABC and Bitcoin SV in November 2018. The former is a continuation of BCH, while the latter, named Satoshi’s Vision, is a new cryptocurrency intended to mimic Bitcoin as it was in the beginning, before forks and updates.
Bitcoin Gold (BTG) was implemented in October 2017, just a few months after Bitcoin Cash was announced. Generally speaking, Bitcoin Gold follows the same principles as Bitcoin. However, the key difference is the change to the proof of work algorithm.
The idea behind the change in the proof of work algorithm is to decentralize the mining process. Mining had become monopolized by mining companies because it is only profitable with specialized equipment.
To be in contention for a mining reward, BTC miners have to use specialized application-specific integrated circuits (or ASICs). These are not only expensive and hard to get, but are also outclassed by new and improved versions almost as soon as they enter the market. That is why Bitcoin Gold developers decided to modify Bitcoin’s consensus algorithm to allow the cryptocurrency to be mined using an average graphics card, making BTG as decentralized and democratic as possible.
By implementing this change, Bitcoin Gold hoped to restore the balance and ensure that any Bitcoin Gold user can participate in the mining process using their own personal computer. However, this made many question BTG’s security, as it increases the vulnerability to 51% attacks.
Bitcoin Diamond (BCD) was forked off from the Bitcoin blockchain in November 2017. The idea behind this hard fork was to solve problems such as lack of privacy and slow transaction confirmations.
One of the key distinctions of Bitcoin Diamond is the total supply of coins, which is 210 million – 10 times bigger than that of Bitcoin. To balance out this difference, they also increased the exchange rate to 1:10. This means that, when the fork took place, you could claim 10 BCD for each Bitcoin you owned. This would not replace your BTC (you could keep that), but add a corresponding amount to your account on the Bitcoin Diamond blockchain.
The developers aimed to lower the cost of transactions by reducing transaction fees, and to make it more accessible to the public. They also increased the protection of privacy by encrypting transaction amounts and the users’ balances.
These three hard forks are only the tip of the iceberg when it comes to Bitcoin. Whereas Bitcoin Cash still enjoys a lot of popularity today, Bitcoin Gold and particularly Bitcoin Diamond’s price and user base has dwindled over the years. There are currently over 100 different active hard forks, each attempting to solve a different problem or improve the way the Bitcoin blockchain works.
Knowing why certain developers chose to fork off from Bitcoin will be useful for anyone who owns crypto. This knowledge will help you decide which branch best suits your interests and needs.